I received a 1099misc for some work I did as an independent contractor. I don't own a small business, am not self-employed, and have no expenses. How do I handle this?

[falec_illmore]

TurboTax keeps telling me this is business income and trying to have me file a Sch-C form, but I don't have a business. The IRS says "If you're not an employee of the payer, and you're not in a self-employed trade or business, you should report the income on line 21 of Form 1040, U.S. Individual Income Tax Return, and any expenses on Schedule A (Form 1040), Itemized Deductions." but I don't know how to make TurboTax do this.

[AmandaR1]

This is correct. Because you "worked" and aren't an employee, you are by definition, self-employed. Other income is rarely used and never appropriate for money you 'worked' for or 1099-misc box 7 NON EMPLOYEE COMPENSATION.

[lmcard01]

This IRS document specifically addresses a situation where income is listed in Box 7 of the 1099-Misc but gets reported on line 21. See <a rel="nofollow" target="_blank" href="https://www.irs.gov/faqs/interest-dividends-other-types-of-income/1099-misc-independent-contractors-...>

[DawnC0]

That link is referring to instances where you are NOT self-employed.  As an independent contractor, you ARE considered self-employed.   

[fbmcardl2]

The problem, DawnC, is that after reviewing all the responses to questions posed on 1099-misc,  I find that TurboTax seems to be telling everyone that if they receive a 1099-Misc with an entry in Box 7 that they are AUTOMATICALLY considered independent contractors and therefore self employed.  And the software is set up that way as well.  Having read it, the link to the IRS document in the comment above confirms that one can indeed receive an entry in Box 7 and yet not be self employed or in a business.  In my opinion, TurboTax should spend more time helping clients figure out if they are indeed self employed rather than automatically defaulting them into that category because they have an item in Box 7. In your very reply from a year ago, in the Recommended Answer below you say: "The IRS has received a copy of the 1099-MISC, and since the income is reported in Box 7, they will expect it to be reported on Schedule C. " Can you at least now admit that it's possible to have an entry in Box 7 and not be self employed?

[DawnC0 · Accepted solution]

Work done by an independent contractor is considered to be Self-Employment.  Please see the following definition from the IRS.

Who is Self-Employed?

Generally, you are self-employed if any of the following apply to you.

• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business)

Your 1099-MISC should be reported on Schedule C since you 'earned' the income.  Social Security and Medicare taxes should be paid on net earnings.  Reporting it as ''Other Income'' will not do this and will likely cause inquiry.  The IRS has received a copy of the 1099-MISC, and since the income is reported in Box 7, they will expect it to be reported on Schedule C.   Where do I enter Schedule C - Use this link to enter self-employment income and expenses..

[VolvoGirl]

When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.

For the future, There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed  return....
http://quickbooks.intuit.com/self-employed

You need to report all your income even if you don't get a 1099Misc. You use your own records.  You are considered self employed and have to fill out a schedule C for business income.   You use your own name, address and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all income is At Risk.   

After it asks if you received any 1099Misc it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit 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.  You do get to take off the 50% ER portion of the SE tax as an adjustment on Schedule 1 line 27.  The SE tax is already included in your tax due or reduced your refund.  It is on the Schedule 4 line 57.  The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf

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.  How to enter self employment income
https://ttlc.intuit.com/replies/4801198