Yes, this is correct. If
your 1099-MISC has an amount in Box 7 (Nonemployee
compensation), the payer did not consider you an employee. Instead, they are
treating you as a self-employed worker, also called an independent contractor and she will be required to file a Schedule C on her tax return
The good thing about filing
Schedule C is the ability to apply any expenses you
incurred while performing those services.
The only downside is that you’ll
be subject to self-employment
tax on your consulting earnings…
which is basically the self-employed person’s equivalent of social security and
Medicare tax that employers normally withhold from your paychecks. That tax is
calculated on Schedule SE, and you’ll see an amount appear on Form 1040, line
58.
When you’re paid this way, there’s no withholding taken out of your income, which means you’ll pay both self-employment tax as well as income tax.
But being self-employed enables you to have lots of write-offs as well, so make sure to enter all your expenses. This helps you reduce the taxes you might owe or increase your refund. We’ll help you get every possible tax break you deserve.
