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Is there such a thing as gross and net income for a 1099?

Forum|Forum|7 years ago
June 3, 2019
2 replies
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I am a new contract employee and received a 1099 for my gross income? If they withhold 10% as a fee from my check then they should claim that as their income and pay taxes on it....correct? I should only pay taxes on all the money paid to me...correct?

Best answer by WillK

Yes there is. The gross is the amount that is reported on your 1099-MISC in box 7. The net will be any expenses you have. The 1099-MISC should have the gross amount reported (everything you were paid without their 10% fee) then you would deduct their 10% fee as an expense on your return.

W

WillKAnswer

Employee

Yes there is. The gross is the amount that is reported on your 1099-MISC in box 7. The net will be any expenses you have. The 1099-MISC should have the gross amount reported (everything you were paid without their 10% fee) then you would deduct their 10% fee as an expense on your return.

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S

srpiper1Author

My gross income is what they paid me with the fee or without the fee? It's confusing how it is phrased above?

J

Janolo71

Hi there. I’m not clear as well. So should I set aside money based on the net or gross? Also, Is 20% sufficient?

X

xmasbaby0

Employee

@Janolo71 Not sure what was going on with the previous user who was having 10% of his check withheld as a "fee" but was a self-employed contract worker whose earnings would be reported on a 1099Misc.

Hopefully you are not in a similar fishy situation.

If your earnings will be reported on a 1099Misc you can expect to pay 15.3% for Self-Employment tax--Social Security and Medicare--plus ordinary income tax at your tax rate. If you are being paid without any SS, Medicare or taxes being withheld, you are not receiving "net" pay. You are receiving only your gross pay. So please explain if anything is being withheld. Why do you say you have "net" and "gross" pay?

https://ttlc.intuit.com/questions/2584365-am-i-an-employee-or-an-independent-contractor

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

https://ttlc.intuit.com/questions/2903027-how-do-i-report-income-from-self-employment

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

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

If you are new to being self-employed, SuperUser @VolvoGirl and @Critter have some good advice you should read.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

VolvoGirl

Employee

Your gross amount is the amount on the 1099Misc. You fill out schedule C for self employment income. After you enter all your income (1099Misc and cash) you enter your expenses. That will give you the Net Profit or Loss on schedule C. You pay tax on a Net Profit over $400.

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, you should use a program like Quicken or QuickBooks to track your income and expenses. There is a 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/community/self-employed/help/how-do-i-report-income-from-self-employment/00/26653