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What is gross income for the optional method of reporting?

Excerpted from "Social Security Handbook". See the up-to-date, official Social Security Handbook at ssa.gov.

1234. What is gross income for the optional method of reporting?

Gross income for optional method of reporting is the gross receipts of the activity minus the cost of items purchased and sold in carrying on that activity. Gross income for this purpose is determined as follows:

  1. If you are a single proprietor, use the gross profits as computed on Schedule F (farm) or Schedule C (non-farm), Form 1040, for Federal income tax purposes.

  2. If you are a partner, first compute the gross income of the partnership as for a single proprietorship. Then allocate the gross income is allocated to each partner on the agreed profit-sharing basis.

  3. If partners received guaranteed payments for services or use of capital, determine each partner's gross income as follows:

    1. Determine the partnership's gross income as for a single proprietorship;

    2. Deduct the total of all guaranteed payments made to all partners for services or use of capital from the partnership's gross income;

    3. Allocate the balance of the partnership's gross income to each partner on the agreed profit-sharing basis (this represents each partner's distributive share of the partnership's gross income); and

    4. Add the guaranteed payment to the distributive share of the partnership's gross income. The total represents each partner's gross income from the partnership.

Last Revised: March, 2001


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Not affiliated with the US Social Security Administration