TAP E03-022

Self-Employment Filing Requirements

Statement of Issue:

Self-employment (Schedule C) non-filers represent a large segment of individual non-filers within the Small Business Self-Employed (SB/SE) division of the Internal Revenue Service (IRS). Complexity of tax laws, lack of knowledge and confusion over filing requirements contribute to non-filing among Schedule C, self-employed, individual taxpayers.

Proposal:

The committee proposed that the IRS partner with the Social with the Social Security Administration and Congress to increase the self-employment tax threshold amount to match requirements to receive the minimum of one Social Security credit. A self-employed taxpayer must file and pay self-employment tax on net earned income over $400 even though the current threshold for one Social Security credit is $890.

Response Notes:

Evaluated TAP's recommendation regarding filing requirements and agree the disparity between IRS Implementation of the recommendation to address the disparity between IRS and SSA filing requirements requires legislative change and therefore, can not be considered by the Program Owner for further action. An identical recommendation is currently under evaluation by the National Taxpayer Advocate (NTA) for inclusion in its 2004 Annual Report to Congress, as part of the Service's response to a Treasury Inspector General for Tax Administration report (TIGTA) audit dated May 2003.