Paying IRS from 0 Income

[penwright1029]

I was with Vine 2023 to November 2024 when I opted out.

My husband and I filed jointly.

We received a $29,200 standard deduction. This is way over the amount of income received by both of us in a year.

We receive SSA, SSI and SSDI as our main sources of income.

When our taxes were professionally filed, our income was shown as 0 on the 1040 form, line 10.

I was not selling the products, I received. I only am using them for personal use.

How can we be paying the IRS taxes with no actual income? I have it set up for them to take payments monthly.

Should I do a tax amend?

[Bsch4477]

You probably received a 1099-NEC form containing your taxable income for your products. That income is subject to 15.3 percent of self employment tax even though you don’t have a regular income tax liability. 

You can avoid that tax if you consider that income a hobby by reporting it as other income instead of self employment income in the program. 

[VolvoGirl]

Yes did you get a 1099NEC or a 1099K from Vine?  Did you enter it and  fill out schedule C for self employment income?

[penwright1029]

Our tax preparer did put the Vine 1099 NEC in as self employment. What doesn't make sense to me is, she gave us a $29,200 standard deduction which came to zero income for us. I'm, possibly, going to add it as hobby this next year. And I'm going to do my own tax return. 

[VolvoGirl]

Yes you had zero income after the Standard Deduction so you probably had zero regular income tax on 1040 line 16.  But if you showed a profit on Schedule C you owe Self Employment tax on the profit.   The SE tax is separate from income tax.  Self employment tax is on 1040 line 23.

You will pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C in addition to regular income tax on it.   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.  So you get social security credit for it when you retire.  

[Opus 17]

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@penwright1029 wrote:

Our tax preparer did put the Vine 1099 NEC in as self employment. What doesn't make sense to me is, she gave us a $29,200 standard deduction which came to zero income for us. I'm, possibly, going to add it as hobby this next year. And I'm going to do my own tax return. 

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If you have a business, you have two separate taxes to think about.

You have income tax.  You take the net profit from business, plus all your other taxable income, subtract any deductions, and see if you have income subject to income tax.  You don't, because your Vine income is taxable, but your other income is not, so your total taxable income is less than the standard deduction so that comes out to zero income tax.  

But if you are self-employed, you also pay self-employment tax (social security and medicare) on your business income.  Even if your overall income is so low that you don't pay income tax, you still pay self-employment tax.   Think about working a part-time job.  If you made less than $29,000 working a small part time job, you would pay no income tax, but you would still pay social security and Medicare tax (automatic withholding from your paycheck).  That's what self-employment tax is, and that's why you pay self-employment tax on business income even if your overall income is too low to pay income tax. 

[penwright1029]

Thank you. Now I understand how that all worked. 

[penwright1029]

I should have mentioned, I'm already retired. I'm 77. We have SS, SSI and SSDI as our only income, which is only around 16,000 a year.

[VolvoGirl]

Even if you are retired or only get SS income if you have self employment profit you still pay the SS & Medicare tax.  And it could potentially increase your SS benefit.  

Working after getting SS benefits. Your SS can increase. See 4th paragraph,
We check additional earnings each year you work while receiving Social Security. If an increase is due, we send a notice and pay a one-time check for the increase and your continuing payment will be higher.
https://blog.ssa.gov/three-common-ways-your-social-security-payment-can-grow-after-retirement

And growing your SS benefits after retirement
https://blog.ssa.gov/how-you-can-grow-your-social-security-benefits-beyond-retirement-age

[Opus 17]

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@penwright1029 wrote:

I should have mentioned, I'm already retired. I'm 77. We have SS, SSI and SSDI as our only income, which is only around 16,000 a year.

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Yes, unfortunately, all income that is considered "compensation" from "working" is subject to social security and medicare tax, even if you are retired and collecting your benefits.  In some cases, having additional income might increase your benefit, but it depends on your work history.  (Your benefit is based on your 35 highest earning years.  If you have some zeroes in there (due to unemployment, or being a stay at home parent, or being a student, for example), then a year of working, even at age 77, will replace one of those zeroes, and could result in a benefit recalculation in your favor.)