Self Employed Income Worksheet: Fill & Download for Free

Line 6 is for any W2 wages you receive which are subject to income tax when you file your 1040, but already have social security and medicare taxes and potentially federal and state withholding taken out. Self employment income is subject to self employment tax plus income tax and thus the worksheet makes a distinction between what you earned as a self employed person (line 1) vs what you earn as an employee (line 6), because the nature of your employment earnings will impact how much estimated tax you should be paying in.

Getting a home loan when you are self-employed doesn’t need to be difficult, as long as your lender understands self-employed guidelines and how to satisfy them.What Documentation do I Need?!Individual Tax Returns (1040) for Previous Two YearsBusiness Tax Returns (1065, 1120, 1120s) for Previous Two YearsThe only documents needed to calculate self-employed income are your tax returns. If you claim your income on Schedule C - you will not have business tax returns and only your personal returns will be needed. In some cases you will only need one year of personal and business tax returns. The documentation needed to qualify a self-employed borrower is actually less than the documentation needed to qualify a wage earning borrower.How is my Income Calculated?!Fannie Mae uses the following worksheet to determine your self-employed income.Essentially, your total self-employed income is either averaged over 12 months (one year) or 24 Months (two years) - typically, whichever calculation is more conservative. If you made less in 2015 than 2016, you’re income would be averaged over 24 months. If you made less in 2016 than 2015 your income would be averaged over 12 months.What Other Factors are Considered for Self-Employed Income?!The following factors must be analyzed before approving a mortgage for a self-employed borrower:the stability of the borrower’s income,the location and nature of the borrower’s business,the demand for the product or service offered by the business,the financial strength of the business, andthe ability of the business to continue generating and distributing sufficient income to enable the borrower to make the payments on the requested mortgage.Self-Employed borrowers should not be discouraged from applying for a mortgage loan. Work with a reputable lender who knows how to underwrite and qualify self-employed borrowers and you will be fine!

You should claim the number of exemptions that you arrive at by completing the worksheet in the top part of the W-4 form (the part that has the instructions). Unless you have unusual tax issues (such as income from a second job, self-employment income, significant investment income, or other unusual circumstances), using the result obtained from the worksheet will typically result in receiving a small refund.You can also use the IRS’s withholding calculator at 2016 Withholding Calculator.Many personal finance software applications have a tax estimator that can advise you how to more precisely adjust your withholdings to achieve a desired return.If you have unusual circumstances, or need more specific advice, you should consult with a tax advisor.