Standard deduction does not reduce Federal Tax due (all income for year is from 1099-MISC)

[kai-kuspa]

I am using TurboTax to prepare my return for the 2015 tax year and after entering in my income for the year (of which all is reported through 1099-MISC) my federal tax due was about $2000 before I had moved to the deductions section. After determining that my largest deduction is the Standard deduction as a single filer with no dependents, the deduction was added to the "Deductions and Credits" screen, but my Federal Tax Due did not decrease. Does the standard deduction not apply to income reported on a 1099-MISC? I'm just trying to understand if I am entering information the wrong way or if the standard deduction does not apply in my case.

Before starting with TurboTax software through my account I used the TurboTax TaxCaster calculator to estimate my Taxes due, as well as an estimator from HrBlock, and both gave me an estimate of about $100 owed. But TurboTax software is now telling me my tax due is $2000, so I'm not sure if I am applying the Standard deduction correctly in either the estimator or the efiling.

Thank you!

[jerry2000 · Accepted solution]

By default, Turbotax uses your standard deduction from the very beginning, so you have the benefit of that even before you go to the deductions area. If you do not enter itemized deductions that add up to be more than your standard deduction, then when you finish the deductions section, Turbotax tells you to use the standard deduction. You don't see any change because it had been in your return from the very beginning.

The standard deduction reduces only ordinary income tax. Neither standard or itemized deductions reduce self-employment tax on net self-employment income or penalties for early withdrawal, or penalties for not having insurance.

[Jimmy the Saint]

My daughter became a real estate agent in the end of 2019.  She sold one house.  Her broker sent her a 1099-Misc.  She made a total of less than $6,500 for the year.  Turbo Tax is telling us that she owes $886 in federal income tax.   Why would she owe anything at all (much less almost 14%), when she made so little?  I would think she would owe nothing, at all.

[CatinaT1]

She is considered Self-Employed and will need to file a Schedule C and pay Self-Employment tax.  She can offset that income with her expenses, but Self-Employment tax is 15.3%.  She did not have any withholdings from her pay like someone who an employee does.

[Olegkhylyuk]

Why Turbotax specialists don’t know how the standart deductions work?  
For example: If my self-employed income is $12400 and the standard deduction for single fillers is $12400, then it means that I owe nothing! $0. 

[cneophytou11]

If you make $12,200 income even if the standard deduction is $12,200 you will still pay 15.3% tax on $12,200.

Standard deduction apply to "Ordinary Income" (W-2, Interest Payments, Dividends, Gains from Stocks, Rental Income, etc.).

Even if you make $100 as 1099 you will owe the IRS "Self Employment Tax" of $15.30. This is federal tax.

You will also owe the State tax on this income.

I was puzzled myself but then I realized that. 

[cneophytou11]

A correction to the above.

If you are 1099 contractor you are wont be taxed if you earn less than $600. i.e. if you earn less than $600 then the employer does not have to issue a 1099-MISC or 1099-NEC.