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Level 1
posted Feb 27, 2021 4:45:30 PM

I am employed. Why is all my federal refund gone once I enter self-employment income?

The reduced amount of refund is much greater than (three times) the tax from the self-employment income that I entered.

0 4 588
4 Replies
Level 15
Feb 27, 2021 4:52:51 PM

When you are self-employed you are not having tax withheld from your paychecks nor are you paying Social Security and Medicare, so you have to pay all of that yourself at tax time unless you pay quarterly tax to keep your tax liability lower at tax time.   You most likely had tax withheld from your W-2 job and were getting a refund until you added the untaxed additional income.   Did you prepare a Schedule C for your business expenses?    You are posting from Premier--not Self-Employed.  You need Self-Employed to prepare a schedule C for business expenses.

 

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

 

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

 

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

 

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

 

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

 

 

Level 15
Feb 27, 2021 4:58:22 PM

Also be aware that any EIC (or other deduction/credits) may have gone down or been eliminated as your income went up, due to the way it's calculated.

Level 1
Feb 27, 2021 6:21:38 PM

Thank you, xmasbaby0!

"You most likely had tax withheld from your W-2 job and were getting a refund until you added the untaxed additional income. " - You are right. Do you mean Turbotax ignores the tax withheld once I add any self-employment income, and the calculation and filing will be wrong? I don't know about Schedule C. I think I will need the software to correctly consider the amount of tax withheld by my employer. Can the "Self-Employed" version do that?

Level 15
Feb 28, 2021 5:39:14 AM

@gradient12 No TurboTax does not ignore the tax withheld from your W-2.   That was included in the calculations.     But you apparently made enough money from your other self-employment income to have a bigger tax liability all together.    If you work as an independent contractor then  when you prepare a Schedule C you can enter your expenses such  as mileage, supplies you bought, home office, etc. that will offset some of the income you have reported receiving from that work.  The Self-Employed software can walk you through that.