Why software (ProSeries) is calculating SE tax and IRS not?

[eliteincometax]

Escenario:

line 8   433 (self-employed) (IT IS MORE THAN 400)

line 9   48465

line 10       31 (adjustment of self-employment tax)

line 11   48434

line 12   20800

line 13        80 (business income deduction)

line 23        62 (SE tax)

and IRS will send a letter explaining the refund of SE tax, 62 dollars.

My question is if I have to do manually in some part of the software the deduction of the business income from form 8995?

Thanks

[TaxGuyBill · Accepted solution]

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@eliteincometax wrote:

Escenario:

line 8   433 (self-employed) (IT IS MORE THAN 400)

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The threshold for SE tax is not $400 of self employed profit.  The threshold is $400 of "net earnings from self-employment".  That is 92.35% of the profit.

Interestingly, it seems that ProSeries round the numbers but the IRS does not.

The "net earnings" on $433 of profit is $399.88.  ProSeries rounds it to $400, which triggers SE tax.  But based on what you are saying, it seems like the IRS is not rounding it, so $399.88 is less than the SE tax threshold.

[eliteincometax]

Thanks so much.

I understand now. 

Proseries is rounded to $400. (Schedule SE line 4a).

For me, Proseries is correct because the amounts are always rounded.

I don't know what the IRS is thinking. 😀😂