What is the purpose of a Schedule SE?

The purpose of Schedule SE is to calculate self-employment tax. This form is specifically designed for individuals who earn income from self-employment, such as sole proprietors or freelancers. Self-employment tax consists of Social Security and Medicare taxes primarily for individuals who work for themselves.

When an individual has self-employment income, they need to determine their liability for these taxes, which is calculated based on the net earnings from self-employment reported on Schedule C (Profit or Loss from Business). Schedule SE takes that net earnings figure and helps the taxpayer compute the self-employment tax, which is then reported on their personal income tax return (Form 1040).

This is important because self-employed individuals are responsible for paying both the employer and employee portions of Social Security and Medicare taxes. Therefore, knowing how to accurately determine this tax liability is critical for compliance with tax laws.

The other options do not align with the purpose of Schedule SE. Capital gains and losses are reported on Schedule D, adjusted gross income is typically calculated on the main tax return, and itemized deductions are detailed on Schedule A.