Income from an occasional act or transaction, absent proof of efforts to continue those acts or transactions on a regular basis, isn't income from self-employment subject to the SE tax.  (Rev Rul 58-112, 1958-1 CB 323; Rev Rul 55-431, 1955-2 CB 312; Rev Rul 55-258, 1955-1 CB 433) Regularity of activity, frequency of transactions, and the production of income are key elements in determining whether an activity will be considered a trade or business for SE tax purposes.  Income from an occasional act or transaction, without proof of efforts to continue on a regular basis, may not be income from self-employment. In Langford, TC Memo 1988-300, an assistant professor who co-authored a textbook without any obligation to work on later revisions was found not to have trade or business income from the activity. Even though the professor did ultimately revise the book, he was not subject to SE tax.

The fees for the services of a notary public are exempt from the self-employment tax. However, the taxpayer has to prove the income came from notary public services. Merely having a notary seal isn't enough; the taxpayer must produce records of his or her notary public business or other evidence to show he or she isn't subject to the self-employment tax.

Non-resident aliens don’t pay self-employment tax. Residents of the Virgin Islands, Puerto Rico, Guam, or American Samoa, however, are subject to the tax. Non-resident and resident aliens employed in the U.S. by an international organization, a foreign government, or a wholly owned instrumentality of a foreign government are not subject to SE tax. See also Chapter 6.3.

A person who administers the estate of a deceased person (i.e., the fiduciary) is subject to SE tax if: (a) the person is a professional fiduciary; or (b) the person is a nonprofessional fiduciary who manages an estate that includes an active trade or business. Nonprofessional fiduciaries are generally not treated as receiving income from a trade or business unless all of the following are met:

Those who serve in the capacity of fiduciary of an estate on an isolated basis (e.g., a friend or relative of the decedent) are not generally subject to SE tax on the fees they receive for their services.

Commissions allowed by the probate court under local law aren't considered self-employment earnings, but any excess is, on the ground that it represents a special payment for operating the business. (Rev Rul 58-5, 1958-1 CB 322)

A limited partner’s share of partnership income is not subject to SE tax. IRS proposed regs define who are considered limited partners. The regs apply to all entities classified as partnerships for Federal tax purposes. Generally, an individual partner is treated as a limited partner unless he/she:

The income newspaper vendors receive for selling newspapers directly to customers for a profit is not SE income if the vendor is under age 18; for those age 18 and over, it is SE income.

Excluded from self-employment income are any Conservation Reserve Program payments made to individuals who are receiving Social Security retirement or disability payments.

Fees received for performances of services as a director of a corporation, including director meeting attendance, are SE income. A shareholder’s portion of an S corporation’s taxable income is not SE income.

If a taxpayer is a member of a partnership that carries on a trade or business, his/her distributive share of the partnership’s income is SE income. Guaranteed payments from the partnership should be included in net earnings from self-employment (in addition to the pass-through income for the year, if the partner is a general partner).

Ministers, Christian Science practitioners, and members of religious orders who haven’t taken a vow of poverty may get an exemption from self-employment tax on their earnings if certain requirements are met. To get the exemption, Form 4361 must be filed.

A husband and wife who file a joint return may elect out of the partnership rules. Thus, a joint venture between them is not treated as a partnership for tax purposes. (Code Sec. 761(f); Code Sec. 1402(a)(17)) When this election is made, each spouse then files a Schedule C with their portion of the business’ income and expenses, and each would be subject to SE tax. For more detail see Chapter 3.00.

The law provides that net earnings from self-employment don’t include any amounts received from an insurance company for services performed by an individual as an insurance salesperson for the company if:

The amount of payment can’t depend on the length of service or overall earnings from services performed for the company. However, eligibility for payment can depend on length of service and/or overall earnings.

Although retired from daily farming activities, taxpayers who are still contractually obligated to supply an agricultural commodity to the agricultural cooperative of which they remain members are in a trade or business of producing, marketing, processing and selling the commodity. The “value added” payments received from the co-op are subject to self-employment tax (Richard J. Bot, CA 8, 12/22/2003 92 AFTR 2d 2003-7385).

Rents Paid in Crop Shares - are not subject to SE tax unless paid under an arrangement where the landowner (or tenant) materially participates in crop production or controls and directs the farming operation and pays the farmer at a fixed rate as his employee (Reg § 1.1402(a)-4(b)).

Rent from real estate and personal property leased with that real estate is not SE income if no services are provided with the rental. Rents received from a hotel or motel are considered SE income because services (e.g., maid service) are generally provided for the occupants. If substantial services are provided, the income is subject to SE tax. “Substantial” means that part of the rent is actually payment for services. For example, hotels, boarding houses, apartments which furnish hotel services, tourist homes or storage garages. (Reg 1.1402(a)-4(c)(2)) See additional discussion of this topic at page 03.17.06.

Rev Rule 83-139, CB 1983-2 150 - Monthly income of a trailer park owner who provided insubstantial services for tenants was not subject to SE tax. Provided were lots, a laundry facility, city sewer, and roadway to park. Owner cleaned and maintained premises daily and furnished hot water in the laundry. However, the ruling points out that an owner who provides additional services like a recreation hall, card area, pool room, kitchen, auditorium, stage and library would be subject to SE tax on income.

(Anderson, TC) - In a case of first impression, the Tax Court held that a member of a fishing boat crew was self-employed because he was compensated solely from the proceeds of the sale of the boat's catch, even though operating expenses were subtracted from the proceeds before the crew's compensation was determined.

The taxpayer argued that the subtraction of the owner's expenses causes him to be classified as an employee due to the requirement in Reg. §31.3121(b)(20)-1(a) that a self-employed crew member's compensation must depend "solely" on the sales proceeds. However, Code Sec. 3121(b)(20) and its accompanying regulations reflected the tradition of compensating crew members with share of the profits from the sale of the catch. The history of the fishing industry, the relevant legislative history, the preamble and example contained in the regulation, and a logical and practical interpretation of the statute all indicated that "proceeds" refers to net proceeds after the subtraction of operating expenses, rather than the gross proceeds from the sale. A crew member qualifies as an employee only if the member is compensated with something other than a share of the catch, such as an hourly wage or a flat fee in excess of $100 for certain types of work.

Royalty income can be subject to self-employment tax depending on the nature of the income and the taxpayer's involvement in the activities generating the royalties. Generally, royalty income is reported on Schedule E (Form 1040) and is not subject to self-employment tax. However, there are exceptions:

Even if excluded, if the income is for a self-employed person, it is subject to SE tax.

This is not considered self-employment income. However, one case upheld the IRS assertion that dividends were subject to payroll taxes because the attorneys who owned the S corp. didn’t take salaries. IMPORTANT: Active shareholders need to take a “reasonable salary,” which of course, would be subject to FICA withholding. See Chapter 3.29 for more on reasonable compensation.

Income received as an employee or statutory employee is not considered self-employed income.

A child under the age of 18, employed in their parent’s unincorporated business, is not subject to FICA/Medicare payroll taxes and is not considered self-employed for purposes of SE tax (no social security tax is owed).

A similar exemption applies for FUTA, which exempts earnings paid to a child under age 21 while employed by his or her parent.

Note that there is no FICA or FUTA exemption for employing a child if the business is incorporated or a partnership that includes nonparent partners.

Where taxpayers feel they were incorrectly treated as independent contractors instead of employees and find themselves subject to a significant SE tax, they can file the Form SS-8 – “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding” – and see if they can get a determination letter from the IRS stating they are employees. (Of course, filing the SS-8 will not make the employer very happy.)

Until a determination is made in their favor, they still have to pay the SE tax and can amend for a refund when and if they receive a favorable opinion. Once the determination letter is in hand, a taxpayer can file an amended return to add Form 8919 (and the employee’s share of the FICA taxes) and delete Schedule SE and the SE tax, resulting in a net refund equal to the employer’s share of the SE tax. Caution: The client should file the SS-8 promptly as it does not extend the statute of limitations, and should the statute expire before the determination, there is no other recourse. The client should also be aware that filing the SS-8, especially if the IRS determines employee status, could result in “burning a bridge” with that employer.

Profit from a rental activity that is reported on Schedule E is not subject to self-employment (SE) tax. But what about short-term rentals reported on Schedule C – are they subject to SE tax? Even though Pub 527, Page 12, indicates taxpayers “may” have to pay self-employment tax on short-term rental income, the “may” applies to real estate dealers. To quote Pub 334, “You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Rent you receive from real estate held for sale to customers is subject to SE tax. However, rent you receive from real estate held for speculation or investment is not subject to SE tax.” (IRC Sec 1402(a)(1))

Social security and Medicare taxes apply to election workers who are paid $2,400 or more in cash or an equivalent form of compensation in 2025.