1099 MISC for Residents

[jeetshek]

Hi all,

I am an International student on F1 visa but a resident for tax filing purposes since its been over 5 years in the USA. I have little 1099 MISC income for 2019. Before entering the 1099 details on the Turbotax free software, I was getting a refund of about $XYZ (federal+state) BUT post adding the 1099 MISC details, it shifted straight to money I owe the IRS (around ABC$, state+federal).  In addition, the 1099 MISC related questions on the software treats the inputs as if you own the business and asks several unnecessary questions. 

Did anyone have similar experience? Any suggestions?

[MinhT1]

Income reported in box 7 of form 1099-MISC is self-employed income. You are considered as self-employed and in IRS parlance, are operating a business doing what you do to earn the income reported on the form 1099-MISC. Self-employed income is subject to income tax AND self-employment tax (calculated at 15.3% on 92.35% of net self-employed income).

You do not own a business in the common meaning of the word. So in TurboTax answer that you use the cash method, that you do not have an EIN. You use your own name as the business name and your personal address as the business address.

[jeetshek]

Hi,

Thanks a lot for your reply. Are you suggesting the business name to be my name and no EIN mentioned on it?  Also how do you suggest I address these questions below:

Describe the reason for this 1099-MISC

Does one of these uncommon situations apply?

Did the involve work that's like your main job?

Did the involve an intent to earn money?

Let's confirm the reason for this income?

The work I did was an internship for a startup company that involved some engineering related work.

[LinaJ2020]

Yes, you can use your name as the name of the business.  If you do not have any employees, you are not required to have an EIN.

1.  Reason for the 1099-MISc, you can simply put something like Engineering internship

2.  If none of the uncommon situations apply, simply check None of the Above.

3.  If this internship involves work like your main job, you would say Yes

4.  If you have intent to earn money, select Yes

5.  Then follow prompts

When you receive a Form 1099-MISC, the IRS will be receiving a copy as well.  Most of the time, IRS treats taxpayers who receive a Form 1099-MISC as business-related thus self-employed.  You are required to pay Self-Employed taxes.  If you received this form only once in a while for some work unrelated to your main job, or if you receive it as an award or prize, you would not be treated as self--employed.  If you will be receiving it ongoing in the future, you are self-employed and will need to file a Schedule C.  

[jeetshek]

Hi,

Thanks. I did what you suggested and it puts my 1099 MISC under Business items- Business Income and Expenses (Sch C) category on the preview page. The issue is- the numbers dont really match up. I am owing a lot more than what I am supposed to be (as suggested-calculated at 15.3% on 92.35% of net self-employed income) and the fact that I am shifting from refund to money I owe is really frustrating. This is largely because of the fact that Turbotax assumes me to be a business owner whereas I was merely an intern for the company.

Please suggest the best way out of this. 

[JamesG1]

I assume that the 1099-Misc is reporting income in box 7.  If this is the case, self-employment income on Schedule C is the appropriate reporting.

You also have the opportunity to offset the income with ordinary and necessary business expenses that were incurred in the business activity.  Were you required to drive your vehicle for business miles?  Were you required to purchase equipment or supplies?

Perhaps this TurboTax Help will be of assistance.

[jeetshek]

Yes, it is box 7 but I do not own the business. It was an Internship I did at a firm.

[KarenJ2]

Please see the following link:

Why is there an amount in Box 7 (Nonemployee Comp) on my 1099-MISC

You worked for the firm but they did not withhold FICA taxes and federal and state taxes for your work with them.  They did not consider you an employee.   So the taxes will need to be paid with your tax returns.

[jeetshek]

Yes, I understand that and I am not debating it. The issue is- the numbers dont really match up. I am owing a lot more than what I am supposed to be (as suggested-calculated at 15.3% on 92.35% of net self-employed income) and the fact that I am shifting from refund to money I owe because of 1099 MISC entry is really frustrating. This is largely because of the fact that Turbotax assumes me to be a business owner whereas I was merely an intern for the company.

Please suggest the best way out of this.

[jeetshek]

Yes, I understand that and I am not debating self-employed taxes. The issue is- the numbers dont really match up. I am owing a lot more than what I am supposed to be (as suggested-calculated at 15.3% on 92.35% of net self-employed income) . In addition, I am shifting from refund to money I owe because of 1099 MISC entry and this is really frustrating. This is largely because of the fact that Turbotax assumes me to be a business owner whereas I was merely an intern for the company.

Please suggest the best way out of this @KarenJ2 @LinaJ2020 @MinhT1 

[KarenJ2]

Self-employed just means you were not an employee.  I'm not sure what you mean by a way out of this.

Did you look at the amount of income you made and calculate  the amount of FICA on that income and the amount of federal tax on that income.   TurboTax would calculate the amount correctly.  

[jeetshek]

Lets say I earned $3000. By my calculations, I should owe 430$ but the amount reflected on my Turbotax is different/higher. Let me know what you think @KarenJ2 

[LeonardS]

Have you taken into account any self-employment tax you my owe on the 1099-MISC income.

[jeetshek]

Yes, I did. My issue is with me having to pay taxes as if I own a business and not self-employment tax.

[LinaJ2020]

Having your business means paying the self-employment tax.  Because you are considered as a business owner, that' why you are paying self-employment tax.  Also, it's the IRS that decides the rules, not TurboTax.  When you receive a Form 1099-MISC  with an amount in box 3 or 7, IRS considers you as a business owner unless you qualify for one of the exceptions like a reward, prize or settlement when you only receive once or twice.  The law says you are a self-employed business owner and subject to self-employment tax even though it is only an internship job.  If you are studying major engineering related and perform an internship related to that, you are required to file a Schedule C as a business owner to pay self-employment tax.  Note that the IRS also receives a copy of this Form 1099-MISC and will expect to see the information is being reported correctly on your taxes.  To compare your numbers with that by TurboTax, please revisit Schedule SE, Form 1040 line 15 and Schedule 2 where the self-employment tax should show on line 10.

If you would like to have one of our tax professionals to review your tax forms, I would suggest you consider our new product/features TurboTaxLive.  To reach one of our tax professionals, in the TurboTax program, once you complete your taxes, before you file, you’ll be given the option for a final review of your return by one of our experts.  After they completed reviewing your return, they’ll inform you of any proposed changes.

Here are the instructions:

From <https://turbotax.response.lithium.com/console/agent/4041379?>

@jeetshek  Also see IRS Schedule SE and Form 1040 tax forms: Schedule SE, 1040, Schedule 2