1099-NEC Causing Massive Deduction in Refund

[akulsh]

Hi all,

I'm in a strange situation and I'm not sure what I'm doing wrong. I completed my Turbotax and chose the file-by-mail option, but then found that I had a pending 1099-NEC. This amount was about $10k and I received it as a part of a compensation for work that I did two years ago.

My original return showed a federal refund but when I amend my return and add the 1099-NEC, my refund vanishes and turbotax shows need to pay ~$2k. I used the Turbotax estimator for calculating my tax and it showed that my refund went less by $1k. I am not sure how to go about amending this and what I'm doing wrong. I'm a very underfunded graduate student and cannot afford to pay such a high tax!

Any pointers will be appreciated. 

Thanks,

[VolvoGirl]

If it ended up on Schedule C for self employment you pay SE tax on it in addition to any regular income tax.

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.  

When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A.  And by increasing your AGI it might reduce some credits you were getting like EIC.  And can make more of any Social Security taxable.

[akulsh]

@VolvoGirl  thanks, how do I start this return over? I think some mistake was made and since this is before deadline I should be able to start over with all proper forms right?

[VolvoGirl]

Wait a minute.   So did you mail the original return?   If you haven't filed yet you do not Amend.   If you did file you need to wait to amend until you get the first refund.   That sounds right on an amended return.   You still get the first refund then the amended return is only the difference you owe back.

If you clicked on the amend button to fix it you might need to undo that first.  How to delete an Amended return in the Online version

https://ttlc.intuit.com/community/amending/help/how-do-i-cancel-or-undo-an-amended-return-in-turbota...

Then to change a return If you haven't mailed or efiled yet, see

https://ttlc.intuit.com/community/tax-topics/help/i-want-to-change-a-return-i-ve-printed-but-haven-t...

[akulsh]

@VolvoGirl  no I haven't mailed the return yet. I filed my return without the 1099-NEC form and got a refund estimate. 

If I understand you right, if I amend my return, the estimate that Turbotax is the difference that I would need to pay back (e.g. if I had about $4k in refund earlier and after amending it, Turbotax showed me a payment of $2k, then this $2k is from that $4k original refund)?

[VolvoGirl]

Yes that is pretty much right.  But,  what return haven't you mailed yet?  The Original return or the Amended return?

If you didn't mail the first original return,  DO NOT AMEND!  You have not filed at all yet.  There is nothing to amend.  Just add it to your original return.  Like I said above, you need to delete the amended return.  Then it should show the right refund.  

[akulsh]

Okay, so I think I may have confused you a little, sorry. 

I haven't mailed in my original return (with about ~$4k in refund), I started an amended return and then cancelled it. This return does not have a 1099-NEC income declared on it. 

If I understand right, you're saying I should attach the 1099-NEC along with the other documentation and then wait for the refund to arrive? Or I should file it without the 1099-NEC and then wait for refund and then file an amendment? 

[VolvoGirl]

OK  so you cancelled the Amended return.  Good.  Is your return back to the way it was originally?  You just need to add the 1099NEC income to it and then you can mail or efile it.  You can go back in and add or change an anything you want before you actually efile or mail it.   Why can't you efile?

Click on Add a State (not Amend) to let you back into your return.

From Tax Home (the first screen you see after you sign in), scroll down to Your tax returns & documents. You may have to select Show to open the drop down.
Select 2021, and then select Add a State (you're not actually adding a state, this is just the workaround).

Then when you are ready to file you can try to switch to efile.
https://ttlc.intuit.com/community/e-file/help/how-do-i-change-from-mail-to-e-file-in-turbotax-online...

[akulsh]

Well I'm filing jointly with my spouse the first time and she doesn't have an ITIN number. So I need to send it via mail this time. 

The return I have shows me the original refund value. How would I go about adding my 1099 NEC in the 1040 form? 

[VolvoGirl]

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version. Or use any of the Desktop CD/Download programs.

How to enter income from Self Employment
https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

Actually I would forget about entering the 1099NEC. Just enter it as Other self employment income or as Cash or General income. You don't need to enter each 1099NEC or 1099K. You can enter all your income as Cash. Only the total goes to schedule C.

[akulsh]

@VolvoGirl thanks a lot! I know I've been asking a lot of questions. I don't have expenses so I can add it in the self employed income and generate another return. I can then mail this return finally

I'll keep this post open should anything come up but I think I got what you meant

[akulsh]

Just one more question - If I use the Turbotax Deluxe Program, would I need to redo the whole process and add this additional income. Then I can finally use the mailing option? 

[VolvoGirl]

No you just upgrade your Account.  Or you can download the .tax2021 file from online to open in the Desktop program.  Is that what you mean?

[akulsh]

Yes, because I wasn't sure of how this works. This is my first time using TurboTax (I used to file using Sprintax earlier). Thanks for being so much help @VolvoGirl !