Free 2008 Instruction 1040-SS - Federal

2008
Instructions for Form 1040-SS

Department of the Treasury Internal Revenue Service

U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico)
Section references are to the Internal Revenue Code unless otherwise noted. You may also be required to file an income tax return with the government of Guam, American Samoa, the USVI, the CNMI, or Puerto Rico. Check with your local tax office for more details. e. Puerto Rico (you may file either Form 1040-PR (in Spanish) or Form 1040-SS). Even if you have a loss or little

General Instructions
What's New
For 2008, the maximum amount of self-employment income subject to social security tax is $102,000. Conservation Reserve Program (CRP) payments. The Food, Conservation, and Energy Act of 2008 excludes CRP payments from self-employment tax for individuals receiving social security benefits for retirement or disability. This is effective for payments received after December 31, 2007. See the instructions for Part V, line 1b, on page SS-6. Optional methods to figure net earnings. Beginning after December 31, 2007, the amount of gross and net income from self-employment you may have when using the farm optional method or nonfarm optional method has increased. This allows electing taxpayers to secure up to four credits of social security benefits coverage. In future years, the thresholds will be indexed to maintain that level of coverage. See Part VI -- Optional Methods to Figure Net Earnings beginning on page SS-7.

Additional Information
For assistance with Part III (Profit or Loss From Farming), see the 2008 Instructions for Schedule F (Form 1040), Profit or Loss From Farming, and Pub. 225, Farmer's Tax Guide. For assistance with Part IV (Profit or Loss From Business (Sole Proprietorship)), see the 2008 Instructions for Schedule C (Form 1040), Profit or Loss From Business, and Pub. 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ). For details on 2008 tax law changes, see Pub. 553, Highlights of 2008 Tax Changes. If you expect to owe SE tax of $1,000 or more for 2009, you may have to make estimated tax payments. Use Form 1040-ES, Estimated Tax for Individuals, to make estimated tax payments. Amended returns. File a new Form 1040-SS to change a Form 1040-SS you already filed. If you filed Form 1040-SS but should have filed Form 1040, file a corrected return on Form 1040. In either case, at the top of page 1 of the corrected return, enter "CORRECTED" in dark bold letters followed by the date. Generally, an amended Form 1040-SS (or Form 1040, if applicable) must be filed within 3 years after the date on which the original return was filed or within 2 years after the tax was paid, whichever is later.

TIP income from self-employment, it
may benefit you to file Form 1040-SS and use either ``optional method'' in Part VI. See pages SS-7 and -8. If (2) and (3) above apply, you also must file Form 1040-SS (or you may use Form 1040-PR in Spanish if you are a resident of Puerto Rico) to: · Report and pay household employment taxes; · Report and pay employee social security and Medicare tax on (a) unreported tips, (b) wages from an employer with no social security or Medicare tax withheld, or (c) uncollected social security and Medicare tax on tips or group-term life insurance (see the instructions for Part I, line 5, on page SS-4); · Claim excess social security tax withheld; · Claim the additional child tax credit (bona fide residents of Puerto Rico only); and · Claim the health coverage tax credit (bona fide residents of Puerto Rico only).

Reminder
You may be able to e-file Form 1040-SS if you are claiming only the additional child tax credit. For general information about electronic filing, visit www.irs.gov/efile and click on "Individual Taxpayers."

When To File
If you file on a calendar year basis, file by April 15, 2009. If you file on a fiscal year basis, file by the 15th day of the 4th month after the close of your fiscal year.

Purpose of Form
This form is for residents of the U.S. Virgin Islands (USVI), Guam, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), and the Commonwealth of Puerto Rico (Puerto Rico) who are not required to file a U.S. income tax return. One purpose of the form is to report net earnings from self-employment to the United States and, if necessary, pay self-employment (SE) tax on that income. The Social Security Administration (SSA) uses this information to figure your benefits under the social security program. SE tax applies no matter how old you are and even if you already are receiving social security or Medicare benefits. See Who Must File, on this page, for additional uses of this form.

Where To File
Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215

Who Must File
You must file Form 1040-SS if: 1. You, or your spouse if filing a joint return, had net earnings from self-employment (from other than church employee income) of $400 or more (or you had church employee income of $108.28 or more -- see Church Employees on page SS-3); 2. You do not have to file Form 1040 with the United States; and 3. You are a resident of: a. Guam, b. American Samoa, c. The USVI, d. The CNMI, or
Cat. No. 26341Y

Amount You Owe
Pay by Check or Money Order
Enclose your check or money order for the full amount due with Form 1040-SS. Make it payable to the "United States Treasury." Do not send cash. Do not attach the payment to your return. Enter "2008 Form 1040-SS" and your name, address, daytime phone number, and social security number (SSN) on your payment. If you are filing a joint return, enter the SSN shown first on your Form 1040-SS.

To help process your payment, enter the amount on the right side of the check like this: $ XXX.XX. Do not use dashes or lines (for example, do not enter "$ XXX ­ " xx or "$ XXX100").

Pay Electronically
Pay by credit card. You can use your American Express® Card, Discover® Card, MasterCard® card, or Visa® card. To pay by credit card, call toll free or visit the website of either service provider listed below and follow the instructions. A convenience fee will be charged by the service provider based on the amount you are paying. Fees may vary between the providers. You will be told what the fee is during the transaction and you will have the option to either continue or cancel the transaction. You can also find out what the fee will be by calling the provider's toll-free automated customer service number or visiting the provider's website shown below. Official Payments Corporation 1-800-2PAY-TAXSM (1-800-272-9829) 1-877-754-4413 (Customer Service) www.officialpayments.com Link2Gov Corporation 1-888-PAY-1040SM (1-888-729-1040) 1-888-658-5465 (Customer Service) www.PAY1040.com Note. These telephone numbers are not toll free in American Samoa. Pay by Electronic Federal Tax Payment System (EFTPS). EFTPS is a free tax payment system designed with all taxpayers in mind. Online or by phone, you input your tax payment information electronically and you are done. EFTPS offers you convenience. Through EFTPS, you can schedule one-time or recurring payments for withdrawal from your checking or savings account up to 365 days in advance. You can also modify or cancel payments up to 2 business days before the scheduled withdrawal date. To use EFTPS, you must enroll. Enroll online at www.eftps.gov or call Customer Service at 1-800-555-4477 to receive an enrollment form and instructions by mail. TTY/TDD help is available by calling 1-800-733-4829. Spanish-speaking assistance is available at 1-800-244-4829. Note. These telephone numbers are not toll free in American Samoa.

If you check the "Yes" box, you, and your spouse if filing a joint return, are authorizing the IRS to call the designee to answer any questions that may arise during the processing of your return. You are also authorizing the designee to: · Give the IRS any information that is missing from your return, · Call the IRS for information about the processing of your return or the status of your refund or payment(s), · Receive copies of notices or transcripts related to your return, upon request, and · Respond to certain IRS notices about math errors, offsets, and return preparation. You are not authorizing the designee to receive any refund check, bind you to anything (including any additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney. The authorization will automatically end no later than the due date (without regard to extensions) for filing your 2009 tax return. This is April 15, 2010, for most people. If you wish to revoke the authorization before it ends, see Pub. 947.

(1-800-829-3676) (not toll free in American Samoa).

By Mail
You can order forms and publications by sending your order to: Internal Revenue Service 1201 N. Mitsubishi Motorway Bloomington, IL 61705-6613

In Person
You can get forms and publications at the following walk-in sites. Note. The following addresses are subject to change. American Samoa American Samoa Government Tax Office Executive Office Building -- Utulei Pago Pago, AS 96799 CNMI Division of Revenue and Taxation DanDan Commercial Center Saipan, MP 96950 Guam Department of Revenue and Taxation 1240 Route 16 Barrigada, Guam 96913 Puerto Rico U.S. Internal Revenue Service 7 Tabonuco Street, Suite 120 San Patricio Office Center Guaynabo, PR 00966 USVI U.S. Internal Revenue Service Almeric L. Christian Federal Building 3013 Estate Golden Rock, Room 3013 Christiansted, VI 00820 U.S. Internal Revenue Service Ron De Lugo Federal Building and Courthouse 5500 Veterans Drive, Room 216 Charlotte Amalie, VI 00802 USVI Bureau of Internal Revenue 9601 Estate Thomas Charlotte Amalie, VI 00802 USVI Bureau of Internal Revenue 4008 Estate Diamond Christiansted, VI 00820

Signature and Date
Sign and date your return. It is not valid unless you sign it. If you are filing a joint return, your spouse must also sign. If your spouse cannot sign the return, see Pub. 501, Exemptions, Standard Deduction, and Filing Information. Generally, anyone you pay to prepare your return must sign it in the space provided. The preparer must give you a copy of the return for your records. Someone who prepares your return but does not charge you should not sign your return. If you have someone prepare your return, you are still responsible for the correctness of the return.

Daytime Phone Number
Providing your daytime phone number may help speed the processing of your return. If we have questions about items on your return and you can answer our questions over the phone, we may be able to continue processing your return without mailing you a letter. If you are filing a joint return, you may enter either your or your spouse's daytime phone number.

Name and SSN
To ensure proper credit to your social security account, enter your name and SSN, and your spouse's if filing a joint return, exactly as shown on your social security card. If you do not have an SSN, get Form SS-5, Application for a Social Security Card, from an SSA district office or online at www.socialsecurity.gov/ online/ss-5.html.

Third Party Designee
If you want to allow a friend, family member, or any other person you choose to discuss your 2008 tax return with the IRS, check the "Yes" box in the Third Party Designee area on page 1 of Form 1040-SS. Also, enter the designee's name, phone number, and any five numbers the designee chooses as his or her personal identification number (PIN). But if you want to allow the paid preparer who signed your return to discuss it with the IRS, just enter "Preparer" in the space for the designee's name. You do not have to provide the other information requested.

How To Get Forms and Publications
By Internet
You can access the IRS website 24 hours a day, 7 days a week, at www.irs.gov to download forms, instructions, and publications.

Who Must Pay SE Tax?
Self-Employed Persons
You must pay SE tax if you had net earnings of $400 or more as a self-employed person. If you are in business (farm or nonfarm) for yourself, you are self-employed. You must also pay SE tax on your share of certain partnership income and

By Phone
You can order forms and publications by calling 1-800-TAX-FORM

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your guaranteed payments. See Partnership Income or Loss on page SS-6.

Church Employees
If you had church employee income of $108.28 or more, you must pay SE tax on that income. Church employee income is wages you received as an employee (other than as a minister or member of a religious order) of a church or qualified church-controlled organization that has a certificate in effect electing exemption from employer social security and Medicare taxes. If your only income subject to self-employment tax is church employee income, skip lines 1 through 4b in Part V. Enter "-0-" on line 4c and go to line 5a.

incurred as a church employee. Attach an explanation. For details, see Pub. 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

Members of Certain Religious Sects
If you have conscientious objections to social security insurance because of your membership in and belief in the teachings of a religious sect recognized as being in existence at all times since December 31, 1950, and which has provided a reasonable level of living for its dependent members, you can request exemption from SE tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. If you filed Form 4029 and have received IRS approval, do not file Form 1040-SS. See Pub. 517 for details.

2. Call the SSA Office of International Programs at: a. 410-965-0144 (not toll free) for questions on benefits under agreements, or b. 410-965-3549 (not toll free) for questions on the coverage rules of the agreements; or 3. Write to Social Security Administration, Office of International Programs, P.O. Box 17741, Baltimore, MD 21235-7741. (Do not send Form 1040-SS to this address. Instead, see Where To File on page SS-1.) Even if you do not have to pay self-employment tax because of a social security agreement, you may still have to file a tax return with the Internal Revenue Service.

Ministers and Members of Religious Orders
In most cases, you must pay SE tax on salaries and other income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner. But if you filed Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, and received IRS approval, you will be exempt from paying SE tax on those net earnings. If you had no other income subject to SE tax, you are not required to file Form 1040-SS. However, if you had other earnings of $400 or more subject to SE tax, see Part V, line A. If you have ever filed Form 2031 to elect social security coverage CAUTION on your earnings as a minister, you cannot revoke that election. If you must pay SE tax, include this income on Part IV, line 1. But do not report it on Part V, line 5a; it is not considered church employee income. Also include on Part IV, line 1: · The rental value of a home or allowance for a home furnished to you (including payments for utilities), and · The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience. However, do not include on Part IV, line 1: · Retirement benefits you received from a church plan after retirement, or · The rental value of or allowance for a home furnished to you (including payments for utilities) after retirement. If you were an ordained minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner, and were employed by a church (congregation) for a salary, do not include that income in Form 1040-SS, Part IV. Instead, figure your SE tax by completing Part V, including on line 2 this income and any rental (parsonage) allowance or the value of meals and lodging provided to you. On the same line, subtract the allowable amount of any unreimbursed business expenses you

Chapter 11 Bankruptcy Cases
While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041) of the bankruptcy estate. However, you -- not the bankruptcy estate -- are responsible for paying self-employment tax on your net earnings from self-employment. Enter on the dotted line to the left of line 3 of Form 1040-SS, Part V, "Chap. 11 bankruptcy income" and the amount of your net profit or (loss). Combine that amount with the total of lines 1a, 1b, and 2 (if any) and enter the result on line 3. For other reporting requirements, see page 20 in the instructions for Form 1040.

Employees of Foreign Governments or International Organizations
You must pay SE tax on income you earned as a U.S. citizen or a resident of Puerto Rico employed by a foreign government (or, in certain cases, by a wholly owned instrumentality of a foreign government or an international organization under the International Organizations Immunities Act) for services performed in the United States, Puerto Rico, Guam, American Samoa, the USVI, or the CNMI. Report income from this employment on Part IV, line 1. Enter the net amount from Part IV, line 27, on Part V, line 2. If you performed services elsewhere as an employee of a foreign government or an international organization, those earnings are exempt from SE tax.

More Than One Business
If you were a farmer and had at least one other business or you had two or more nonfarm businesses, your net earnings from self-employment are the combined net earnings from all of your businesses. If you had a loss in one business, it reduces the income from another. Complete and file only one Form 1040-SS for any 1 year. Attach a separate Part III or Part IV for each trade or business, and combine the net earnings in a single Part V. Joint returns. If both you and your spouse have self-employment income from separate farm or nonfarm businesses, each of you must complete and file a separate Part III or Part IV. Be sure to enter at the top of each Part III or Part IV the name and SSN of the spouse who owns the business. Each of you must also complete a separate Part V. Attach these pages to a single Form 1040-SS.

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Commonwealth or Territory Residents Living Abroad
Generally, if you are a resident of Guam, American Samoa, the USVI, the CNMI, or Puerto Rico living abroad, you must pay SE tax. Exception. The United States has social security agreements with many countries to eliminate dual taxes under two social security systems. Under these agreements, you must generally pay social security and Medicare taxes only to the country you live in. The United States now has social security agreements with the following countries: Australia, Austria, Belgium, Canada, Chile, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. Additional agreements are expected in the future. If you have questions about international social security agreements, you can: 1. Visit the Social Security Administration (SSA) website at www. socialsecurity.gov/international;

Husband-Wife Business
If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Do not use Part III or IV. Instead, file the appropriate partnership return. Exception -- Qualified joint venture. If you and your spouse materially participate (see Material participation in the 2008 Instructions for Schedule C) as the only members of a jointly owned and

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operated business, and you file a joint Form 1040-SS, you can make a joint election to be taxed as a qualified joint venture instead of a partnership. To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Each of you must file a separate Part III or Part IV, as well as a separate Part V. On each line of your separate Part III or Part IV, you must enter your share of the applicable income, deduction, or loss. For complete information on this election, see the 2008 Instructions for Schedule C. Rental real estate business. If you and your spouse make the election for your rental real estate business, the income generally is not subject to SE tax (for an exception, see item 3 under Other Income and Losses Included in Net Earnings From Self-Employment on page SS-7). If the election is made for a farm rental business that is not included in self-employment, file two Forms 4835, Farm Rental Income and Expenses, with Form 1040. Do not file Form 1040-SS. Exception -- Community income. If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. possession, the income and deductions are reported based on the following. · If only one spouse participates in the business, all of the income from that business is the self-employment earnings of the spouse who carried on the business. · If both spouses participate, the income and deductions are allocated to the spouses based on their distributive shares. · If either or both you and your spouse are partners in a partnership, see Partnership Income or Loss on page SS-6. · If you and your spouse elected to treat the business as a qualifying joint venture, see Exception -- Qualified joint venture beginning on page SS-3.

spouse under a divorce or separate maintenance decree, or 2. You meet all of the following conditions. a. You lived apart from your spouse for the last 6 months of 2008. Temporary absences for special circumstances, such as business, medical care, school, or military service, count as time lived in the home. b. You file a separate return from your spouse. c. You paid over half the cost of keeping up your home for 2008. d. Your home was the main home of your child, adopted child, stepchild, or eligible foster child for more than half of 2008. e. You can claim the child as a dependent or the child's other parent can claim the child under the rules for children of divorced or separated parents (see Pub. 501). Married filing jointly. You can choose this filing status if you were married at the end of 2008 and both you and your spouse agree to file a joint return. If you choose to file a joint return, check the box for married filing jointly and be sure to include your spouse's name and SSN on the lines provided below your name and SSN. If your spouse also had self-employment income, complete and attach a separate Part V and, if applicable, Part VI. If necessary, attach a separate Part III or Part IV for your spouse's farm or nonfarm business. Joint and several tax liability. If you file a joint return, both you and your spouse are generally responsible for the tax and any interest or penalties due on the return. This means that if one spouse does not pay the tax due, the other may have to. However, you may qualify for relief from liability for tax on your joint return if (a) there is an understatement of self-employment tax because your spouse omitted income or claimed false deductions or credits; (b) you are divorced, separated, or no longer living with your spouse; or (c) given all the facts and circumstances, it would not be fair to hold you liable for the tax. To request relief, you generally must file Form 8857, Request for Innocent Spouse Relief, no later than 2 years after the date on which the IRS first attempted to collect the tax from you. For more information, see Pub. 971 and Form 8857. Married filing separately. You can choose this filing status if you were married at the end of 2008. This method may benefit you if you want to be responsible only for your own tax.

Line 5
Also include the following taxes in the line 5 total. Employee social security and Medicare tax on tips not reported to employer. Complete Form 4137, Social Security and Medicare Tax on Unreported Tip Income, if you received cash and charge tips of $20 or more in a calendar month and did not report all of those tips to your employer. On the dotted line next to line 5, enter "Tax on Tips," and the amount of tax due (from Form 4137, line 13). Be sure to include this tax in the total for line 5. Attach to Form 1040-SS the completed Form 4137. Uncollected employee social security and Medicare tax on tips. If you did not have enough wages to cover the social security and Medicare tax due on tips you reported to your employer, the amount of tax due should be identified with codes A and B in box 12 of your Form W-2AS, W-2CM, W-2GU, or W-2VI; or entered in boxes 22 and 23 of your Form 499R-2/ W-2PR. Include this tax in the total for line 5. Enter the amount of this tax and "Uncollected Tax" on the dotted line next to line 5. Uncollected employee social security and Medicare tax on group-term life insurance. If you had group-term life insurance through a former employer, you may have to pay social security and Medicare tax on part of the cost of the life insurance. The amount of tax due should be identified with codes M and N in box 12 of your Form W-2AS, W-2CM, W-2GU, or W-2VI. Include this tax in the total for line 5. Enter the amount of this tax and "Uncollected Tax" on the dotted line next to line 5. Uncollected employee social security and Medicare tax on wages. If you are an employee who received wages from an employer who did not withhold social security and Medicare tax from your wages, complete Form 8919, Uncollected Social Security and Medicare Tax on Wages, to figure your share of the unreported tax. Enter the amount of tax due (from Form 8919, line 13) and "Uncollected Tax" on the dotted line next to line 5, and include this tax in the total for line 5. Attach to Form 1040-SS the completed Form 8919.

Fiscal Year Filers
If your tax year is a fiscal year, use the tax rate and earnings base that apply at the time the fiscal year begins. Do not prorate the tax or earnings base for a fiscal year that overlaps the date of a rate or earnings base change.

Line 6
Enter any estimated tax payments you made for 2008 including any overpayment from your 2007 return that you applied to your 2008 estimated tax. If you or your spouse paid separate estimated tax but are now filing a joint return, add the amounts you each paid and enter the total on line 6. If you and your spouse paid joint estimated tax but are now filing separate returns, you can divide the amount paid in any way you choose as long as you both agree. If you cannot agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2008. For an example of how to do this, see chapter 3 of Pub. 505, Tax Withholding and Estimated Tax.

Specific Instructions
Part I--Total Tax and Credits
Line 1
Check the filing status that applies to you. Single. Your filing status is single if: 1. On the last day of the year, you are unmarried or legally separated from your

Line 4
If either of the following applies, see Schedule H (Form 1040), Household Employment Taxes, and its instructions to find out if you owe these taxes. · You paid any one household employee cash wages of $1,600 or more in 2008. · You paid total cash wages of $1,000 or more in any calendar quarter of 2007 or 2008 to household employees.

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Line 7
If you, or your spouse if filing a joint return, had more than one employer for 2008 and total wages of more than $102,000, too much social security tax may have been withheld. You can take a credit on this line for the amount withheld in excess of $6,324. But if any one employer withheld more than $6,324, you must ask that employer to refund the excess to you. You cannot claim it on Form 1040-SS. Figure this amount separately for you and your spouse. You must attach Form W-2AS, W-2CM, W-2GU, W-2VI, or 499R-2/W-2PR. See chapter 3 of Pub. 505 for more information.

two digits must be 01 through 12 or 21 through 32. Otherwise, the direct deposit will be rejected and a check sent instead. Ask your financial institution for the correct routing number to enter on line 12b if: · Your deposit is to a savings account that does not allow you to write checks, or · Your checks state they are payable through a financial institution different from the one at which you have your checking account.

4. Lived with you for more than half of 2008. If the child did not live with you for the required time, see Exception to time lived with you in the instructions for Form 1040, line 6c. 5. Was a U.S. citizen or national, or a resident alien of the United States. Note. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption. If you are a U.S. citizen or U.S. national and your adopted child lived with you all year as a member of your household, that child meets the citizen test. Information about your qualifying child. On Part I, line 2, enter the qualifying child's name, social security number, and relationship to you. If you have more than six qualifying children, attach a statement to Form 1040-SS with the required information. If the child meets the conditions to be a qualifying child of any other person (other than your spouse if filing jointly) for 2008, see Qualifying child of more than one person in the instructions for Form 1040, line 6c.

Line 12c
Check the appropriate box for the type of account. Do not check more than one box. You must check the correct box to ensure your deposit is accepted.

Line 9
If, during 2008, you were a bona fide resident of Puerto Rico and an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient, see Form 8885, Health Coverage Tax Credit, to figure the amount of your credit, if any. See chapter 1 of Pub. 570 for the bona fide residency rules.

Line 12d
The account number can be up to 17 characters (both numbers and letters). Include hyphens but omit spaces and special symbols. Enter the number from left to right and leave any unused boxes blank. Do not include the check number. Some financial institutions will not allow a joint refund to be CAUTION deposited to an individual account. If the direct deposit is rejected, a check will be sent instead. The IRS is not responsible if a financial institution rejects a direct deposit.

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Lines 12a Through 12d
Complete lines 12b through 12d if you want us to directly deposit the amount shown on line 12a to your checking or savings account at a U.S. bank or other U.S. financial institution (such as a mutual fund, brokerage firm, or credit union). Otherwise, we will send you a check. Note. If you do not want your refund directly deposited to your account, do not check the box on line 12a. Draw a line through the boxes on lines 12b and 12d. You cannot request a deposit of your refund to an account that is not in your name (such as your tax preparer's own account). Check with your financial institution to make sure your direct CAUTION deposit will be accepted and to get the correct routing and account numbers. The IRS is not responsible for a lost refund if you enter the wrong account information. If the direct deposit to your account(s) is different than the amount you expected, you will receive an explanation in the mail about 2 weeks after your refund is deposited.

Line 1
For purposes of figuring the additional child tax credit, you must report all of your income derived from sources within Puerto Rico that is excluded from U.S. tax because you were a bona fide resident of Puerto Rico. This includes items such as wages, interest, dividends, taxable pensions and annuities, and taxable social security benefits. Also include any profit or (loss) from Part III, line 36, and Part IV, line 27. For more information on these and other types of income to include on line 1, see the Form 1040 instructions. See Pub. 570 for the rules to use in determining your Puerto Rican source income.

Part II--Bona Fide Residents of Puerto Rico Claiming Additional Child Tax Credit
If, during 2008, you were a bona fide resident of Puerto Rico and you qualify to claim the additional child tax credit, complete Part I, line 2; Part II; and the worksheet on page SS-6 to figure the amount of your credit.

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CAUTION

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You must have three or more qualifying children to claim the additional child tax credit.

Part III--Profit or Loss From Farming
The accounting method you used to record your farm income determines whether you complete, in addition to Section B, Section A or C. Cash method. Include in income both the cash actually or constructively received and the fair market value of goods or other property you received. Generally, you deduct your expenses when you pay them. Accrual method. Include your income in the year you earned it. It does not matter when you get it. Deduct your expenses when you incur them.

Qualifying for the Credit
You may be able to claim the additional child tax credit for 2008 if all of the following apply. · You were a bona fide resident of Puerto Rico (see Pub. 570). · Social security and Medicare taxes were withheld from your wages or you paid self-employment tax. · You had three or more qualifying children (defined below). Qualifying child. A qualifying child for purposes of the additional child tax credit is a child who: 1. Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew). A foster child is any child placed with you by an authorized placement agency or by a judgment, decree, or other order of any court of competent jurisdiction. 2. Was under 17 at the end of 2008. 3. Did not provide over half of his or her own support for 2008.

Line 12a
If you want to split the direct deposit of your refund among two or three accounts, check the box on line 12a and attach Form 8888, Direct Deposit of Refund to More Than One Account. If you want your refund deposited to only one account, do not check the box on line 12a, but instead complete lines 12b through 12d. If you file a joint return and check the box on line 12a and attach Form 8888 or fill in lines 12b through 12d, your spouse may get at least part of the refund.

Part V--Self-Employment Tax
If you are filing a joint return and both you and your spouse have CAUTION income subject to self-employment tax, you must each complete a separate Part V. This includes those who made a joint election to be taxed as a qualified joint venture.

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Line 12b
The routing number for your financial institution must be nine digits. The first

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Additional Child Tax Credit Worksheet --Part II, Line 3
1. Do you have three or more qualifying children? No. Stop. You cannot claim the credit. Yes. Go to line 2.

Keep for Your Records

2. Number of qualifying children: _______ × $1,000. Enter the result . . . . . . . . . . . . . . . . . . . . . . . . 3. Enter the amount from Part II, line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Enter the amount shown below for your filing status . . . . . . . . . . . . . . . . . . .
· Married filing jointly -- $110,000 · Single -- $75,000 · Married filing separately -- $55,000

2.

3. 4.

5. Is the amount on line 3 more than the amount on line 4? No. Leave line 5 blank. Enter -0- on line 6. Yes. Subtract line 4 from line 3. If the result is not a multiple of $1,000, increase it to the next multiple of $1,000 (for example, increase $425 to $1,000, increase $1,025 to $2,000, etc.) . . . . . . . . . . . .

5. 6.

6. Multiply the amount on line 5 by 5% (.05). Enter the result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Is the amount on line 2 more than the amount on line 6? No. Stop. You cannot claim the credit. Yes. Subtract line 6 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Enter one-half of the amount from Part V, line 12, here . . . . . . . . . . . . . . . . 9. Enter the total of any: · Amount from Part II, line 2, plus · Employee social security and Medicare tax on tips not reported to employer and shown on the dotted line next to Part I, line 5, plus · Uncollected employee social security and Medicare tax shown on the dotted line next to Part I, line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.

7.

9.

10. Add lines 8 and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 11. Enter the amount, if any, from Part I, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 12. Is the amount on line 10 more than the amount on line 11? No. Stop. You cannot claim the credit. Yes. Subtract line 11 from line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 13. Additional child tax credit. Enter the smaller of line 7 or line 12 here and on Form 1040-SS, Part II, line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.

Line 1b
If you were receiving social security retirement or social security disability benefits at the time you received your Conservation Reserve Program (CRP) payment(s), enter the amount of your taxable CRP payment(s) in Part V, line 1b. The amount of these payments is included in Part III, line 6, and in information received from farm partnerships showing your distributive share.

a trade or business and any guaranteed payments for services or the use of capital. However, if you were a limited partner, include only guaranteed payments for services you actually rendered to or on behalf of the partnership. If you were a general partner, reduce Part V, lines 1a and 2, for any section 179 expense deduction, oil or gas depletion, and unreimbursed partnership expenses. Attach an explanation of these deductions. If your partnership was engaged solely in the operation of a group investment program, earnings from the operation are not self-employment earnings for either the general or limited partners. If a partner died and the partnership continued, include in self-employment income the deceased partner's distributive share of the partnership's ordinary income or loss through the end

What Is Included in Net Earnings From Self-Employment
Generally, net earnings include your net profit from a farm or nonfarm business. If you were a partner in a partnership, see the following instructions.

of the month in which he or she died. See section 1402(f). If you were married and both you and your spouse were partners in a partnership, each of you must report your net earnings from self-employment from the partnership. Each of you must complete a separate Part V. If only one of you was a partner in a partnership, the spouse who was the partner must pay SE tax on all of his or her share of partnership income. Community income. Your own distributive share of partnership income is included in figuring your net earnings from self-employment. Unlike the division of that income between spouses for figuring income tax, no part of your share can be included in figuring your spouse's net earnings from self-employment.

Partnership Income or Loss
When figuring your total net earnings from self-employment, include your share of partnership income or loss attributable to

Share Farming
You are considered self-employed if you produced crops or livestock on someone else's land for a share of the crops or

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livestock produced (or a share of the proceeds from the sale of them). This applies even if you paid another person (an agent) to do the actual work or management for you. For details, see Pub. 225.

Other Income and Losses Included in Net Earnings From Self-Employment
1. Rental income from a farm if, as landlord, you materially participated in the production or management of the production of farm products on this land. This income is farm earnings. To determine if you materially participated in farm management or production, do not consider the activities of any agent who acted for you. The material participation tests for landlords are explained in chapter 12 of Pub. 225. 2. Cash or a payment-in-kind from the Department of Agriculture for participating in a land diversion program. 3. Payments for the use of rooms or other space when you also provided substantial services for the convenience of your tenants. Examples are hotel rooms, boarding houses, tourist camps or homes, parking lots, warehouses, and storage garages. See chapter 5 of Pub. 334 for more information. 4. Income from the retail sale of newspapers and magazines if you were age 18 or older and kept the profits. 5. Income you receive as a direct seller. Newspaper carriers or distributors of any age are direct sellers if certain conditions apply. See chapter 5 of Pub. 334 for details. 6. Amounts received by current or former self-employed insurance agents and salespersons that are: a. Paid after retirement but figured as a percentage of commissions received from the paying company before retirement, b. Renewal commissions, or c. Deferred commissions paid after retirement for sales made before retirement. However, certain termination payments received by former insurance salespersons are not included in net earnings from self-employment (as explained in item 10 under Income and Losses Not Included in Net Earnings From Self-Employment). 7. Income of certain crew members of fishing vessels with crews of normally fewer than 10 people. See chapter 10 of Pub. 334 for details. 8. Fees as a state or local government employee if you were paid only on a fee basis and the job was not covered under a federal-state social security coverage agreement. 9. Interest received in the course of any trade or business, such as interest on notes or accounts receivable. 10. Fees and other payments received by you for services as a director of a corporation. 11. Recapture amounts under sections 179 and 280F included in gross income because the business use of the property dropped to 50% or less. Do not include

amounts you recaptured on the disposition of property. See Form 4797, Sales of Business Property. 12. Fees you received as a professional fiduciary. This may also apply to fees paid to you as a nonprofessional fiduciary if the fees relate to active participation in the operation of the estate's business or the management of an estate that required extensive management activities over a long period of time. 13. Gain or loss from section 1256 contracts or related property by an options or commodities dealer in the normal course of dealing in or trading section 1256 contracts.

Income and Losses Not Included in Net Earnings From Self-Employment
1. Salaries, fees, etc., subject to social security or Medicare tax that you received for performing services as an employee, including services performed as a public official (except as a fee basis government employee as explained in item 8 under Other Income and Losses Included in Net Earnings From Self-Employment). 2. Fees received for services performed as a notary public. However, if you have other earnings of $400 or more subject to SE tax, on the dotted line next to Part V, line 3, enter "Exempt -- Notary" and the amount of your net profit as a notary public from line 2. Subtract that amount from the total of lines 1a, 1b, and 2 and enter the result on line 3. 3. Income you received as a retired partner under a written partnership plan that provides lifelong periodic retirement payments if you had no other interest in the partnership and did not perform services for it during the year. 4. Income from real estate rentals if you did not receive the income in the course of a trade or business as a real estate dealer. Report this income in Part IV if you and your spouse made an election to be taxed as a qualified joint venture. 5. Income from farm rentals (including rentals paid in crop shares) if, as landlord, you did not materially participate in the production or management of the production of farm products on the land. See chapter 12 of Pub. 225 for details. Report this income on Form 4835, Farm Rental Income and Expenses, and Form 1040. Use two Forms 4835 if you and your spouse made an election to be taxed as a qualified joint venture. 6. Payments you receive from the Conservation Reserve Program if you are receiving social security benefits for retirement or disability. Deduct these payments on line 1b of Part V. 7. Dividends on shares of stock and interest on bonds, notes, etc., if you did not receive the income in the course of your trade or business as a dealer in stocks or securities. 8. Gain or loss from: a. The sale or exchange of a capital asset;

b. Certain transactions in timber, coal, or domestic iron ore; or c. The sale, exchange, involuntary conversion, or other disposition of property unless the property is stock in trade or other property that would be includible in inventory, or held mainly for sale to customers in the ordinary course of the business. 9. Net operating losses from other years. 10. Termination payments you received as a former insurance salesperson if all of the following conditions are met. a. The payment was received from an insurance company because of services you performed as an insurance salesperson for the company. b. The payment was received after termination of your agreement to perform services for the company. c. You did not perform any services for the company after termination and before the end of the year in which you received the payment. d. You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date of termination. e. The amount of the payment depended primarily on policies sold by or credited to your account during the last year of the agreement, or the extent to which those policies remain in force for some period after termination, or both. f. The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payment depended on length of service).

Line 8b
If you received tips of $20 or more in any month and did not report the full amount to your employer, you must file Form 4137 (see instructions for Part I, line 5, on page SS-4). Disregard the references to Form 1040 shown on Form 4137. Enter on line 8b the amount from Form 4137, line 10.

Line 8c
If you are an employee who received wages from an employer who did not withhold social security and Medicare tax, you must file Form 8919 (see instructions for Part I, line 5, on page SS-4). Enter on line 8c the amount from Form 8919, line 10.

Part VI--Optional Methods To Figure Net Earnings
The optional methods may give you credit toward your social security coverage even though you have a loss or a small amount of income from self-employment. But the optional methods may require you to pay SE tax when you would otherwise not be required to pay. If you are filing a joint return and both you and your spouse choose to use an optional method to figure net earnings from self-employment, you must each complete and attach a separate Part VI.

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You can change the method after you file your return. That is, you can change from the regular to the optional method or from the optional to the regular method. To do this, file a new Form 1040-SS. See the instructions under Amended returns on page SS-1. Using the optional methods may

TIP qualify bona fide residents of
Puerto Rico to claim the additional child tax credit or give them a larger credit.

Under this method, report in Part VI, line 4, two-thirds of your gross nonfarm income, up to $4,200, as your net earnings. But you cannot report less than your actual net earnings from nonfarm self-employment. Figure your share of gross income from a nonfarm partnership in the same manner as a farm partnership. For details, see Farm Optional Method on this page.

Using Both Optional Methods
If you can use both methods, you can report less than your total actual net earnings from farm and nonfarm self-employment, but you cannot report less than your actual net earnings from nonfarm self-employment alone. If you use both methods to figure net earnings from self-employment, you cannot report more than $4,200 of net earnings from self-employment. Disclosure, Privacy Act, and Paperwork Reduction Act Notice. The IRS Restructuring and Reform Act of 1998, the Privacy Act of 1974, and Paperwork Reduction Act of 1980 require that when we ask you for information we must first tell you our legal right to ask for the information, why we are asking for it, and how it will be used. We must also tell you what could happen if we do not receive it and whether your response is voluntary, required to obtain a benefit, or mandatory under the law. This notice applies to all papers you file with us, including this tax return. It also applies to any questions we need to ask you so we can complete, correct, or process your return; figure your tax; and collect tax, interest, or penalties. Our legal right to ask for information is sections 6001, 6011, and 7651 and their regulations. They say that you must file a return or statement with the IRS and pay to the United States Treasury any tax for which you are liable. Your response is mandatory under these sections. Section 6109 requires that you provide your identifying number. This is so we know who you are, and can process your return and other papers. You must fill in all parts of the tax form that apply to you. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. We ask for tax return information to carry out the tax laws of the United States. We need it to figure and collect the right amount of tax. If you do not file a return, do not provide the information we ask for, or provide fraudulent information, you may be charged penalties and be subject to

Farm Optional Method
You may use this method to figure your net earnings from farm self-employment if your gross farm income was $6,300 or less or your net farm profits were less than $4,548. Net farm profits are the total of the amounts from Part III, line 36, and your distributive share from farm partnerships -- minus the amount you would have entered in Part V, line 1b, had you not used the optional method. There is no limit on how many years you can use this method. Under this method, report in Part VI, line 2, two-thirds of your gross farm income, up to $4,200, as your net earnings. This method can increase or decrease your net self-employment farm earnings. You can use this method even if your farming business had a loss. For a farm partnership, figure your share of gross income based on the partnership agreement. With guaranteed payments, your share of the partnership's gross income is your guaranteed payments plus your share of the gross income after it is reduced by all guaranteed payments made by the partnership. If you were a limited partner, include only guaranteed payments for services you actually rendered to or on behalf of the partnership.

Nonfarm Optional Method
You may be able to use this method to figure your net earnings from nonfarm self-employment if your net nonfarm profits were less than $4,548 and also less than 72.189% of your gross nonfarm income. Net nonfarm profits are the total of the amounts from Part IV, line 27, and your distributive share from other than farm partnerships. To use this method, you also must be regularly self-employed. You meet this requirement if your actual net earnings from self-employment were $400 or more in 2 of the 3 years preceding the year you use the nonfarm optional method. The net earnings of $400 or more could be from either farm or nonfarm earnings or both. The net earnings include your distributive share of partnership income or loss subject to SE tax. Use of the nonfarm optional method from nonfarm self-employment is limited to 5 years. The 5 years do not have to be consecutive.

criminal prosecution. We may also have to disallow any deductions shown on the tax return. This could make the tax higher or delay any refund, and the calculation of your social security benefits may be affected. Interest may also be charged. Generally, tax returns and return information are confidential, as stated in section 6103. However, section 6103 allows or requires the IRS to disclose or give the information shown on your tax return to others as described in the Code. For example, we may disclose your tax information to the SSA for use in calculating your social security benefits; to the Department of Justice, to enforce the tax laws, both civil and criminal; and to cities, states, the District of Columbia, U.S. commonwealths or possessions, and certain foreign governments to carry out their tax laws. We may disclose your tax information to other persons as necessary to obtain information which we cannot get in any other way in order to determine the amount of or to collect the tax you owe. We may disclose your tax information to the Comptroller General of the United States to permit the Comptroller General to review the Internal Revenue Service. We may disclose your tax information to Committees of Congress; federal, state, and local child support agencies; and to other federal agencies for the purposes of determining entitlement for benefits or the eligibility for and the repayment of loans. We may also disclose this information to other countries under a tax treaty, or to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. Keep this notice with your records. It may help you if we ask you for other information. If you have questions about the rules for filing and giving information, call or visit any IRS office. The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:
Recordkeeping . . . . . . . . Learning about the law or the form . . . . . . . . . . . . . Preparing the form . . . . . . Copying, assembling, and sending the form to the IRS 5 hr., 27 min. 59 min. 3 hr., 46 min. 1 hr., 3 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the form to this address. Instead, see Where To File on page SS-1.

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