Thank you for trying to help me by combing through this. I put your questions below and interlaced my answers.
Q: What line of Form 1040 are you calling the "baseline taxes"? I would think you would be looking at line 16.
A: I am calling baseline as the net taxes TurboTax is showing that I owe BEFORE I enter the $100k and -$100k. So it would be what would land on Line 37 of Form 1040 if I conclude my filing BEFORE I enter the $100k and -$100k. The idea is I simply note what that amount is (in TurboTax screen) AND I WOULD EXPECT TO RETURN BACK TO IT after I enter the $100k and the -$100k. Unfortunately, that is NOT the case. I return to the original taxes I owe PLUS ~$4k, so the $100k and -$100k do NOT quite cancel out and what ends up on Line 37 Form 1040 is about $4k more than what it was before entering the $100k and -$100k.
Q: Before you look at the tax, you should look at the income amounts, either total income on Form 1040 line 9, or taxable income on Form 1040 line 15. Do those two lines go back to the original amount after you enter the 1099-MISC and the negative other income? If so, but the tax on line 16 does not go back to the original amount, then we have to dig into the tax calculation.
A: This was a good exercise – I generated/saved Form 1040 PDF without entering the $100k and the -$100k. Then I generated/saved it again after entering the $100k and -$100k.
The amounts on Lines 9, 15, and 16 of Form 1040 all match before and after. IN FACT, ALL Lines 1 through 22 of Form 1040 remain the same. Line 23 is different: it was $3,112 before vs $6,912 after. As a consequence, Line 24 is also up by the same difference. Lines 25 through 36 all remain the same. Line 37 is up (as explained above) by almost $4k ($3974 to be exact)!
Q: Now look at Schedule 1. Does Schedule 1 have $100,000 on line 5 and -$100,000 on line 8z? If the -$100,000 is not on line 8z, what line of Schedule 1 is it on?
A: Schedule 1 (which is nonexistent before entering the $100k and -$100k and only exists afterwards) shows a $100k on Line 5 and -$100k on both Lines 8z and 9. ALL OTHER LINES (Part I & all of PART II) ARE EMPTY.
Q: Do you have any other Schedule E income besides the $100,000 of royalties?
A: No other income on Schedule E. This is further affirmed that there’s no Schedule E in my filing before entering the $100k and -$100k so it gets born after I enter the $100k the resulting Schedule E has $100k on Lines 4, 21, 23b, 24, and 26.
Q: Do you have any other entries in Part I of Schedule 1 besides lines 5 and 8z? If so, which lines, and what amounts?
A: As per above, Part I of Schedule 1 has $100k on Line 5 and -$100k on Lines 8z and Line 9 (obviously Line 9 is just the sum of Lines 8a through 8z). All other lines of Part I of Schedule 1 are empty. The enirety of Part II of Schedule 1 is all empty.
Q: Are you using TurboTax Online or the CD/Download TurboTax software?
A: I am using a downloaded TurboTax Deluxe.
