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Hi and welcome to our site!The issue is that compensation reported on 1099MISC form is classified as your self-employment income. Self-employment income is subject of income taxes (federal and state) based on your tax bracket AND additional self-employment taxes 15.6%.When you receive wages reportable on W2 form - employment taxes are paid partially by your employer and partially by you as withheld from wages every paycheck. When you are self-employed - there is no withholding - and as a self-employed person - you are the only responsible for self-employment taxes which are equivalent of employment taxes.
That is explanation of your situation. What to do now? As a self-employed - you are considered as running your own business - and you ate taxed not on the gross income - but on your net income after all allowable deductions. You may deduct all relevant business costs - for instance the cost of your tools, special clothes, etc. Such deductions will help you to reduce your net business income - and both - your income tax liability and self-employment tax liability will be reduced.
Your activity is treated as having your own business - you may report all business income and expenses -on the schedule C -http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
The net income (after deductions)will be reported on the form 1040 line 12 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax and net income is likely self-employment income and 15.3% self-employment tax would be required.Self-employment taxes from schedule SE will go to the form 1040 line 56 - http://www.irs.gov/pub/irs-pdf/f1040.pdf Also - you will deduct half of self-employment taxes on the line 27. Generally - that all you needs for income tax purposes . Please review all possible deductions - that might help to reduce income tax liability.
turbo tax did not ask me to fill out a schedule se. is that only if my employer from 1099 misc paid some sort of taxes on my behalf, which would be stated on my 1099 misc? also line 4 of se says not to fill out this schedule unless you have entered a value for line 2 which is receiving social security of disability. i didn't so they're telling me to not fill out the form, is this correct?
so is line 6 of se where you multiply your income by 53.5% only appilicable if your employer paid taxes on your behalf? and line 2 about only filling out the schedule if you were paid social security or disability, is that relating to entire se form or something else?
so basically if i were able to multiply my income by the 57.51% and deduct that from what i owe, that would mean that my employer who gave me the 1099 would have paid taxes for me, and that is what line 6 of se is trying to calculate? and if my employer paid no taxes for me over the year i basically have to pay the 15% PLUS 15.3% self employment tax minus expenses of 1099 misc amount?
so owing 15% plus another 15% self employment tax, over 30% total of your 1099 misc income, after expenses, is correct? i had the exact same 1099 from the same company in 2011 and don't remember paying nearly that much.