I am trying to understand how to fix my taxes for royalty payments I am receiving.
I receive royalty payments as part of a business deal with a company for a product idea they sell. I am not self employed, I am not my own business, I am just a person who came up with a product idea. I have a full time job with a company, this is just additional income.
Last year I received a 1099-NEC and used TurboTax to do my taxes. TurboTax classified the income as self employment income and I filed my taxes in 2022 that way. I had to pay taxes on those royalties and paid self employment tax.
This year I went to do my taxes in TurboTax and got hit hard. I was doing some research on the IRS website and it said I shouldn’t be classifying royalties as self employment if I am not self employed, have no business expenses or my own business. I should have been classifying this as supplement or misc income.
So I have two questions for my circumstance;
How do I take my 1099-NEC and classify that income in this year’s taxes if it isn’t self employment? I didn’t get a 1099-MISC but these are definitely royalties. Should I enter it as a 1099-MISC?
How do I correct my 2022 tax returns for paying self employment taxes on that income?
