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When not self employed do I need a Schedule SE

Wife Works for a make-up company from home. They gave her a 1099 NEC- now TT is asking about Schedule SE TAX? No idea what's going on.
2 Replies
Expert Alumni

When not self employed do I need a Schedule SE

TurboTax is probably calculating the SE tax based on your wife's self employment income based on her 1099-NEC. 


When you enter a 1099-NEC it defaults to reporting as self employed on Schedule C.


The self-employment tax (officially known as the SECA tax for Self-Employment Contributions Act tax) is the self-employed person's version of the FICA (Federal Insurance Contributions Act) tax paid by employers and employees for Social Security and Medicare, and it's due on your net earnings from self-employment.


-follow this link for additional information-

The Self-Employment Tax - TurboTax Tax Tips & Videos



Level 1

When not self employed do I need a Schedule SE

If she got a 1099-NEC and not a W2 from a company, they don't consider her an employee and that income is considered to be from self-employment by the IRS. If she thought she was an employee, perhaps she should talk to her "boss" about if she is an employee or not . Another term used for her status is independent contractor.


In the meantime, she owes self employment taxes on that income.


The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).  You must pay self-employment tax and file Schedule SE (Form 1040 or 1040-SR) if your net earnings from self-employment were $400 or more. Typically when you are employed, your employer pays for half of these taxes and the other half are deducted, or pre-payed, on your behalf out of your paycheck. No one is pre-paying those taxes if you are self-employed, so you will need to do so now. Even if she is full time employed by someone else giving her a W2, this extra income is considered from self-employment. Even if the total is only a small amount, if it totals more than the min of $400, she is responsible for paying the full amount of SE tax from that extra income. She was sent a 1099-NEC (NEC stands for non-employee compensation) they consider her an independent contractor. If she also made money from other sources where she was not employed, even if she did not get a 1099-NEC from those other sources, it should also be reported as income and taxed as well. 


Note that if you continue to get income, you may be required to pre-pay these taxes on a quarterly basis so you aren't hit with a late payment penalty. These are called Estimated Taxes and Turbotax will print out coupons for you to use to send in those payments every quarter.


The good news is that any expenses she had running that trade or business are deductible, and she can possibly deduct expenses for her home office space if used exclusively for that business, as well as any supplies, etc. There are many things that can be deducted. 


Welcome to the wonderful world of self-employment and the tax side of the gig economy.

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