Did you receive a 1099-MISC in the mail this year? If it reports an amount in box 7 for non-employee compensation, calculating the tax on it isn't as difficult as you may think. Watch this video to learn more about calculating your taxes on IRS form 1099.
Beginning with the 2020 tax year, Form 1099-NEC replaces the Form 1099-MISC for non-employee compensation. Additionally, Schedule C-EZ is no longer available.
Hello, I’m Victoria from TurboTax with some important information about your 1099-MISC forms.
Did you receive a 1099-MISC in the mail this year? If so, check to see if it reports an amount in box 7 for non-employee compensation. Calculating the tax on the income isn't as difficult as you may think.
There are many reasons why you may receive a 1099-MISC, but commonly it's because of the work you do as an independent contractor, meaning that you aren't an employee of the organizations you provide services to.
As an independent contractor, the IRS treats you as self-employed. One advantage to this is that you can take business deductions to reduce your taxable 1099-MISC income.
However, this also means that you need to fill out additional schedules with your tax return.
Usually, you will have to report the 1099-MISC earnings on a Schedule C or C-EZ to calculate your net profit from self-employment.
Your net profit is equal to the amounts reported on your 1099, plus any other business income not on a 1099, minus any business expenses you deduct, such as the cost of purchasing office supplies, for example.
Once you calculate this net profit, you report it on your 1040 and it's taxed in the same way as the other types of income you report.
Most independent contractors are not subject to tax withholding, so it's important that you make estimated tax payments to the IRS as you earn the income during the year.
And if you do, make sure you keep track of each payment so you can report them on your return and reduce the amount of tax you must pay when you file your tax return.
When you include income from a 1099-MISC on Schedule C of your tax return, you may also need to file a Schedule SE to report the self-employment taxes you owe on your net profit. These taxes cover the Social Security and Medicare programs. However, you do get to deduct the employer's portion of the self-employment tax you calculate on your 1099-MISC income on the first page of your tax return.
If you have 1099-MISC income from contracting or other self-employment, TurboTax Home & Business will guide you step by step through everything you need to report.
We'll ask you simple questions about your income, fill in all the right tax forms, and handle the calculations.
Don’t worry about knowing which tax forms to fill out when you are self-employed, TurboTax Self-Employed will ask you simple questions about you and your business and give you the business deductions you deserve based on your answers. TurboTax Self-Employed uncovers industry-specific deductions. Some you may not even be aware of.