Sorry, but you don't know what you're talking about. Pull out your 2011 form 1040: http://www.irs.gov/pub/irs-pdf/f1040.pdf http://www.irs.gov/pub/irs-pdf/f104

Sorry, but you don't know what you're talking about. Pull out your 2011 form 1040: http://www.irs.gov/pub/irs-pdf/f1040.pdf http://www.irs.gov/pub/irs-pdf/f1040.pdf * 56: Self-employment tax. Attach Schedule SE. * 61: Add lines 55 through 60. This is your total tax. * 62-72: Credits and payments, including the Earned Income Credit. * 76: AMOUNT YOU OWE: Subtract line 72 (total credits) from line 61 (total tax). That's where his $6.3k SE bill gets nearly wiped out by $5.5k in earned income credit. Credits, unlike deductions, are subtracted dollar for dollar from total tax owed. If he files jointly with a spouse, it can actually reduce their tax bill to $0 on that income. There's no category of taxes that can't be reduced by EIC, including SE (payroll) tax.