My husband is self-employed as a Remodel Contractor. He collected tax from his customers. The customers sent him a 1099-NEC. The total income (Box 1) includes the tax he collected. He paid that tax collected back to the State (by filing the Combined Excise Tax Return).
Question: Where do we enter this tax payment he paid to the State? We don't think the tax he collected is actually his income because he sent it to back to the local/state already. So where on the 1040 tax form do we need to offsite this amount? Any suggestions? Thank you!
That is handled in one of 2 ways depending on how you report the income on Schedule C.....
>Income does NOT INCLUDE the sales tax collected and paid to the state - then you do not report the sales tax on your tax return.
>Income reported INCLUDES the sales tax - then the sales tax is entered as an expense On Schedule C. Probably under Taxes and Licenses.
Oh do all his customers give him a 1099NEC? You might have to keep track of the sales tax. How are you entering the sales you don't get a 1099NEC? Are you including the sales tax in the income? I would enter ALL the income with the Sales tax. Then expense the whole amount you pay to Washington under Taxes and Licenses on Schedule C line 23.
If you have the Online version or even in the Desktop program just enter your total business income as Cash or General. You don't need to enter the actual 1099Misc or 1099NEC. Only the total goes to schedule C line 1.
Where to enter expenses in the Online Self Employed version
Yes you only pay tax on the Net Profit after expenses. Is this your first time filling out schedule C for self employment?
To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. 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 any of the Desktop programs. But you will get the most help in the Home & Business version.
How to enter income from Self Employment
https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/26653
Where to enter business expenses
https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-my-self-employment-business-expenses-like-home-office-vehicle-mileage-and-supplies/01/27109
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. You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040. The SE tax is already included in your tax due or reduced your refund. 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
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
1040 Schedule C Instructions
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
Publication 535 Business Expenses
https://www.irs.gov/pub/irs-pdf/p535.pdf
Turbo Tax Self Employed Tax Hub
https://turbotax.intuit.com/personal-taxes/self-employment-taxes
Turbo Tax Self Employment info
https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed/L2HLojrj5
That is handled in one of 2 ways depending on how you report the income on Schedule C.....
>Income does NOT INCLUDE the sales tax collected and paid to the state - then you do not report the sales tax on your tax return.
>Income reported INCLUDES the sales tax - then the sales tax is entered as an expense On Schedule C. Probably under Taxes and Licenses.
Thanks so much for a quick reply. Appreciate it!
First, we thought it would be easier not to include the sales tax for income but the customers already included it on the 1099 so if we don't it doesn't match the 1099. Would it be OK then?
Second, is that a common practice if we enter it as an an expense on Schedule C, under Taxes and Licenses?
Oh do all his customers give him a 1099NEC? You might have to keep track of the sales tax. How are you entering the sales you don't get a 1099NEC? Are you including the sales tax in the income? I would enter ALL the income with the Sales tax. Then expense the whole amount you pay to Washington under Taxes and Licenses on Schedule C line 23.
If you have the Online version or even in the Desktop program just enter your total business income as Cash or General. You don't need to enter the actual 1099Misc or 1099NEC. Only the total goes to schedule C line 1.
Where to enter expenses in the Online Self Employed version
See IRS Schedule C instructions line 23 on page C-9
Only 1 or 2 of his commercial customers send the 1099. The rest of homeowners don't.
Question: If we included the sales tax amounts as our income, wouldn't that put us on a higher tax bracket or the expenses we entered would offset that?
Yes you only pay tax on the Net Profit after expenses. Is this your first time filling out schedule C for self employment?
To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. 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 any of the Desktop programs. But you will get the most help in the Home & Business version.
How to enter income from Self Employment
https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/26653
Where to enter business expenses
https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-my-self-employment-business-expenses-like-home-office-vehicle-mileage-and-supplies/01/27109
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. You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040. The SE tax is already included in your tax due or reduced your refund. 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
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
1040 Schedule C Instructions
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
Publication 535 Business Expenses
https://www.irs.gov/pub/irs-pdf/p535.pdf
Turbo Tax Self Employed Tax Hub
https://turbotax.intuit.com/personal-taxes/self-employment-taxes
Turbo Tax Self Employment info
https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed/L2HLojrj5