I am a self employed business owner with 1099 employees. Do I add the income I paid them into my wages?

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March 1, 2023
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TurboTax Self Employed Online

VolvoGirl

Employee

No. It goes under Contract Labor. And what do you mean to your wages? You don't pay yourself wages unless you are filing a separate business return like a C Corp or partnership or LLC S corp. But if you are filing Schedule C in your personal return you don't pay yourself.

If you paid anyone $600 or more you need to give them a 1099NEC (was a 1099Misc). But not to corporations or for merchandise. You send the IRS a copy of the 1099NEC with the transmittal summary form 1096. These are due to the person by Jan 31 and to the IRS by Jan 31 also.

That is Contract Labor on Schedule C line 11.

How to enter Contract Labor

https://ttlc.intuit.com/community/entering-importing/help/how-do-i-enter-contract-labor/00/27407

laurenha88Author

Thank you so much. I am a sole owner so I’m filing using turbo tax self employed. It’s my understanding that I file all income (including my the income I paid out to my 1099 employees) as one. Then as you said, put it under contract labor? Does this sound correct?

VolvoGirl

Employee

Yes. You enter your total gross self employment income on Schedule C line 1. Then enter all your expenses. You pay tax on the Net Profit.

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.

The SE tax is already included in your tax due or reduced your refund. It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23. 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