Why does my taxable income show zero, yet I still owe federal taxes?

[achiang0228]

The AGI does show a positive number, but I thought that federal tax was calculated using Taxable Income. I also do consulting on the side, for which I did not pay any estimated taxes, so perhaps that's affecting my federal taxes? I have a little W2 income and I also have another side business that showed a loss this year that exceeded my W2 income.

[xmasbaby0]

Sounds like you have self-employment tax for the consulting income.  That is for Social Security and Medicare.

You have self-employment income for which you will pay self-employment tax for Social Security and Medicare.   You will need to use online Premium software or any version of the CD/download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/questions/2926899-how-does-my-side-job-affect-my-taxes

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-nec/1099-nec/L5qTsBiSe_US_en_U...

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

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

[achiang0228]

What is the tax rate used to calculate social security and medicare?

[xmasbaby0]

The SE tax rate is 15.3% with 12.4%for Social Security and 2.9%for Medicare.

[DoninGA · Accepted solution]

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@achiang0228 wrote:

What is the tax rate used to calculate social security and medicare?

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The SE taxes are calculated on 92.35% of your net self-employment income using a tax rate of 15.3%

[achiang0228]

Thanks. It's a little confusing to see Taxable Income at $0 and still have federal taxes due. I'm using the TurboTax Home & Business edition, so it would be nice to see this self employment tax explicitly called out in the Tax Summary. 

[xmasbaby0]

Switch to Forms mode.

[achiang0228]

Which Form in Forms mode shows the self employment tax calculation?

[DoninGA]

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@achiang0228 wrote:

Which Form in Forms mode shows the self employment tax calculation?

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Schedule SE

[achiang0228]

I still don't understand why my Taxable Income shows zero, and yet there's federal tax to be paid. Is my consulting income worked into the Taxable Income? Is self employment tax calculated from some other figure than Taxable Income?

[VolvoGirl · Accepted solution]

You don't owe any regular income tax on your income.  But you owe the self employment tax on your business income.  2 different kinds of tax.  You owe self employment tax on a Net Profit of $400 or more on Schedule C .  

The regular income tax is on 1040 line 16 & 22.  

The SE tax will be automatically included in your tax due or reduce your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.

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.  That is the payroll tax.  

[achiang0228]

Thanks. That makes sense.

It would be helpful in the Home & Business version to split out the taxes due so it's more clear where they come from. Right now it's a little confusing to see Taxable Income of zero and Taxes Due of something greater than zero.