Yes, you need to claim all income on your tax return. The $600 rule is for the issuer of the 1099-Misc. The payer does not need to issue a 1099 if the income paid to a person was below $600.
There are several possible reasons for the decrease in your refund.
- The income may have reduced or disqualified you for certain credits.
- The increase in income may have pushed you into another tax bracket.
- If the income is $400 or more you pay not only income tax on the income listed on a 1099-Misc but also self-employment taxes.
Self-employment taxes are social security taxes 12.4% and medicare taxes 2.9%. Employees who receive W2s have 1/2 of the social security and medicare taxes withheld from their pay. The employer pays the other 1/2.
As a self-employed taxpayer you are the employer and employee and therefore pay all the social security and medicare taxes totaling 15.3%.
The best way to see what is happening to look at the forms with the income in and without the income to see what is happening. Pay particular attention to lines 16-24 to see how the tax changed and lines 27-33 to see how your refund changed in the different scenarios.
Please take these steps to preview your 1040 in TurboTax Online:
1. Login to TurboTax Online (https://turbotax.intuit.com/)
2. Click on "Pick up where I left off"
3. Select "Tax Tools" from the menu on the left side of the screen
4. Next select "Tools" from the drop-down menu on the left side of the screen
5. Then click "View Tax Summary" from the pop-up menu
6. Lastly, click on "Preview My 1040" from the menu on the left side of the screen.
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