1099NEC and self employment deductions - income maximums?

[TaxDocMama]

I’m starting TurboTax and am not sure if figuring out self employment /independent contractor deductions is worth it since my husband has W2 job and I have 1 small 1099 NEC job with substantially less income. Are there income limits to getting any/all of the self employment deductions? Are these included in itemized deductions v the standard deductions, or are these totally separate?

And since so many people work from home now, are there changes to who can claim the self-employed/home based business deductions…as in working from home for a virtual company as a contractor?

Thanks for your thoughts!

[ThomasM125 · Accepted solution]

You are required to report all income from self-employment work and all expenses that are ordinary and necessary for the generation of that income. You are not supposed to simply choose not to deduct expenses. They are separate deductions that apply if you have self-employment income. They are not itemized deductions.

You can take a deduction for a home office for your self-employment work if you have office space that is used exclusively for the management or conduct of the business and you don't have another office available elsewhere in addition to the home office. If you have a loss on your business, may not get a full deduction for your home office expenses, but unused deductions can be carried over to future years.

[VolvoGirl]

Yes you have to report 1099NEC and self employment income no matter how small.  You can deduct expenses.  You can even show a loss and deduct it from your other income.  Business expenses are not the same as the personal Standard Deduction or Itemized Deductions.  You can deduct both.  

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  Here's a Schedule C  https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version or use any of the Desktop CD/Download programs.

How to enter self employment income

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small and if you don't get the 1099NEC.  For the future, you should use a program like Quicken or QuickBooks to track your income and expenses.  There is a QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed  return....

http://quickbooks.intuit.com/self-employed

You use your own records.  You are considered self employed and have to fill out a schedule C for business income.   You use your own name, address and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all income is At Risk.   

After it asks if you received any 1099Misc or 1099NEC it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

[TaxDocMama]

Thanks so much!