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This is similar to another question (here)... but I'm not sure if the answer is the same.

I work in the oilfield and I mine cryptocurrency. Because of the current crypto bull cycle the income from each is roughly the same in 2021 to-date. Combined, it will be far exceed the cap.

I was stressing to create an LLC with an S-corp tax election to limit my tax liability. But if my SE Tax will be limited due to exceeding the cap I don't believe I have to concern myself with the LLC this year.

Is this addressed in the 1040 schedules, or would I have to pay in and then file Form 843?

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Self-Employment Tax (like FICA tax) consists of Social Security tax and Medicare tax. The Social Security tax part of it is capped (for 2020 at $137,700) along with the Social Security tax withheld from your job, and this is reflected in 2020 form 1040 Schedule SE lines 7-10.

The Medicare tax part of Self-Employment Tax is not capped (and in fact at sufficiently high incomes you have to pay Additional Medicare Tax).

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  • Right. To be explicit, filling out schedule SE with your tax return will prevent you from needing to file form 843 later. Schedule SE uses your wage income from the 1040 and your self-employment income from schedule C. Separate note: As a sole proprietor, you could get a tax break for qualified business income, as well: irs.gov/newsroom/qualified-business-income-deduction – Orange Coast- reinstate Monica May 4 at 4:41
  • I wish things weren't so complicated, Lol. #1 I may be over the phase-out limit of $207,500 by year's end if the crypto market holds up. #2... Even the IRS is not specific sometimes, in exception 2 for determining eligibility, "dealing in certain assets", is stated as a reason for exclusion in their "Facts About QBI Deduction" webpage. Thank you for the input. Definitely will look further into it. Feather in the cap for the future regardless. :) – Nolan Robidoux May 5 at 1:57

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