| The income of a newspaper carrier who is under age | | | | income reaches the maximum amount for the 12.4 |
| 18 is not subject to the self-employment tax (Sections | | | | percent old age, survivors and disability insurance |
| 1402(c)(2)(A) and 3121(b)(14)(B)). This rule also applies | | | | (OASDI) portion of the self-employment tax. This |
| to carriers of magazines who are under age 18.The | | | | maximum amount is $94,200 for 2006. Because this |
| carrier must distribute the newspapers or magazines | | | | amount represents the amount after multiplying the net |
| to the ultimate consumer for a fixed price. The | | | | self-employment income by 92.35 percent, the |
| compensation of the carrier must be based solely on | | | | unadjusted amount of self-employment income |
| the difference between what the price the carrier sells | | | | subject to the OASDI portion of the self-employment |
| the newspapers or magazines to the consumer and | | | | tax is $102,003.24 ($94,200 / 0.9235).The unadjusted |
| their cost to the carrier.The newspaper or magazine | | | | self-employment income is the amount of the net |
| may guarantee a minimum amount of compensation to | | | | income reported on Schedule C of Form 1040 |
| the carrier or credit the carrier with unsold and/or | | | | (Schedule F for a farmer). No ceiling applies to the 2.9 |
| returned newspapers or magazines. The newspaper | | | | percent portion of the self-employment tax for |
| or magazine may not pay the carrier an hourly wage | | | | Medicare purposes.The exemption from the |
| or a fixed salary. A written contract must provide that | | | | self-employment tax for newspaper or magazine |
| the newspaper or magazine will not treat the carrier | | | | carriers who are under age 18 makes the choice of |
| as an employee for federal tax purposes.If a teenager | | | | doing such work more attractive to such teenagers |
| makes over $400 in adjusted net income from most | | | | who need a part-time or summer job.Alan D. Campbell |
| other self-employment activities, the teenager would | | | | is a CPA in Arkansas and Florida and is self-employed |
| be subject to self-employment tax. The | | | | primarily as an author of tax publications. He earned a |
| self-employment tax rate is 15.3 percent. The adjusted | | | | Ph.D. in accounting with an emphasis in taxation from |
| net income from self-employment is the net income | | | | the University of North Texas. He is also admitted to |
| from the business multiplied by 92.35 percent. | | | | practice before the United States Tax Court. He has |
| Therefore, to have a self-employment tax liability, the | | | | published numerous articles on tax topics in |
| net income from the activity must exceed $433.13 | | | | professional journals. He is the co-author of the book |
| ($400 / 0.9235).Once the self-employment income | | | | Tax Strategies for the Self-Employed and the revision |
| exceeds this amount, the self-employment tax rate | | | | editor of CCH Financial and Estate Planning Guide, 15th |
| applies to it until the amount of the self-employment | | | | edition. |