When you enter a 1099-MISC with a dollar amount in box 7, this goes to a Schedule C in your 1040.
This is the "return" for your solely owned proprietorship business.
The 1099-MISC (and maybe other things) are the income on Sch C, and you are able to enter expenses.
The net income (gross income minus expenses) will be added to your 1040 as taxable income.
More importantly - because this escapes most people who file a Sch C for the first time, you also must pay self-employment taxes on this net income (well, 92.35% of it anyway). This is the same as the Social Security and Medicare taxes on your W-2 - only you have to pay all 15.3% of the self-employment taxes.
To offset set this a little, half of the SE taxes are carried over to Schedule 1 (line 14) to reduce your taxable income.
But on the whole, you will pay upwards of your marginal tax rate (from your tax bracket) plus 15.3% on your net income when you add a business.
Now the SE tax does not affect your tax bracket (only the Sch C net income does), but it will bump up your tax due, potentially by a lot. You have to prepare for this.
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