| The income of a newspaper carrier who is under | | | | have a self-employment tax liability, the net |
| age 18 is not subject to the self-employment tax | | | | income from the activity must exceed $433.13 |
| (Sections 1402(c)(2)(A) and 3121(b)(14)(B)). This | | | | ($400 / 0.9235). |
| rule also applies to carriers of magazines who are | | | | Once the self-employment income exceeds this |
| under age 18. | | | | amount, the self-employment tax rate applies to |
| The carrier must distribute the newspapers or | | | | it until the amount of the self-employment income |
| magazines to the ultimate consumer for a fixed | | | | reaches the maximum amount for the 12.4 |
| price. The compensation of the carrier must be | | | | percent old age, survivors and disability insurance |
| based solely on the difference between what the | | | | (OASDI) portion of the self-employment tax. This |
| price the carrier sells the newspapers or | | | | maximum amount is $94,200 for 2006. Because |
| magazines to the consumer and their cost to the | | | | this amount represents the amount after |
| carrier. | | | | multiplying the net self-employment income by |
| The newspaper or magazine may guarantee a | | | | 92.35 percent, the unadjusted amount of |
| minimum amount of compensation to the carrier | | | | self-employment income subject to the OASDI |
| or credit the carrier with unsold and/or returned | | | | portion of the self-employment tax is $102,003.24 |
| newspapers or magazines. The newspaper or | | | | ($94,200 / 0.9235). |
| magazine may not pay the carrier an hourly wage | | | | The unadjusted self-employment income is the |
| or a fixed salary. A written contract must provide | | | | amount of the net income reported on Schedule |
| that the newspaper or magazine will not treat the | | | | C of Form 1040 (Schedule F for a farmer). No |
| carrier as an employee for federal tax purposes. | | | | ceiling applies to the 2.9 percent portion of the |
| If a teenager makes over $400 in adjusted net | | | | self-employment tax for Medicare purposes. |
| income from most other self-employment | | | | The exemption from the self-employment tax for |
| activities, the teenager would be subject to | | | | newspaper or magazine carriers who are under |
| self-employment tax. The self-employment tax | | | | age 18 makes the choice of doing such work |
| rate is 15.3 percent. The adjusted net income | | | | more attractive to such teenagers who need a |
| from self-employment is the net income from the | | | | part-time or summer job. |
| business multiplied by 92.35 percent. Therefore, to | | | | |