2250730
I am doing my taxes on TT Deluxe for 2020. I, for the first time have a 1099-NEC to enter and when it's all said and done the computed tax rate is over 25%. I thought the tax rate for 1099-NEC and a contractor is supposed to be 15.3% according to the IRS guidelines. I have completed the 1099 and Schedule C through the step by Step method. I have even manually entered it into the forms with the same result. Taxable income on the summary is $91334 taxes $25329. Seems there is an error with TT Deluxe
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Your 1099-NEC income gets taxed twice. You pay regular income tax at your tax bracket on that income and separately you pay about 15.3 percent self employment tax.
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 (If it is 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 (FICA). 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.
You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040. It will be on Schedule 1 line 14 which goes to 1040 line 10a. And subtract the QBI Adjustment on 1040 line 13.
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