You should enter the royalty income as a form 1099-MISC entry in TurboTax, as royalties. Royalties get reported on schedule E, which is the same schedule rental income gets reported on, so you may see some rental related questions that the IRS requires you to answer. Income reported on a schedule E is not subject to self-employment taxes, so you shouldn't have to deal with that.
Where you enter the 1099-MISC Royalty income depends on the source of the income.
If this is from Investment property such as natural resources that are extracted by a third party who leases your property or from intellectual property that you did not create, this would be reported on Schedule E. If you are not actively earning this income, it will go on Schedule E.
To enter on the schedule E, go to personal income and select 1099-MISC,
If this is from natural resources that you extract from property that you own, then this would be reported on a schedule C. If you inherited property from your dad that has natural resources that you are extracting, then it would be self employment income.
Thank you however I still need answers. My dad was a musician and he received royalties. He passed several years ago, I am the beneficiary of those royalties. In Turbotax there is a few different ways to enter this. All were reported to me on 1099-Misc (some as 'Royalty', some as 'Other'). Turbotax is trying to make me pay self employment tax on the income and complete schedule E or C (neither of which I can access). Any help is most appreciated as relates to Turbotax specifically.
You should enter the royalty income as a form 1099-MISC entry in TurboTax, as royalties. Royalties get reported on schedule E, which is the same schedule rental income gets reported on, so you may see some rental related questions that the IRS requires you to answer. Income reported on a schedule E is not subject to self-employment taxes, so you shouldn't have to deal with that.