I received $5000 in contest prize money. Reported on a 1099-Misc. My tax bracket is 25%, but my balance due went up by $1500 when I entered it in TurboTax. Why?

[DS30]

check your return to see if you are reporting it as self-employment income (line 57 on 1040)
To preview your Form 1040:
• TurboTax Online sign-in, click Here
• Select "Take me to my Return"
• Go to "Tax Tools" (on the side bar) then  "Tools"
• Under the Tools Center, select "view tax summary"
• Select "Preview my 1040"

[SweetieJean · Accepted solution]

Any increase in income can lower some deductions/credits.

[elpoojmar]

For more context : My Household income puts me in the phase out regime for the Child Tax Credit, so an additional $5000 reduces my credit by $250.

[DS30]

You want to make sure that you are not reporting your 1099-MISC one time winnings as self-employment income.

To Check your return to see if you are reporting it as self-employment income (line 57 on 1040)

To preview your Form 1040:

• TurboTax Online sign-in, click Here
• Select "Take me to my Return"
• Go to "Tax Tools" (on the side bar) then  "Tools"
• Under the Tools Center, select "view tax summary"
• Select "Preview my 1040"

To enter it as other income (on line 21 of your 1040 with is not subject to self-employment taxes)

Once you have signed into your TurboTax Account (for TurboTax Online sign-in, click Here), select "Take Me To My Return" and type "1099-MISC" in the search bar then select "jump to 1099-MISC". TurboTax will guide you in entering this information

You need to make sure that when you enter/editing this 1099-MISC into TurboTax, that you select the following choices so that it is not included as self-employment income. Just edit your 1099-MISC information and pay close attention for the answer to the last 4 questions.

1. Click through the screen for work description (do not associate this 1099-MISC with all work listed)
2. Does one of these uncommon situations apply? - None of these apply
3. Did the involve work that's like XXXX main job? - No
4. How often did (you) get income for ? Just leave as 2017 only (even if you received a similar payment in a prior year, select 2017 only)
5. Did the involve an intent to earn money? No

Now your income will be reported on line 21 on your 1040.

[elpoojmar]

I tried this and I get the same result.  Note that I had essentially managed to get it to do this before, by clicking "prize money" as the category of income.  That was an improvement on when it said I owed roughly $2000 because of additional "self-employment" tax.  But this is still too much.  Any other idea?

[DS30]

The prize money might have pushed you into another tax bracket and would be taxed at your highest marginal rate. In addition, you may be losing some of the deduction benefits as suggested by Sweetie Jean.

You can always review the first 2 pages of your Form 1040 with and without the prize money to see if your credits or deductions change much.

To preview Form 1040 Summary:
• TurboTax Online sign-in, click Here
• Select "Take me to my Return"
• Go to "Tax Tools" (on the side bar) then  "Tools"
• Under the Tools Center, select "view tax summary"
• Select "Form 1040"