When you get a Form 1099-MISC with income in Box 7, you are
being treated as a self-employed independent contractor instead of a “W-2”
employee. Your social security and medicare are added (in the form of "self-employment tax") to the total amount due to the IRS that is calculated by TurboTax.
When you enter this information into the TurboTax section
Wages & Income---Other Common Income---Income from Form 1099-MISC, it will be treated as self-employment income
and any such income over $400 will generate “self-employment tax” in addition
to income tax. This is how a person pays
Social Security and Medicare on self-employment income. For more on self-employment tax, see this
link:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employment-Tax-Social-Security-a...
In case you are interested, here is information from the IRS
on the “independent contractor versus employee” question:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-...
