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How to file with side business

How should we file if my wife has a side business with income reported on 1099 misc ($22k) in addition to her regular W2 job ($45k).  Note: my job is only W2 income (49k).  Due to these amounts if I file "married but filing jointly" it puts us in a higher tax bracket.  Should we file her 1099 side job separately?

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How to file with side business

No you should still file a Joint return.  She will owe some extra self employment tax on it.

 

 

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 15.  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 Schedule 1 line 14 which flows to 1040 line 8a.  Turbo Tax automatically calculates the SE Tax and Adjustment.

 

For 2019 Schedule C Net Profit or Loss now goes to 1040 Schedule 1 line 3.  Then the total on schedule 1 line 9 goes to 1040 line 7a.

 

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

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