The 2010 Tax Relief Act, which reduced the self-employment tax by 2 percent for notaries who own a sole proprietorship or signing agent business (and other self-employed individuals) continues on 2012 income.
The tax rate of 13.3 percent includes 10.4 percent for Social Security and 2.9 percent for Medicare. The Social Security portion of the self-employment tax will return to 12.4 percent for 2013 earnings.
Notaries who are self-employed are not considered employees. No taxes are automatically withheld from paychecks for federal income tax, Social Security or Medicare. The self-employment tax is a way for the federal government to collect for Social Security and Medicare.
Income received as a self-employed notary or signing agent, including notarial fees, clerical and travel fees, must be reported as part of the gross income which is reported on Schedule C or Schedule C-EZ of a 1040 tax form. However, notarial fees allowable by the Pennsylvania Notary Public Law, such as those collected for completing affidavits, verifications, acknowledgments, certifications, are not subject to self-employment tax.
According to the Internal Revenue Service, www.irs.gov: “Fees received for services performed as a notary public – If you had no other income subject to self-employment tax, enter Exempt – Notary on Form 1040, line 56. Do not file Schedule SE. However, if you had other earnings of $400 or more subject to the self-employment tax, enter Exempt – Notary and the amount of your net profit as a notary public from Schedule C or Schedule C-EZ on the dotted line to the left of Schedule SE, line 3. Subtract that amount from the total of lines 1a, 1b, and 2 and enter the results on line 3.”
Remember that expenses such as travel, notarial supplies, seminar tuition, notary association membership fees and Errors and Omissions Insurance premiums may be deducted as business expenses. If you have an office in your home, you can also deduct expenses associated with it, including a portion of your utility costs and mortgage insurance.
For more information on reporting taxable income and self-employment tax, visit the Internal Revenue Service Web site at www.irs.gov or consult a tax professional.