Irs Publication 595 - Tax Highlights For Commercial Fishermen

Table 1. Employment Tax Treatment of Fishing Activities and Certain Fishermen

Treatment Under Employment Taxes

Social Security and

Federal Unemployment

Activity or Person

Income Tax Withholding

Medicare Taxes

Tax (FUTA)

a. Catching salmon or halibut.

Withhold unless c. applies.

Taxable unless c. applies.

b. Catching other fish, sponges,

Withhold unless c. applies.

Taxable unless c. applies.

Taxable if vessel is more

etc.

than 10 net tons and c. does

not apply.

c. Individual considered

Exempt

self-employed (see Which

fishermen are considered

self-employed?).

d. Native Americans exercising

Exempt

fishing rights.

should not be reported on a Schedule C. For

Earning credits in 2001 and 2002. You can

ship, each of you should include your respective

more information, see Publication 541, Partner-

earn a maximum of four credits per year. For

share of SE income on a separate Schedule SE.

ships.

2001, you earn one credit for each $830 ($870

However, if your spouse is not your partner,

for 2002) of income subject to social security

but your employee, you must pay employment

Not-for-profit fishing. You must fish

taxes. You need $3,320 ($830 x 4) of self-em-

taxes for him or her. For more information, see

to make a profit in order to report your

ployment income and wages to earn four credits

Employment Tax Forms, later.

fishing income and expenses on

CAUTION

in 2001. For 2002, you will need $3,480 ($870 x

Schedule C. You do not need to actually make a

Self-employment tax deduction. You can

4) of self-employment income and wages to

profit as long as you are making a good faith

deduct one-half of your SE tax as a business

earn four credits.

expense in figuring your adjusted gross income.

effort. If you are not fishing for profit, report your

For an explanation of the number of credits

This deduction only affects your income tax. It

fishing income and expenses as explained

you must have to be insured and the benefits

does not affect either your net earnings from

under Not-for-Profit Activities in chapter 1 of

available to you and your family under the social

self-employment or your SE tax.

Publication 535.

security program, contact your nearest Social

To deduct the tax, enter on Form 1040, line

Security Administration (SSA) office.

27, the amount shown on the “Deduction for

More information. For specific information on

one-half of self-employment tax” line of the

Optional methods. You may want to use one

completing Schedule C, see Schedule C Exam-

Schedule SE.

of the optional methods in Part II of Long Sched-

ple and the filled-in Schedule C, later.

ule SE (Section B) when you have a loss or a

More information. For more information on

small net profit and any of the following apply.

Schedule SE (Form 1040)

self-employment tax, see Publication 533.

•

You want to receive credit for social secur-

Form 1099–MISC

Use Schedule SE (Form 1040) to report and

ity benefit coverage.

figure your self-employment tax. See Self-em-

•

You incurred child or dependent care ex-

File Form 1099 – MISC for each person to whom

ployment tax (SE tax), later. Most fishermen can

penses for which you could claim a credit

you have paid the following during the year.

use Short Schedule SE (Section A) to figure

(this method may increase your earned in-

their self-employment tax. You must file Sched-

come, which could increase your credit for

1) A share of your catch (or a share of the

ule SE with your Form 1040 if you were self-em-

these expenses).

proceeds from the sale of your catch) to an

p l oy ed a n d y ou r n et e a r ni n g s f r o m

•

individual who is not your employee

self-employment were $400 or more.

You are entitled to the earned income

(self-employed). For information about in-

credit (this method may increase your

Even if you do not have to file Schedule

dividuals considered to be self-employed,

earned income, which could increase your

TIP

SE, it may be to your benefit to file it

see Which fishermen are considered

earned income credit).

and use an optional method in Part II of

self-employed, later.

Long Schedule SE (Section B). For more infor-

2) At least $600 in rents, services, and other

mation, see Optional methods, later.

Using the optional methods will in-

income payments to an individual who is

crease your SE tax.

not your employee (self-employed).

CAUTION

Self-employment tax (SE tax). The SE tax is

3) Cash payments of at least $600 to a com-

a social security and Medicare tax primarily for

mercial fisherman for the purchase of fish

individuals who work for themselves. It is similar

Estimated tax. You may have to pay esti-

for resale. See the instructions for Form

to the social security and Medicare taxes with-

mated tax. This depends on how much income

1099 – MISC for definitions of “cash” and

held from the pay of wage earners.

and SE taxes you expect for the year and how

“fish” and for information about the record-

much of your income will be subject to withhold-

keeping requirements for resale buyers.

ing. The SE tax is treated and collected as part

Social security coverage. Your payments of

of the income tax. For more information, see

4) Cash payments of up to $100 per trip that

SE tax contribute to your coverage under the

When Do Fishermen Pay Estimated Tax and

are:

social security system. Social security coverage

File Tax Returns, later.

provides you with retirement benefits, disability

a) Dependent on a minimum catch,

benefits, survivor benefits, and hospital insur-

Reporting self-employment tax. Figure your

ance (Medicare) benefits. Social security bene-

b) Paid solely for additional duties for

SE tax on Schedule SE. Then report the tax on

fits are available to self-employed persons just

which additional cash payments are

line 53 of Form 1040 and attach Schedule SE to

as they are to wage earners.

traditional in the fishing industry, and

Form 1040. If you file a joint return and you both

You must be insured under the social secur-

have SE income, each of you must complete a

c) Not otherwise reportable as wages.

ity system before you begin receiving social se-

separate Schedule SE.

curity benefits. You are insured if you have the

required number of credits (also called quarters

Husband-wife partnership. If you and your

W h i c h

f i s h e r m e n

a r e

c o n s i d e r e d

of coverage).

spouse operate a fishing business as a partner-

self-employed? Certain fishermen who work

Page 4

Irs Publication 595 - Tax Highlights For Commercial Fishermen - 2001 Page 4

Related Articles

Related forms

Related Categories