How should the deduction for self-employment tax be treated with the change in the method for computing the Federal Income Tax Deduction?
The self-employment tax must be deducted as an itemized deduction on the cash basis. The Department’s position has been that the self-employment tax is considered paid when the federal tax return is completed and filed, whether the monies used to pay it came from estimated payments, withholding or money paid with the return. When the tax return is completed and filed the taxpayer is able to determine how much of his estimate and/or withholding is used to pay federal income tax and how much is used to pay self-employment tax, and not until then.
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