Figure 12-1. Can I Use the Optional Methods?
Summary: This contains two flowcharts. The first one is used to determine if the taxpayer can use the nonfarm optional method to figure net earnings from self-employment.
Start
START here to determine if you can use the nonfarm optional method.
Decision (1)
Are your net nonfarm profits less than $7,493?
| IF Yes Continue To Decision (2) |
| IF No Continue To Process (a) |
Decision (2)
Are your net nonfarm profits less than 72.189% of your gross nonfarm income?
| IF Yes Continue To Decision (3) |
| IF No Continue To Process (a) |
Decision (3)
Were your actual net earnings from self-employment $400 or more in at least 2 of the 3 tax years before this year?
| IF Yes Continue To Decision (4) |
| IF No Continue To Process (a) |
Decision (4)
Have you previously used this method less than 5 years? (Note: There is a 5-year lifetime limit.)
| IF Yes Continue To Process (b) |
| IF No Continue To Process (a) |
Process (a)
You cannot use the nonfarm optional method.
| Continue To End |
Process (b)
You can use the nonfarm optional method. See Pub. 334.
Footnote: If you use both optional methods, see Using Both Optional Methods for limit on the amount to report.
| Continue To End |
End
This is the end of the flowchart.
Summary: The second flowchart is used to determine if the taxpayer can use the farm optional method to figure net earnings from self-employment.
Start
START here to determine if you can use the farm optional method.
Decision (1)
Is your gross farm income $10,380 or less?
| IF Yes Continue To Process (a) |
| IF No Continue To Decision (2) |
Decision (2)
Are your net farm profits less than $7,493?
| IF Yes Continue To Process (a) |
| IF No Continue To Process (b) |
Process (a)
You can use the farm optional method. (see footnote) See Table 12-1.
Footnote: If you use both optional methods, see Using Both Optional Methods for limit on the amount to report.
| Continue To End |
Process (b)
You cannot use the farm optional method.
| Continue To End |
End
This is the end of the flowchart.