Why is the 1099-MISC being reported as a Business when I worked only for the summer as a research assistant

[MeMyself]

While working this past summer at Rutgers U, I performed typical research assistant duties, and I got paid for the summer as a result. The university sent me a 1099-MISC and no taxes were taken out. I am not a business. I am a student, but Turbo Tax assumes that I'm a business owner and forces me to register as a business. Why?  In addition, Turbo tax found for me a Federal Deduction that is greater than what the Total Income is reported on the 1099-MISC.  So I should pay $0 tax, but yet Turbo tax shows that I owe federal taxes.  Why?  This seems like a bug in Turbo tax.

[VictoriaD75 · Accepted solution]

You need to enter the information a little differently. Generally, 1099-MISC is used to report nonemployee compensation, which indicates business income. Delete what you have entered previously.

Follow these steps if you have a 1099-MISC:

• Under the Federal menu, click on Wages & Income
• Expand the menu for Other Common Income
• Click Start/Revisit next to Form 1099-MISC
• Enter the information as shown on your document

This will remove the self-employment tax and indication of business income.

[MeMyself]

I'm sorry. You lost me. I don't see how to navigate to where you were pointing to. I can open the 1099-MISC but I don't see how to clear any of this.  I've deleted the 1099-MISC entry, re-added the entry, but the same HUGE payment to Uncle Sam always come up because it's a business expense.

Please provide for me the step-by-step navigation, please?

Thank you.

[MinhT1]

Income reported in box 7 of form 1099-MISC is self-employed income. You are considered as self-employed and in IRS parlance, are operating a business doing what you do to earn the income reported on the form 1099-MISC. TurboTax will populate a Schedule C after you enter all your information.

Self-employed income is subject to income tax AND self-employment tax (calculated at 15.3% on 92.35% of net self-employed income).

You do not own a business in the common meaning of the word. So in TurboTax answer that you use the cash method, that you do not have an EIN. You use your own name as the business name and your personal address as the business address.

[MeMyself]

Thank you, Victoria!!!

I got it.  I deleted the entry from the Business part, and deleted also the 1099-MISC part.  Then I saved the file, and then I click on the VISIT ALL portion of the income, and it walked me through the entry.  I entered the 1099-MISC boxes, and voila.  It's better now. There is no Business portion attached anymore. Unfortunately, Uncle Sam still charges me taxes, but it is a smaller amount compared to the previous. Thank you.

[maryquart]

I am having a similar problem with my college son who earned $2500 as a research assistant over the summer doing the same research that he received a wage for during the school year.  The school year payments were recorded on a W-2 where only state taxes were deducted, but the summer research payment was included in a 1099-MISC of which no taxes were deducted.  Following these steps, he is still generating a tax due.  His taxable income is approximately $4000 but the standard deduction is only $3800 which is generating a $49 tax due. It seems that he is being punished because he can be claimed as a dependent on by taxes. The summer research payment is now also generating social security and medicare taxes due since none were deducted at that time.  Is this what should be happening?

[DavidD66]

Your son's tax return sounds correct based upon what you posted.  I would question why the college treated him as an independent contractor during the summer, instead of treating him as an employee.  But when you are treated as an independent contractor, you are "self-employed" as far as that income is concerned, and thus responsible for self-employment tax, which is both halves (employer and employee) of social security and medicare tax.

[acmiskho]

Hi,

Thank you for this. Unfortunately I am having the same issue. In the section "1099-MISC and Other Common Income," whether I click on the 1099-MISC or "Visit All" button and have it walk me through the steps, it is showing up as business income when it is not. Do you have any other tips on working around this? Thank you. 

[JohnB5677]

DavidD66 is correct. 

The work you are doing is being considered a private contractor's position as opposed to an employee.  I don't think you'd question if you got a W-2 that it was employment income.

The tasks you performed as a private contractor are self-employment income, and it is being correctly posted that way.  This income is not only subject to income tax, but it will also incur a 15.3% self employment tax (Social Security & Medicare).   

@acmiskho

[acmiskho]

Hi,

Thank you for responding! I actually found a different thread that was more specific to my situation and more recent, and so was able to get my question there. This situation wasn't what had applied to me, but appreciate the quick response. 

[Amy106]

I entered a 1099MISC income for a bonus from the state of Kansas.  Turbo Tax keeps wanting me to do a business code, etc.  How can I report the income, but not have it listed as a business (which it is not)

[PattiF]

You can report the income so that it is not business income.

First you need to delete the 1099-MISC that you previously entered.

To delete a form In TurboTax Online, here's the general procedure for viewing a list of all the forms in your return and deleting unwanted forms, schedules, and worksheets in TurboTax Online:

1. Sign in to TurboTax and open your return by selecting Continue or Pick up where you left off
2. In the left menu, select Tax Tools and then Tools
3. In the pop-up window Tool Center, choose Delete a form
4. Select Delete next to the form, schedule, and worksheet in the list and follow the instruction

You would report the 1099-MISC as Other Income by following these steps:

Follow these steps in TurboTax Online:

• In the Federal section, under Your income and expenses
• Scroll to Other Common Income
• Select Form 1099-MISC
• Follow the Prompts and enter amount in Box 3, Continue
•  Describe the reason for this 1099-MISC box
• Do any of these uncommon situations apply? check last box
• Select No, it didn't involve work like my main job on Did the Kansas bonus involve work that's like your main job?
• Answer How often did you get income...Although you may receive this income every year, say that you only receive the 1099-MISC only in 2022, not in previous years and not in 2023, you will then have the screen where you can say that it did not involve an intent to earn money.
• Select No on Did the Kansas bonus involve an intent to earn money?

@Amy106