All [Event] MetLife & TurboTax Present: the Ask us Anything Forum posts

Re: 1099-NEC for taxes not from main employer

DianeW777 — Sat, 04 Apr 2026 23:35:03 GMT

All the calculations are correct after entering the 1099-NEC.

Self employment tax which can be better explained below.
- Based on the business income the self employment tax is correct. ($2968 x .9235 x .153 = $419)
The self employment tax deduction if half of your self employment tax and is allowed to reduce your overall personal taxable income.
You should see the tips on Schedule 1-A on your return. Check to see if you see them on Line 5 and Line 13.

An exception could be your selection for type of industry the work was for, as well as the answer on the page 'Let's check for uncommon situations (should be no). Although it is a deduction from your income is is not a deduction from your self employment income before the calculation of self employment tax.

Review your Form 1040:

From the left rail menu in TurboTax Online, select Tax Tools (You may have to scroll down on the left rail menu.)

Select Tax Tools
On the drop-down select Tools
On the pop-up menu titled “Tools Center”, select View Tax Summary
On the left sidebar, select Preview my 1040

For TurboTax Desktop, change to 'Forms' and review the forms

@ppetersny

Re: Underpayment penalty not working for California?

avian099 — Fri, 03 Apr 2026 23:46:58 GMT

Here is the exception from form 5805: "The amount of your tax liability (not including tax on lump-sum distributions and accumulation distribution of trusts) less credits (including the withholding credit) but not including estimated tax payments for either 2024 or 2025 was less than $500 (or less than $250 if married/RDP filing a separate return).

The withholding credit is part of what is deducted to determine the final tax liability from the prior year and if it is less than 500/250 then one does not need to deal with an underpayment penalty.

Re: 1099-NEC for taxes not from main employer

ppetersny — Fri, 03 Apr 2026 23:37:33 GMT

thank you. There were no tips reported anywhere else other than the 1099-NEC. I noticed that the deduction that it says I am getting for tips (2758.00) is 210 less that the amount of tips (2968) which matches the 210 self-employment tax deduction it says I'm getting. And it's also charging a self-employment tax of 419 on the tips reported on the 1099-NEC. Perhaps there's a way to cause the tips on the 1099-NEC to not be treated like self-employment (?)

Here is the summary if this helps explain what I am seeing....

Your filing status is Single. This affects your tax rates and which deductions you can take.

Your total income was $18,396, including:

Total wage income: $14,846
Taxable interest income: $582
Business income: $2,968

You took the Standard Deduction of $15,750. You also had a self-employment tax deduction of $210 and a qualified tips deduction of $2,758.

After applying your deductions, your taxable income was $0. Your total tax before credits was $0, but you owed $419 in self-employment tax.

You've already paid $997 through W-2 withholdings. After subtracting your self-employment tax from your payments, your refund is $578. This means you paid more in taxes during the year than you owed, so you get the extra money back.

thank you.

Re: 1099-NEC for taxes not from main employer

RobertB4444 — Fri, 03 Apr 2026 16:31:00 GMT

Is there a deduction for tips entered anywhere else? Also, go back through where you entered the 1099 and make certain that there isn't a typo. The system thinks that there is a deduction for tips that is BIGGER than the amount on the 1099 so it is having trouble with it. The deduction that you entered should have been exactly equal to the amount on the 1099. Make certain that they match and that there isn't any tip deduction entered anywhere else.

Re: Underpayment penalty not working for California?

RobertB4444 — Thu, 02 Apr 2026 22:20:14 GMT

Penalties are charged on the amount that is owed after your payments are applied. If your payments are made timely and equal or exceed your tax liability then there is never a penalty. If your payments are not made timely or you owe taxes then there may be a penalty assessed.

In this instance the amount that you paid in is seen by the system as enough to avoid a penalty. If the system is wrong you will receive a letter in the mail from the FTB.

Re: Underpayment penalty not working for California?

avian099 — Thu, 02 Apr 2026 22:05:03 GMT

@DawnC @RobertB4444 Here's where I actually need clarification. Last year my tax liability was about $2500 and I had paid in more than that so got a refund but to me this does not meet the $500 liability limit in exception 1. That's why I wanted to know if by liability they meant what you might still owe once you complete your taxes or if it means what you owed altogether. I wasn't liable for anything additional last year and as I indicated got a refund but the total tax on line 64 of the 2024 540 was about $2500.

Re: Underpayment penalty not working for California?

avian099 — Thu, 02 Apr 2026 18:14:56 GMT

Thanks. Ok then I guess I should leave things as is and not manually fill in form 5805. The money I received and withholding taken out was approximately the same monthly throughout the year.

As for withholding I made sure that the increase is equal to the total of the estimated payment vouchers.

In fact it's slightly more. This is the first year I have owed an amount like this to the state so I have never had to deal with underpayment or vouchers before.

Re: Underpayment penalty not working for California?

avian099 — Thu, 02 Apr 2026 18:03:17 GMT

Thanks. So even if I don't meet the safe harbor rules if I had a refund last year I do not have to pay a penalty. It is somewhat confusing, IMO. The taxes I owe to the state this year are more than $500 as I indicated in my original post.

Re: Underpayment penalty not working for California?

RobertB4444 — Thu, 02 Apr 2026 13:53:23 GMT

That underpayment penalty is based on when you made your payments and when you earned your money. The system has estimated - based on your answers - that the FTB will not charge you a penalty this year. It is always possible that you will still get a letter from them looking for a 9$ penalty but I would let the system do it's thing and see what happens. You almost certainly don't owe a penalty.

As far as estimates vs increased withholding - increased withholding is better than estimated payments. The IRS views withholding as having been paid equally over every day of the year so there is never a question of timely payment. As long as your increase in withholding covers the amount that you would have covered with estimated payments you're definitely ahead.

Re: Regarding return of excess contribution ROTH IRA

RobertB4444 — Thu, 02 Apr 2026 13:26:59 GMT

No, you followed the correct steps. Go ahead and create the 1099-R that takes care of the withdrawal that you had with the codes P and J as @MarilynG1 says above and that should take care of the problem.

Re: 1099-NEC for taxes not from main employer

ppetersny — Thu, 02 Apr 2026 06:55:47 GMT

Does anyone have any thoughts on this?

Re: Underpayment penalty not working for California?

DawnC — Thu, 02 Apr 2026 00:32:57 GMT

Tax liability is the total tax you owe for the whole year. (Line 24 of Form 1040). It represents the total tax obligation after applying deductions and non-refundable credits, but before subtracting payments made via withholding or estimated payments.

If you have a tax due of less than $500, you meet exception #1. You must make estimated tax payments if you expect to owe at least $500 ($250 if married/registered domestic partner (RDP) filing separately) in tax for 2025. If in the prior year your tax liability, less any credits for the prior year, was less than $500 ($250 for married/RDP filing separately) you are not subject to the underpayment of estimated tax penalty. CA 5805 Instructions

Re: 1099-NEC for taxes not from main employer

ppetersny — Thu, 02 Apr 2026 00:08:13 GMT

I am still confused about something, before adding the 1099-NEC for the tips, TT was showing a Fed refund of 997 and state refund of 324. After adding the 1099-NEC info (2968.41) it is now showing Fed refund of 578 and stat refund of 206. If there is no tax on tips, that doesn't sound right that the refund would be lowered. Not sure if this is related, but at one point it said "We weren't able to deduct all of your tips because the deduction can't be more than your self-employment income" It listed the deduction for tips as 2758.00

Underpayment penalty not working for California?

avian099 — Wed, 01 Apr 2026 23:53:19 GMT

I have an approximately $800 underpayment for California state taxes. Originally it said I had a penalty but then I answered questions about last year's taxes and now there is no penalty. I don't think I meet the safe harbor rules but last year I did get a refund. The 5805 form is not included in the forms that I need to send to the California FTB but I did look at the form and it shows "penalty exception 1 $500/250". However when I manually input my information into the form and do my own calculations I seem to have a very small penalty of about $9 so is this why the form is not included because this is a very small amount or is there a bug of some kind. I revisited the underpayment section, deleted and input the same information few times and still no penalty fee. Also is tax liability defined as what you owed throughout the year or what you owe after you complete tax forms. I assumed that liability means what you owed throughout the year.

The program did create estimated payment vouchers but rather than using these I increased my withholding which I believe is acceptable. I will be earning a lot less this year than last year.

Thanks.

Re: 1099-NEC for taxes not from main employer

ppetersny — Wed, 01 Apr 2026 23:50:50 GMT

Thank you!

Re: 1099-NEC for taxes not from main employer

DianeW777 — Wed, 01 Apr 2026 23:46:51 GMT

No problem at all. Use the federal employer identification number with no dashes (or letters-not common). This will allow your return to move forward and you can have every confidence it's all right to use that. The IRS keeps no record of state information in your tax files.

@ppetersny

Re: 1099-NEC for taxes not from main employer

ppetersny — Wed, 01 Apr 2026 23:44:36 GMT

Thank you. Now it is having an issue with the 1099-NEC box 6 with "State Number" I filled in the State as "NY" and the 1099-NEC does not have a state number, but Turbo Tax keeps flagging "needs info" for the state number

Re: Rental property losses

DawnC — Wed, 01 Apr 2026 23:14:52 GMT

It depends. Most rental activities are considered passive. Passive losses can generally only offset passive income (like profits from other rentals). They cannot usually be used to lower the taxes you owe on ordinary income.

The IRS allows you to deduct up to $25,000 of rental losses against your ordinary income if your AGI is within limits. Passive activities are typically rentals or businesses in which the taxpayer does not actively participate.

Losses not allowed in the current year may be carried forward to future years.
Modified adjusted gross income (MAGI) limits apply, capping the special allowance at $100,000 or $50,000 for those filing as Married Filing Separately.

See More info on Passive Activities

Rental property losses

user17744465357 — Wed, 01 Apr 2026 23:07:30 GMT

Will claiming losses on Schedule E line 16 reduce my federal taxes for the year?

if not how can I use losses to reduce federal income tax?

Re: 1099-NEC for taxes not from main employer

RobertB4444 — Wed, 01 Apr 2026 23:01:59 GMT

In your daughter's federal return scroll down in the wages and income section to "1099-MISC and Other Common Income" and click start next to "1099-NEC".

Say yes and then select "Self-employment income" as the type of income. Then enter the information from the 1099-NEC.

On the next page it will ask if any of the income on the 1099 is tip income and you will enter the full amount from the 1099-NEC.

That will enter and remove the income from her tax return and you'll be all good. The tip amount will be reported an 1040 schedule 1-A.