Form 1040-SS, U.S. Self-Employment Tax Return; Form 1040-PR, Planilla Para La Declaracion De La Contribucion Federal Sobre El Trabajo Por Cuenta Propia-Puerto Rico; and Anejo H-PR,

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Instructions for Form 1040-SS

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2007

Department of the Treasury
Internal Revenue Service

Instructions for Form
1040-SS
U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for
Bona Fide Residents of Puerto Rico)
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
What’s New

• For 2007, the maximum amount of

self-employment income subject to social
security tax is $97,500.
• If you and your spouse jointly own and
operate a farm or nonfarm business, you
may qualify to be taxed as a qualified joint
venture instead of a partnership. See
Husband-Wife Business beginning on
page 3.

Reminder
The rules for determining whether you are
a bona fide resident of a possession
changed in 2006. For details, see Pub.
570, Tax Guide for Individuals With
Income From U.S. Possessions.

Purpose of Form
Residents of the U.S. Virgin Islands
(USVI), Guam, American Samoa, the
Commonwealth of the Northern Mariana
Islands (CNMI), and the Commonwealth
of Puerto Rico (Puerto Rico) use Form
1040-SS for the following purposes.
• Report net earnings from
self-employment and pay
self-employment (SE) tax. The Social
Security Administration (SSA) uses this
information to figure your benefits under
the social security program. SE tax
applies no matter how old you are and
even if you already are receiving social
security or Medicare benefits.
• Report and pay household employment
taxes.
• Report and pay employee social
security and Medicare tax on (a)
unreported tips, (b) wages from an
employer with no social security or
Medicare tax withheld, or (c) uncollected
social security and Medicare tax on tips or
group-term life insurance (see the
instructions for Part I, line 5, on page 4).
• Claim excess social security tax
withheld.
• Claim the additional child tax credit
(bona fide residents of Puerto Rico only).
• Claim the health coverage tax credit
(bona fide residents of Puerto Rico only).
You may also be required to file an
income tax return with the government of

Guam, American Samoa, the USVI, the
CNMI, or Puerto Rico. Check with your
local tax office for more details.

Additional Information
For assistance with Part III (Profit or Loss
From Farming), see the 2007 Instructions
for Schedule F (Form 1040), Profit or
Loss From Farming, and Pub. 225,
Farmer’s Tax Guide.
For assistance with Part IV (Profit or
Loss From Business), see the 2007
Instructions for Schedule C (Form 1040),
Profit or Loss From Business, and Pub.
334, Tax Guide for Small Business (for
Individuals Who Use Schedule C or
C-EZ).
For details on 2007 tax law changes,
see Pub. 553, Highlights of 2007 Tax
Changes.
If you expect to owe SE tax of $1,000
or more for 2008, you may have to make
estimated tax payments. Use Form
1040-ES, Estimated Tax for Individuals,
to make estimated tax payments.

Who Must File
You must file Form 1040-SS if:
1. You, or your spouse if filing a joint
return, had net earnings from
self-employment (from other than church
employee income) of $400 or more (or
you had church employee income of
$108.28 or more — see Church
Employees on page 2);
2. You do not have to file Form 1040
with the United States; and
3. You are a resident of:
a. Guam,
b. American Samoa,
c. The USVI,
d. The CNMI, or
e. Puerto Rico. (You may file either
Form 1040-PR or Form 1040-SS.)
Even if you have a loss or little

TIP income from self-employment, it
may benefit you to file Form
1040-SS and use either ‘‘optional
method’’ in Part VI. See page 7.
If (2) and (3) above apply, you also
must file Form 1040-SS (or you may use
Form 1040-PR in Spanish if you are a
resident of Puerto Rico) to:
• Report and pay household employment
taxes; and
Cat. No. 26341Y

• Report and pay employee social
security and Medicare tax on (a)
unreported tips, (b) wages from an
employer with no social security or
Medicare tax withheld, or (c) uncollected
social security and Medicare tax on tips or
group-term life insurance (see the
instructions for Part I, line 5, on page 4);
• Claim excess social security tax
withheld;
• Claim the additional child tax credit
(bona fide residents of Puerto Rico only);
and
• Claim the health coverage tax credit
(bona fide residents of Puerto Rico only).

When To File
If you file on a calendar year basis, file by
April 15, 2008. If you file on a fiscal year
basis, file by the 15th day of the 4th
month after the close of your fiscal year.

Where To File
Internal Revenue Service Center, Austin,
TX 73301-0215.

Amount You Owe
Pay by Check or Money Order
Enclose your check or money order for
the full amount due with Form 1040-SS.
Make it payable to the “United States
Treasury.” Do not send cash. Enter “2007
Form 1040-SS” and your name, address,
daytime phone number, and social
security number (SSN) on your payment.
If you are filing a joint return, enter the
SSN shown first on your Form 1040-SS.
To help process your payment, enter
the amount on the right side of the check
like this: $ XXX.XX. Do not use dashes or
lines (for example,
do not enter “$ XXX – ”
xx
or “$ XXX100”).

Pay Electronically
Pay by credit card. You can use your
American Express® Card, Discover®
Card, MasterCard® card, or Visa® card.
To pay by credit card, call toll-free or visit
the website of either service provider
listed below and follow the instructions. A
convenience fee will be charged by the
service provider based on the amount you
are paying. Fees may vary between the
providers. You will be told what the fee is
during the transaction and you will have
the option to either continue or cancel the

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transaction. You can also find out what
the fee will be by calling the provider’s
toll-free automated customer service
number or visiting the provider’s website
shown below. If you pay by credit card
before filing your return, enter on page 1
of Form 1040-SS in the upper left corner
the confirmation number you were given
at the end of the transaction and the
amount you charged (not including the
convenience fee).
Link2Gov Corporation
1-888-PAY-1040SM (1-888-729-1040)
1-888-658-5465 (Customer Service)
www.PAY1040.com
Official Payments Corporation
1-800-2PAY-TAXSM (1-800-272-9829)
1-877-754-4413 (Customer Service)
www.officialpayments.com
Pay by Electronic Federal Tax Payment
System (EFTPS). EFTPS is a free tax
payment system designed with all
taxpayers in mind. Online or by phone,
you input your tax payment information
electronically and you are done. EFTPS
offers you convenience. Through EFTPS,
you can schedule one-time or recurring
payments for withdrawal from your
checking or savings account up to 365
days in advance. You can also modify or
cancel payments up to 2 business days
before the scheduled withdrawal date. To
use EFTPS, you must enroll. Enroll online
at www.eftps.com or call 1-800-555-4477
to receive an enrollment form and
instructions by mail. TTY/TDD help is
available by calling 1-800-733-4829.

Third Party Designee
If you want to allow a friend, family
member, or any other person you choose
to discuss your 2007 tax return with the
IRS, check the “Yes” box in the Third
Party Designee area on page 1 of Form
1040-SS. Also enter the designee’s
name, phone number, and any five
numbers the designee chooses as his or
her personal identification number (PIN).
But if you want to allow the paid preparer
who signed your return to discuss it with
the IRS, just enter “Preparer” in the space
for the designee’s name. You do not have
to provide the other information
requested.
If you check the “Yes” box, you, and
your spouse if filing a joint return, are
authorizing the IRS to call the designee to
answer any questions that may arise
during the processing of your return. You
are also authorizing the designee to:
• Give the IRS any information that is
missing from your return,
• Call the IRS for information about the
processing of your return or the status of
your refund or payment(s),
• Receive copies of notices or transcripts
related to your return, upon request, and
• Respond to certain IRS notices about
math errors, offsets, and return
preparation.
You are not authorizing the designee
to receive any refund check, bind you to

anything (including any additional tax
liability), or otherwise represent you
before the IRS. If you want to expand the
designee’s authorization, see Pub. 947,
Practice Before the IRS and Power of
Attorney.
The authorization will automatically
end no later than the due date (without
regard to extensions) for filing your 2008
tax return. This is April 15, 2009, for most
people. If you wish to revoke the
authorization before it ends, see Pub.
947.

Signature and Date
Sign and date your return. It is not valid
unless you sign it. If you are filing a joint
return, your spouse must also sign. If your
spouse cannot sign the return, see Pub.
501, Exemptions, Standard Deduction,
and Filing Information.
Generally, anyone you pay to prepare
your return must sign it in the space
provided. The preparer must give you a
copy of the return for your records.
Someone who prepares your return but
does not charge you should not sign your
return.
If you have someone prepare your
return, you are still responsible for the
correctness of the return.

Daytime Phone Number
Providing your daytime phone number
may help speed the processing of your
return. If we have questions about items
on your return and you can answer our
questions over the phone, we may be
able to continue processing your return
without mailing you a letter. If you are
filing a joint return, you may enter either
your or your spouse’s daytime phone
number.

How To Get Forms and
Publications
By Internet
You can access the IRS website 24 hours
a day, 7 days a week, at www.irs.gov to
download forms, instructions, and
publications.

By Phone
If you are a resident of the U.S. Virgin
Islands or Puerto Rico, you can order
forms and publications by calling
1-800-TAX-FORM (1-800-829-3676).

Puerto Rico
U.S. Internal Revenue Service
7 Tabonuco Street, Suite 120
San Patricio Office Center
Guaynabo, PR 00966
USVI
U.S. Internal Revenue Service
Almeric L. Christian Federal Building
3013 Estate Golden Rock, Room 3013
Christiansted, VI 00820
U.S. Internal Revenue Service
Ron DeLugo Federal Building and
Courthouse
5500 Veterans Drive, Room 216
Charlotte Amalie, VI 00802
USVI Bureau of Internal Revenue
9601 Estate Thomas
Charlotte Amalie, VI 00802
USVI Bureau of Internal Revenue
4008 Estate Diamond
Christiansted, VI 00820
American Samoa
American Samoa Government
Tax Office
Executive Office Building – Utulei
Pago Pago, AS 96799
CNMI
Division of Revenue and Taxation
DanDan Commercial Center
Saipan, MP 96950

Name and SSN
To ensure proper credit to your social
security account, enter your name and
SSN, and your spouse’s if filing a joint
return, exactly as shown on your social
security card. If you do not have an SSN,
get Form SS-5, Application for a Social
Security Card, from an SSA district office.

Who Must Pay SE Tax?
Self-Employed Persons
You must pay SE tax if you had net
earnings of $400 or more as a
self-employed person. If you are in
business for yourself or you are a farmer,
you are self-employed.
You must also pay SE tax on your
share of certain partnership income and
your guaranteed payments. See
Partnership Income or Loss on page 5.

Church Employees

In Person

If you had church employee income of
$108.28 or more, you must pay SE tax on
that income. Church employee income is
wages you received as an employee
(other than as a minister or member of a
religious order) of a church or qualified
church-controlled organization that has a
certificate in effect electing exemption
from employer social security and
Medicare taxes.

You can get forms and publications at the
following walk-in sites.
Note. The following addresses are
subject to change.

If your only income subject to
self-employment tax is church employee
income, skip lines 1 through 4b in Part V.
Enter -0- on line 4c and go to line 5a.

By Mail
You can order forms and publications by
sending your order to:
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903

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Ministers and Members of
Religious Orders
In most cases, you must pay SE tax on
salaries and other income for services
you performed as a minister, a member of
a religious order who has not taken a vow
of poverty, or a Christian Science
practitioner. But if you filed Form 4361,
Application for Exemption From
Self-Employment Tax for Use by
Ministers, Members of Religious Orders
and Christian Science Practitioners, and
received IRS approval, you will be exempt
from paying SE tax on those net earnings.
If you had no other income subject to SE
tax, you are not required to file Form
1040-SS. But if you had other earnings of
$400 or more subject to SE tax, see Part
V, line A.
If you must pay SE tax, include this
income on Part IV, line 1. But do not
report it on Part V, line 5a; it is not
considered church employee income.
Also include on Part IV, line 1:
• The rental value of or allowance for a
home furnished to you (including
payments for utilities), and
• The value of meals and lodging
provided to you, your spouse, and your
dependents for your employer’s
convenience.
However, do not include on Part IV,
line 1:
• Retirement benefits you received from
a church plan after retirement, or
• The rental value of or allowance for a
home furnished to you (including
payments for utilities) after retirement.
If you were an ordained minister, a
member of a religious order who has not
taken a vow of poverty, or a Christian
Science practitioner, and were employed
by a church (congregation) for a salary,
do not include that income in Form
1040-SS, Part IV. Instead, complete Part
V, including on line 2 this income and any
rental (parsonage) allowance or the value
of meals and lodging provided to you. On
the same line, subtract the allowable
amount of any unreimbursed business
expenses you incurred as a church
employee.
For details, see Pub. 517, Social
Security and Other Information for
Members of the Clergy and Religious
Workers.
If you have ever filed Form 2031
to elect social security coverage
CAUTION on your earnings as a minister,
you cannot revoke that election.

!

Members of Certain Religious
Sects
If you have conscientious objections to
social security insurance because of your
membership in and belief in the teachings
of a religious sect recognized as being in
existence at all times since December 31,
1950, and which has provided a
reasonable level of living for its
dependent members, you can request
exemption from SE tax by filing Form

4029, Application for Exemption From
Social Security and Medicare Taxes and
Waiver of Benefits. If you filed Form 4029
and have received IRS approval, do not
file Form 1040-SS. See Pub. 517 for
details.

Even if you do not have to pay
self-employment tax because of a social
security agreement, you may still have to
file a tax return with the Internal Revenue
Service.

Employees of Foreign
Governments or International
Organizations

While you are a debtor in a chapter 11
bankruptcy case, your net profit or loss
from self-employment will be included on
the income tax return (Form 1041) of the
bankruptcy estate. However, you — not
the bankruptcy estate — are responsible
for paying self-employment tax on your
net earnings from self-employment.

You must pay SE tax on income you
earned as a U.S. citizen or a resident of
Puerto Rico employed by a foreign
government (or, in certain cases, by a
wholly owned instrumentality of a foreign
government or an international
organization under the International
Organizations Immunities Act) for
services performed in the United States,
Puerto Rico, Guam, American Samoa,
the USVI, or the CNMI. Report income
from this employment on Part IV, line 1.
Enter the net amount from Part IV, line
27, on Part V, line 2. If you performed
services elsewhere as an employee of a
foreign government or an international
organization, those earnings are exempt
from SE tax.

Commonwealth or Territory
Residents Living Abroad
Generally, if you are a resident of Guam,
American Samoa, the USVI, the CNMI, or
Puerto Rico living abroad, you must pay
SE tax.
Exception. The United States has social
security agreements with many countries
to eliminate dual taxes under two social
security systems. Under these
agreements, you must generally pay
social security and Medicare taxes only to
the country you live in.
The United States now has social
security agreements with the following
countries: Australia, Austria, Belgium,
Canada, Chile, Finland, France,
Germany, Greece, Ireland, Italy, Japan,
Luxembourg, the Netherlands, Norway,
Portugal, South Korea, Spain, Sweden,
Switzerland, and the United Kingdom.
Additional agreements are expected in
the future.
If you have questions about
international social security agreements,
you can:
1. Visit the Social Security
Administration (SSA) website at www.
socialsecurity.gov/international;
2. Call the SSA Office of International
Programs at:
a. 410-965-0144 (not toll free) for
questions on benefits under agreements,
or
b. 410-965-3549 (not toll free) for
questions on the coverage rules of the
agreements; or
3. Write to Social Security
Administration, Office of International
Programs, P.O. Box 17741, Baltimore,
MD 21235-7741. (Do not send Form
1040-SS to this address. Instead, see
Where To File on page 1.)

-3-

Chapter 11 Bankruptcy Cases

Enter on the dotted line to the left of
line 3 of Form 1040-SS, Part V, “Chap. 11
bankruptcy income” and the amount of
your net profit or (loss). Combine that
amount with the total of lines 1 and 2 (if
any) and enter the result on line 3.
For other reporting requirements, see
page 22 in the instructions for Form 1040.

More Than One Business
If you were a farmer and had at least one
other business or you had two or more
nonfarm businesses, your net earnings
from self-employment are the combined
net earnings from all of your businesses.
If you had a loss in one business, it
reduces the income from another.
Complete and file only one Form 1040-SS
for any 1 year. Attach a separate Part III
or Part IV for each trade or business, and
include the net earnings in Part V.
Joint returns. If both you and your
spouse have self-employment income
from a farm or nonfarm business, each of
you must complete and file a separate
Part III or Part IV. Be sure to enter at the
top of each Part III or Part IV the name
and SSN of the spouse who owns the
business. Each of you must also
complete a separate Part V.

Husband-Wife Business
If you and your spouse jointly own and
operate a farm or nonfarm business and
share in the profits and losses, you are
partners in a partnership, whether or not
you have a formal partnership agreement.
Do not use Part III or IV. Instead, file
Form 1065, U.S. Return of Partnership
Income. See Pub. 541, Partnerships, for
more details.
Exception — Qualified joint venture. If
you and your spouse materially
participate (see Material participation on
page C-2 of the instructions for Schedule
C) as the only members of a jointly owned
and operated business, and you file a
joint Form 1040-SS, you can make a joint
election to be taxed as a qualified joint
venture instead of a partnership. To make
this election, you must divide all items of
income, gain, loss, deduction, and credit
between you and your spouse in
accordance with your respective interests
in the venture. Each of you must file a
separate Part III or Part IV, as well as a
separate Part V.

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Exception — Community income. If
you and your spouse wholly own an
unincorporated business as community
property under the community property
laws of a state, foreign country, or U.S.
possession, you can treat the business
either as a sole proprietorship or a
partnership. A change in your reporting
position will be treated as a conversion of
the entity.

Fiscal Year Filers
If your tax year is a fiscal year, use the
tax rate and earnings base that apply at
the time the fiscal year begins. Do not
prorate the tax or earnings base for a
fiscal year that overlaps the date of a rate
or earnings base change.

Specific Instructions
Part I—Total Tax and
Credits
Line 1
Check the filing status that applies to you.
Single. Your filing status is single if:
1. On the last day of the year, you are
unmarried or legally separated from your
spouse under a divorce or separate
maintenance decree, or
2. You meet all of the following
conditions.
a. You lived apart from your spouse
for the last 6 months of 2007. Temporary
absences for special circumstances, such
as business, medical care, school, or
military service, count as time lived in the
home.
b. You file a separate return from your
spouse.
c. You paid over half the cost of
keeping up your home for 2007.
d. Your home was the main home of
your child, adopted child, stepchild, or
eligible foster child for more than half of
2007.
e. You can claim the child as a
dependent or the child’s other parent can
claim the child under the rules for children
of divorced or separated parents (see
Pub. 501).
Married filing jointly. You can choose
this filing status if you were married and
both you and your spouse agree to file a
joint return. If you choose to file a joint
return, check the box for married filing
jointly and be sure to include your
spouse’s name and SSN on the lines
provided below your name and SSN. If
your spouse also had self-employment
income, complete and attach a separate
Part V and, if applicable, Part VI. If
necessary, attach a separate Part III or
Part IV for your spouse’s farm or nonfarm
business.
Joint and several tax liability. If you
file a joint return, both you and your
spouse are generally responsible for the
tax and any interest or penalties due on

the return. This means that if one spouse
does not pay the tax due, the other may
have to.
Married filing separately. You can
choose this filing status if you were
married. This method may benefit you if
you want to be responsible only for your
own tax.

Line 4
If either of the following applies, see
Schedule H (Form 1040), Household
Employment Taxes, and its instructions to
find out if you owe these taxes.
• You paid any one household employee
cash wages of $1,500 or more in 2007.
• You paid total cash wages of $1,000 or
more in any calendar quarter of 2006 or
2007 to household employees.

Line 5
Employee social security and Medicare
tax on tips not reported to employer.
Complete Form 4137, Social Security and
Medicare Tax on Unreported Tip Income,
if you received cash and charge tips of
$20 or more in any month and did not
report all of those tips to your employer.
On the dotted line next to line 5, enter
“Tax on Tips,” and the amount of tax due
(from Form 4137, line 12). Be sure to
include this tax in the total for line 5.
Attach to Form 1040-SS the completed
Form 4137 and Schedule U (Form 1040),
U.S. Schedule of Unreported Tip Income,
which is found at the bottom of Form
4137.
Uncollected employee social security
and Medicare tax on tips. If you did not
have enough wages to cover the social
security and Medicare tax due on tips you
reported to your employer, the amount of
tax due should be identified with codes A
and B in box 12 of your Form W-2AS,
W-2CM, W-2GU, or W-2VI; or entered in
boxes 22 and 23 of your Form 499R-2/
W-2PR. Include this tax in the total for line
5. Enter the amount of this tax and
“Uncollected Tax” on the dotted line next
to line 5.
Uncollected employee social security
and Medicare tax on group-term life
insurance. If you had group-term life
insurance through a former employer, you
may have to pay social security and
Medicare tax on part of the cost of the life
insurance. The amount of tax due should
be identified with codes M and N in box
12 of your Form W-2AS, W-2CM, W-2GU,
or W-2VI. Include this tax in the total for
line 5. Enter the amount of this tax and
“Uncollected Tax” on the dotted line next
to line 5.
Uncollected social security and
Medicare tax on wages. If you are an
employee who received wages from an
employer who did not withhold social
security and Medicare tax from your
wages, complete Form 8919, Uncollected
Social Security and Medicare Tax on
Wages, to figure your share of the
unreported tax. Enter the amount of tax
due (from Form 8919, line 13) and
“Uncollected Tax” on the dotted line next

-4-

to line 5, and include this tax in the total
for line 5. Attach to Form 1040-SS the
completed Form 8919.

Line 6
Enter any estimated tax payments you
made for 2007 including any overpayment
from your 2006 return that you applied to
your 2007 estimated tax. If you or your
spouse paid separate estimated tax but
are now filing a joint return, add the
amounts you each paid and enter the
total on line 6. If you and your spouse
paid joint estimated tax but are now filing
separate returns, you can divide the
amount paid in any way you choose as
long as you both agree. If you cannot
agree, you must divide the payments in
proportion to each spouse’s individual tax
as shown on your separate returns for
2007. For an example of how to do this,
see chapter 3 of Pub. 505, Tax
Withholding and Estimated Tax.

Line 7
If you, or your spouse if filing a joint
return, had more than one employer for
2007 and total wages of more than
$97,500, too much social security tax may
have been withheld. You can take a credit
on this line for the amount withheld in
excess of $6,045. But if any one employer
withheld more than $6,045, you must ask
that employer to refund the excess to you.
You cannot claim it on Form 1040-SS.
Figure this amount separately for you and
your spouse. You must attach Form
W-2AS, W-2CM, W-2GU, W-2VI, or
499R-2/W-2PR. See chapter 3 of Pub.
505 for more information.

Line 9
If, during 2007, you were a bona fide
resident of Puerto Rico and an eligible
trade adjustment assistance (TAA)
recipient, alternative TAA recipient, or
Pension Benefit Guaranty Corporation
(PBGC) pension recipient, see Form
8885, Health Coverage Tax Credit, to
figure the amount of your credit, if any.
See chapter 1 of Pub. 570 for the new
bona fide residency rules.

Lines 12a Through 12d
Complete lines 12b through 12d if you
want us to directly deposit the amount
shown on line 12a to your checking or
savings account at a U.S. bank or other
U.S. financial institution (such as a mutual
fund, brokerage firm, or credit union).
Otherwise, we will send you a check.
Note. If you do not want your refund
directly deposited to your account, do not
check the box on line 12a. Draw a line
through the boxes on lines 12b and 12d.
Check with your financial
institution to make sure your direct
CAUTION deposit will be accepted and to get
the correct routing and account numbers.
The IRS is not responsible for a lost
refund if you enter the wrong account
information.
If you file a joint return and check the
box on line 12a and attach Form 8888,

!

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Instructions for Form 1040-SS

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Direct Deposit of Refund to More Than
One Account, or fill in lines 12b through
12d, your spouse may get at least part of
the refund.
If the direct deposit to your account(s)
is different than the amount you expected,
you will receive an explanation in the mail
about 2 weeks after your refund is
deposited.

Line 12a
If you want to split the direct deposit of
your refund among two or three accounts,
check the box on line 12a and attach
Form 8888. If you want your refund
deposited to only one account, do not
check the box on line 12a, but instead
complete lines 12b through 12d.

Line 12b
The routing number for your financial
institution must be nine digits. The first
two digits must be 01 through 12 or 21
through 32. Otherwise, the direct deposit
will be rejected and a check sent instead.
Your personal check may state that it
is payable through a financial institution
different from the one at which you have
your checking account. If so, do not use
the routing number on that check.
Instead, contact your financial institution
for the correct routing number to enter on
line 12b.

Line 12d
The account number can be up to 17
characters (both numbers and letters).
Include hyphens but omit spaces and
special symbols. Enter the number from
left to right and leave any unused boxes
blank. Do not include the check number.
Some financial institutions will not
allow a joint refund to be
CAUTION deposited to an individual account.
If the direct deposit is rejected, a check
will be sent instead. The IRS is not
responsible if a financial institution rejects
a direct deposit.

!

Part II—Bona Fide
Residents of Puerto Rico
Claiming Additional Child
Tax Credit
If, during 2007, you were a bona fide
resident of Puerto Rico and you qualify to
claim the additional child tax credit,
complete Part I, line 2; Part II; and the
worksheet on page 6 of these instructions
to figure the amount of your credit.

!

CAUTION

You must have three or more
qualifying children to claim the
additional child tax credit.

Qualifying for the Credit
You may be able to claim the additional
child tax credit for 2007 if all of the
following apply.
• You were a bona fide resident of
Puerto Rico (see Pub. 570).
• Social security and Medicare taxes
were withheld from your wages or you
paid self-employment tax.

• You had three or more qualifying
children (defined below).
Qualifying child. A qualifying child for
purposes of the additional child tax credit
is a child who:
1. Is your son, daughter, stepchild,
foster child, brother, sister, stepbrother,
stepsister, or a descendant of any of them
(for example, your grandchild, niece, or
nephew). A foster child is any child placed
with you by an authorized placement
agency or by a judgment, decree, or other
order of any court of competent
jurisdiction.
2. Was under 17 at the end of 2007.
3. Did not provide over half of his or
her own support for 2007.
4. Lived with you for more than half of
2007. If the child did not live with you for
the required time, see Exception to time
lived with you in the instructions for Form
1040, line 6c.
5. Was a U.S. citizen or national, or a
resident alien of the United States.
Note. An adopted child is always
treated as your own child. An adopted
child includes a child lawfully placed with
you for legal adoption. If you are a U.S.
citizen or U.S. national and your adopted
child lived with you all year as a member
of your household, that child meets the
citizen test.
Information about your qualifying
child. On Part I, line 2, enter the
qualifying child’s name, social security
number, and relationship to you. If you
have more than six qualifying children,
attach a statement to Form 1040-SS with
the required information.

Line 1
For purposes of figuring the additional
child tax credit, you must report all of your
income derived from sources within
Puerto Rico that is excluded from U.S. tax
because you were a bona fide resident of
Puerto Rico. This includes items such as
wages, interest, dividends, taxable
pensions and annuities, and taxable
social security benefits. Also include any
profit or (loss) from Part III, line 36, and
Part IV, line 27. For more information on
these and other types of income to
include on line 1, see the Form 1040
instructions. See Pub. 570 for the rules to
use in determining your Puerto Rican
source income.

Part III—Profit or Loss
From Farming
The accounting method you used to
record your farm income determines
whether you complete Part III, Section A
or C.
Cash method. Include in income both
the cash actually or constructively
received and the fair market value of
goods or other property you received.
Generally, you deduct your expenses
when you pay them.
Accrual method. Include your income in
the year you earned it. It does not matter

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when you get it. Deduct your expenses
when you incur them.

Part V—Self-Employment
Tax
If you are filing a joint return and
both you and your spouse have
CAUTION income subject to
self-employment tax, you must each
complete a separate Part V.

!

What Is Included in Net
Earnings From
Self-Employment
Generally, net earnings include your net
profit from a farm or nonfarm business. If
you were a partner in a partnership, see
the following instructions.

Partnership Income or Loss
When figuring your total net earnings from
self-employment, include your share of
partnership income or loss attributable to
a trade or business and any guaranteed
payments for services or the use of
capital. However, if you were a limited
partner, include only guaranteed
payments for services you actually
rendered to or on behalf of the
partnership.
If you were a general partner, reduce
Part V, lines 1 and 2, for any section 179
expense deduction, oil or gas depletion,
and unreimbursed partnership expenses.
If your partnership was engaged solely
in the operation of a group investment
program, earnings from the operation are
not self-employment earnings for either
the general or limited partners.
If a partner died and the partnership
continued, include in self-employment
income the deceased partner’s
distributive share of the partnership’s
ordinary income or loss through the end
of the month in which he or she died. See
section 1402(f).
If you were married and both you and
your spouse were partners in a
partnership, each of you must pay SE tax
on your own share of the partnership
income. If you are filing jointly, you must
each complete a separate Part V.
Otherwise, each of you must file a
separate Form 1040-SS.

Share Farming
You are considered self-employed if you
produced crops or livestock on someone
else’s land for a share of the crops or
livestock produced (or a share of the
proceeds from the sale of them). This
applies even if you paid another person
(or agent) to do the actual work or
management for you. For details, see
Pub. 225.

Other Income and Losses Included
in Net Earnings From
Self-Employment
1. Rental income from a farm if, as
landlord, you materially participated in the
production or management of the

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Instructions for Form 1040-SS

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Additional Child Tax Credit Worksheet —Part II, Line 3

Keep for Your Records

1. Do you have three or more qualifying children?
䡺 No. Stop. You cannot claim the credit.
䡺 Yes. Go to line 2.
2. Number of qualifying children: _______ × $1,000. Enter the result . . . . . . . . . . . . . . . . . . . . . . . .
3. Enter the amount from Part II, line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4. Enter the amount shown below for your filing status . . . . . . . . . . . . . . . . . . .

4.

2.

• Married filing jointly — $110,000
• Single — $75,000
• Married filing separately — $55,000

5. Is the amount on line 3 more than the amount on line 4?
䡺 No. Leave line 5 blank. Enter -0- on line 6.
䡺 Yes. Subtract line 4 from line 3. If the result is not a multiple of
$1,000, increase it to the next multiple of $1,000 (for example,
increase $425 to $1,000, increase $1,025 to $2,000, etc.) . . . . . . . . . . . .

5.

6. Multiply the amount on line 5 by 5% (.05). Enter the result . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7. Is the amount on line 2 more than the amount on line 6?
䡺 No. Stop. You cannot claim the credit.
䡺 Yes. Subtract line 6 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Enter one-half of the amount from Part V, line 12, here . . . . . . . . . . . . . . . .

8.

9. Enter the total of any:
• Amount from Part II, line 2, plus
• Employee social security and Medicare tax on tips not reported to
employer and shown on the dotted line next to Part I, line 5, plus
• Uncollected employee social security and Medicare tax shown on the
dotted line next to Part I, line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.

7.

10. Add lines 8 and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
11. Enter the amount, if any, from Part I, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
12. Is the amount on line 10 more than the amount on line 11?
䡺 No. Stop. You cannot claim the credit.
䡺 Yes. Subtract line 11 from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
13. Additional child tax credit. Enter the smaller of line 7 or line 12 here and on
Form 1040-SS, Part II, line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
production of farm products on this land.
This income is farm earnings. To
determine if you materially participated in
farm management or production, do not
consider the activities of any agent who
acted for you. The material participation
tests are explained in Pub. 225.
2. Cash or a payment-in-kind from the
Department of Agriculture for participating
in a land diversion program.
3. Payments for the use of rooms or
other space when you also provided
substantial services. Examples are hotel
rooms, boarding houses, tourist camps or
homes, parking lots, warehouses, and
storage garages.
4. Income from the retail sale of
newspapers and magazines if you were
age 18 or older and kept the profits.
5. Amounts received by current or
former self-employed insurance agents
and salespersons that are:
a. Paid after retirement but figured as
a percentage of commissions received

from the paying company before
retirement,
b. Renewal commissions, or
c. Deferred commissions paid after
retirement for sales made before
retirement.
However, certain termination
payments received by former insurance
salespersons are not included in net
earnings from self-employment (as
explained in item 9 under Income and
Losses Not Included in Net Earnings
From Self-Employment on page 7).
6. Income of certain crew members of
fishing vessels with crews of normally
fewer than 10 people. See Pub. 334 for
details.
7. Fees as a state or local
government employee if you were paid
only on a fee basis and the job was not
covered under a federal-state social
security coverage agreement.

-6-

8. Interest received in the course of
any trade or business, such as interest on
notes or accounts receivable.
9. Fees and other payments received
by you for services as a director of a
corporation.
10. Recapture amounts under sections
179 and 280F included in gross income
because the business use of the property
dropped to 50% or less. Do not include
amounts you recaptured on the
disposition of property. See Form 4797,
Sales of Business Property.
11. Fees you received as a
professional fiduciary. This may also
apply to fees paid to you as a
nonprofessional fiduciary if the fees relate
to active participation in the operation of
the estate’s trade or business or the
management of an estate that required
extensive management activities over a
long period of time.
12. Gain or loss from section 1256
contracts or related property by an

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Instructions for Form 1040-SS

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options or commodities dealer in the
normal course of dealing in or trading
section 1256 contracts.

Income and Losses Not
Included in Net Earnings From
Self-Employment
1. Salaries, fees, etc., subject to
social security or Medicare tax that you
received for performing services as an
employee, including services performed
as a public official (except as a fee basis
government employee as explained in
item 7 on page 6, under Other Income
and Losses Included in Net Earnings
From Self-Employment).
2. Fees received for services
performed as a notary public. However, if
you have other earnings of $400 or more
subject to SE tax, on the dotted line next
to Part V, line 3, enter “Exempt — Notary”
and the amount of your net profit as a
notary public from line 2. Subtract that
amount from the total of lines 1 and 2 and
enter the result on line 3.
3. Income you received as a retired
partner under a written partnership plan
that provides lifelong periodic retirement
payments if you had no other interest in
the partnership and did not perform
services for it during the year.
4. Income from real estate rentals if
you did not receive the income in the
course of your trade or business as a real
estate dealer.
5. Income from farm rentals (including
rentals paid in crop shares) if, as landlord,
you did not materially participate in the
production or management of the
production of farm products on the land.
See Pub. 225 for details.
6. Dividends on shares of stock and
interest on bonds, notes, etc., if you did
not receive the income in the course of
your trade or business as a dealer in
stocks or securities.
7. Gain or loss from:
a. The sale or exchange of a capital
asset;
b. Certain transactions in timber, coal,
or domestic iron ore; or
c. The sale, exchange, involuntary
conversion, or other disposition of
property unless the property is stock in
trade or other property that would be
includible in inventory, or held mainly for
sale to customers in the ordinary course
of the business.
8. Net operating losses from other
years.
9. Termination payments you received
as a former insurance salesperson if all of
the following conditions are met.
a. The payment was received from an
insurance company because of services
you performed as an insurance
salesperson for the company.
b. The payment was received after
termination of your agreement to perform
services for the company.
c. You did not perform any services
for the company after termination and

before the end of the year in which you
received the payment.
d. You entered into a covenant not to
compete against the company for at least
a 1-year period beginning on the date of
termination.
e. The amount of the payment
depended primarily on policies sold by or
credited to your account during the last
year of the agreement, or the extent to
which those policies remain in force for
some period after termination, or both.
f. The amount of the payment did not
depend to any extent on length of service
or overall earnings from services
performed for the company (regardless of
whether eligibility for the payment
depended on length of service).

Line 8b
If you received tips of $20 or more in any
month and did not report the full amount
to your employer, you must file Form
4137 (see instructions for Part I, line 5, on
page 4). Disregard the references to
Form 1040 shown on Form 4137. Enter
on line 8b the amount from Form 4137,
line 9.

Line 8c
If you are an employee who received
wages from an employer who did not
withhold social security and Medicare tax,
you must file Form 8919 (see instructions
for Part I, line 5, on page 4). Enter on line
8c the amount from Form 8919, line 10.

Part VI—Optional Methods
To Figure Net Earnings
The optional methods may give you credit
toward your social security coverage even
though you have a loss or a small amount
of income from self-employment. But the
optional methods may require you to pay
SE tax when you would otherwise not be
required to pay.
If you are filing a joint return and both
you and your spouse choose to use an
optional method to figure net earnings
from self-employment, you must each
complete and attach a separate Part VI.
You can change the method after you
file your return. That is, you can change
from the regular to the optional method or
from the optional to the regular method.
To do this, file Form 1040X, Amended
U.S. Individual Income Tax Return. For
information on the deadline for making
this change, see the Instructions for Form
1040X.
Using the optional methods may

TIP qualify bona fide residents of
Puerto Rico to claim the additional
child tax credit or give them a larger
credit.

Farm Optional Method
You may use this method to figure your
net earnings from farm self-employment if
your gross farm income was $2,400 or
less or your net farm profits were less
than $1,733. Net farm profits are the total
of the amounts from Part III, line 36, and

-7-

your distributive share from farm
partnerships.
There is no limit on how many years
you can use this method.
Under this method, report in Part VI,
line 2, two-thirds of your gross farm
income, up to $1,600, as your net
earnings. This method can increase or
decrease your net self-employment farm
earnings. You may use this method even
if your farming business had a loss.
For a farm partnership, figure your
share of gross income based on the
partnership agreement. With guaranteed
payments, your share of the partnership’s
gross income is your guaranteed
payments plus your share of the gross
income after it is reduced by all
guaranteed payments made by the
partnership. If you were a limited partner,
include only guaranteed payments for
services you actually rendered to or on
behalf of the partnership.

Nonfarm Optional Method
You may be able to use this method to
figure your net earnings from nonfarm
self-employment if your net nonfarm
profits were less than $1,733 and also
less than 72.189% of your gross nonfarm
income. Net nonfarm profits are the total
of the amounts from Part IV, line 27, and
your distributive share from other than
farm partnerships.
To use this method, you also must be
regularly self-employed. You meet this
requirement if your actual net earnings
from self-employment were $400 or more
in 2 of the 3 years preceding the year you
use the nonfarm optional method. The net
earnings of $400 or more could be from
either farm or nonfarm earnings or both.
The net earnings include your distributive
share of partnership income or loss
subject to SE tax. Use of this method is
limited to 5 years, which do not have to
be consecutive.
Under this method, report in Part VI,
line 4, two-thirds of your gross nonfarm
income, up to $1,600, as your net
earnings. But you cannot report less than
your actual net earnings from nonfarm
self-employment.
Figure your share of gross income
from a nonfarm partnership in the same
manner as a farm partnership. For details,
see Farm Optional Method, above.

Using Both Optional Methods
If you can use both methods, you can
report less than your total actual net
earnings from farm and nonfarm
self-employment, but you cannot report
less than your actual net earnings from
nonfarm self-employment alone.
If you use both methods to figure net
earnings from self-employment, you
cannot report more than $1,600 of net
earnings from self-employment.
Disclosure, Privacy Act, and
Paperwork Reduction Act Notice. The
IRS Restructuring and Reform Act of
1998, the Privacy Act of 1974, and

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Instructions for Form 1040-SS

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Paperwork Reduction Act of 1980 require
that when we ask you for information we
must first tell you our legal right to ask for
the information, why we are asking for it,
and how it will be used. We must also tell
you what could happen if we do not
receive it and whether your response is
voluntary, required to obtain a benefit, or
mandatory under the law.
This notice applies to all papers you
file with us, including this tax return. It
also applies to any questions we need to
ask you so we can complete, correct, or
process your return; figure your tax; and
collect tax, interest, or penalties.
Our legal right to ask for information is
sections 6001, 6011, and 7651 and their
regulations. They say that you must file a
return or statement with the IRS and pay
to the United States Treasury any tax for
which you are liable. Your response is
mandatory under these sections. Section
6109 requires that you provide your SSN
on what you file. This is so we know who
you are, and can process your return and
other papers. You must fill in all parts of
the tax form that apply to you.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law.
We ask for tax return information to
carry out the tax laws of the United
States. We need it to figure and collect
the right amount of tax.

If you do not file a return, do not
provide the information we ask for, or
provide fraudulent information, you may
be charged penalties and be subject to
criminal prosecution. We may also have
to disallow any deductions shown on the
tax return. This could make the tax higher
or delay any refund, and the calculation of
your social security benefits may be
affected. Interest may also be charged.
Generally, tax returns and return
information are confidential, as stated in
section 6103. However, section 6103
allows or requires the IRS to disclose or
give the information shown on your tax
return to others as described in the Code.
For example, we may disclose your tax
information to the SSA for use in
calculating your social security benefits;
to the Department of Justice, to enforce
the tax laws, both civil and criminal; and
to cities, states, the District of Columbia,
U.S. commonwealths or possessions, and
certain foreign governments to carry out
their tax laws.
We may disclose your tax information
to other persons as necessary to obtain
information which we cannot get in any
other way in order to determine the
amount of or to collect the tax you owe.
We may disclose your tax information to
the Comptroller General of the United
States to permit the Comptroller General
to review the Internal Revenue Service.
We may disclose your tax information to
Committees of Congress; federal, state,
and local child support agencies; and to
other federal agencies for the purposes of

-8-

determining entitlement for benefits or the
eligibility for and the repayment of loans.
We may also disclose this information to
other countries under a tax treaty, or to
federal and state agencies to enforce
federal nontax criminal laws, or to federal
law enforcement and intelligence
agencies to combat terrorism.
Keep this notice with your records. It
may help you if we ask you for other
information. If you have questions about
the rules for filing and giving information,
call or visit any IRS office.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated average
time is:
Recordkeeping . . . . . . . .
Learning about the law or
the form . . . . . . . . . . . . .
Preparing the form . . . . . .
Copying, assembling, and
sending the form to the IRS

5 hr., 34 min.
49 min.
3 hr., 43 min.
1 hr., 16 min.

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. You
can write to the Internal Revenue Service,
Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution
Ave. NW, IR-6406, Washington, DC
20224. Do not send the form to this
address. Instead, see Where To File on
page 1.