Hi
So I moonlight as a musician, and earn a few $k a year doing this, but much of this is eaten up with car mileage (to gigs), repairs to my instruments, advertising, insurance etc. I don't pay in quarterly taxes since my net income is so low it's a subsidized hobby almost.
So why is it that after I enter my gross income from this side business, then start to enter in these piecemeal REDUCTIONS in my effective income, that my projected tax return in the box above is progressively lessening/worsening? I would expect it to be the other way around!
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Strangely enough, an income decrease can sometimes reduce your refund. One example is reducing or losing the Earned Income Credit (EIC) . Your earned income goes down every time you enter a business expense. Your EIC is based on your earned income (gross income less expenses), so as your income goes down, so does your refund.
When figuring your net earnings from self-employment, you must claim all your allowable business expenses. See Publication 596 - Internal Revenue Service, Chapter 5, page 21.
Without examining your return, it's impossible to say exactly what caused your refund to decrease. However, there's a high probability that at least one reason is listed below.
If your refund is wildly off, it's possible you simply mistyped a dollar amount somewhere. An extra digit here, a missing number there, even something as seemingly insignificant as a misplaced decimal point can have an eye-popping effect on your TurboTax refund.
Changes in your income or tax rate:
The reduction in Schedule C net earnings might also cause an IRA contribution to become an excess contribution subject to penalty due to having insufficient compensation to support a contribution already entered.
Loss of credits or deductions:
Related Information:
Strangely enough, an income decrease can sometimes reduce your refund. One example is reducing or losing the Earned Income Credit (EIC) . Your earned income goes down every time you enter a business expense. Your EIC is based on your earned income (gross income less expenses), so as your income goes down, so does your refund.
When figuring your net earnings from self-employment, you must claim all your allowable business expenses. See Publication 596 - Internal Revenue Service, Chapter 5, page 21.
Without examining your return, it's impossible to say exactly what caused your refund to decrease. However, there's a high probability that at least one reason is listed below.
If your refund is wildly off, it's possible you simply mistyped a dollar amount somewhere. An extra digit here, a missing number there, even something as seemingly insignificant as a misplaced decimal point can have an eye-popping effect on your TurboTax refund.
Changes in your income or tax rate:
The reduction in Schedule C net earnings might also cause an IRA contribution to become an excess contribution subject to penalty due to having insufficient compensation to support a contribution already entered.
Loss of credits or deductions:
Related Information:
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