IRS Instruction 1040-SS – If you’re a self-employed individual in a U.S. territory like Puerto Rico, understanding IRS Form 1040-SS is crucial for complying with U.S. tax obligations while potentially claiming valuable credits. This comprehensive guide breaks down the 2025 instructions for Form 1040-SS, including how to report self-employment income, calculate taxes, and claim the Additional Child Tax Credit (ACTC) for bona fide residents of Puerto Rico. Whether you’re in Sigli, Aceh, or anywhere else, this article uses the latest official IRS sources to help you navigate the process smoothly.
What Is Form 1040-SS?
Form 1040-SS, officially titled “U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico),” is a specialized tax form for residents of U.S. territories who aren’t required to file a standard U.S. income tax return like Form 1040. It’s primarily used to report net earnings from self-employment to the U.S. government, which helps calculate Social Security benefits and, if applicable, pay self-employment (SE) tax.
This form applies to bona fide residents of:
- Puerto Rico
- U.S. Virgin Islands (USVI)
- Guam
- American Samoa
- Commonwealth of the Northern Mariana Islands (CNMI)
Important note: Starting with tax year 2023, Form 1040-PR (the Spanish-language version) has been discontinued, and all filers should use Form 1040-SS instead. The form now includes both English and Spanish translations for easier accessibility.
Who Must File Form 1040-SS in 2025?
You need to file Form 1040-SS if all three of the following conditions apply:
- You (or your spouse if filing jointly) had net earnings from self-employment of $400 or more, or church employee income of $108.28 or more.
- You are not required to file Form 1040 with the United States.
- You are a bona fide resident of one of the territories listed above.
Even if you don’t meet the self-employment threshold, you might still need to file to:
- Report and pay household employment taxes.
- Pay taxes on unreported tips or wages.
- Withhold Additional Medicare Tax.
- Claim excess Social Security tax withheld.
- Claim the ACTC as a Puerto Rico resident.
Bona fide residency is determined by factors like physical presence, tax home location, and connections to the territory. If you’re a U.S. citizen working for a foreign government or international organization, SE tax may still apply.
Purpose and Benefits of Filing Form 1040-SS
The primary purpose is to report self-employment earnings for Social Security and Medicare coverage, ensuring you’re credited toward future benefits. Unlike regular income tax, SE tax funds these programs directly.
Benefits include:
- Building Social Security credits for retirement, disability, or survivor benefits.
- Potential eligibility for the ACTC, which can provide up to $1,700 per qualifying child for Puerto Rico residents.
- Reporting digital asset transactions if applicable.
Filing also helps avoid penalties for underpayment or non-filing.
How to Calculate Self-Employment Tax on Form 1040-SS?
Self-employment tax is calculated using Schedule SE (Form 1040), which you attach to Form 1040-SS. Here’s a high-level overview:
- Determine Net Earnings: Include profits from businesses (Schedule C), farms (Schedule F), partnerships, or guaranteed payments. Multiply by 92.35% to get the taxable amount.
- Apply the Tax Rate: For 2025, the SE tax rate is 15.3% on net earnings up to the Social Security wage base of $176,100 (increasing to $184,500 in 2026).
- Optional Methods: If earnings are low, use Part II of Schedule SE to maximize credits (up to $7,240 in net earnings for 2025).
- Exemptions: Ministers or religious workers with approved Form 4361 may skip certain calculations.
Use the IRS worksheets in the instructions for precise figures. Remember, half of your SE tax is deductible as an adjustment to income.
Claiming the Additional Child Tax Credit (ACTC) for Bona Fide Puerto Rico Residents
One of the key features for Puerto Rico residents is the ACTC, now available with just one qualifying child (previously required three or more). The maximum credit is $1,700 per child under age 17.
Eligibility Requirements:
- Bona fide Puerto Rico residency (presence test, no external tax home or closer connections elsewhere).
- Paid Social Security/Medicare taxes or SE tax.
- Not claimed as a dependent on another U.S. return.
- Valid SSN for you (or one spouse on joint returns; the other can use an ITIN) and the child (issued before the due date).
Qualifying Child Criteria:
- Under 17 at year-end.
- Related to you (child, sibling, etc.).
- Lived with you over half the year.
- Didn’t provide over half their own support.
- U.S. citizen, national, or resident alien.
Complete Part II of Form 1040-SS. Refunds including ACTC are delayed until mid-February 2026.
Filing Deadlines and Extensions for 2025
- Standard Deadline: April 15, 2026, for calendar-year filers.
- Fiscal-Year Filers: 15th day of the 4th month after year-end.
- Automatic Extensions:
- Puerto Rico residents: 6 months to October 15, 2026, via Form 4868 (doesn’t extend payment).
- Other territories (if outside U.S./Puerto Rico): 2 months to June 15, 2026, plus 4 more months if requested.
Pay any owed taxes by the original deadline to avoid penalties.
Required Attachments and Documents
Attach the following if applicable:
- Schedule SE for SE tax calculations.
- Schedule C (nonfarm business) or F (farm).
- Form 4137 (unreported tips).
- Form 8919 (uncollected taxes).
- Form 8959 (Additional Medicare Tax).
- W-2 forms from territories (e.g., W-2PR).
- For ACTC: List children in Part I, complete Part II.
If the taxpayer is deceased, check the “Deceased” box and note the date. For digital assets, refer to Pub. 570.
Recent Changes and Updates for 2025
Key updates include:
- Expanded ACTC eligibility to one or more children.
- SSN requirement for ACTC (issued before due date).
- Increased Social Security wage base to $176,100.
- Optional methods cap at $7,240.
- New space for more qualifying children on the form.
- Emphasis on electronic payments and direct deposits.
- Text reminders for Taxpayer Assistance Center (TAC) appointments.
- Disaster relief references via Pub. 547.
How to File Form 1040-SS?
- Electronic Filing: Recommended for faster processing.
- Paper Filing: Mail to the appropriate IRS address based on your territory (see instructions).
- Payments: Use electronic methods or checks payable to “United States Treasury.”
For help, consult IRS.gov or a tax professional. Avoid common mistakes like missing attachments or incorrect SSN entries.
Common Mistakes to Avoid
- Underreporting earnings.
- Forgetting to attach schedules.
- Missing the ACTC if eligible.
- Not filing for extensions properly.
- Ignoring digital asset reporting.
Resources and Where to Get Help
Download the official 2025 instructions and form from IRS.gov. For more details, see Pub. 570 (Tax Guide for Individuals With Income From U.S. Possessions). If you need personalized advice, visit a local TAC or use the IRS Interactive Tax Assistant.
This guide is for informational purposes only and not tax advice. Always consult the latest IRS publications or a professional for your specific situation. Stay updated on changes via IRS.gov.