If self employment income is less than standard deduction, do we still owe taxes?

Question

The wages for self-employment (1099) are less than the standard deduction for 2009, and taxes were already taken out of the W-2 portion of our wages--so the only thing that hasn't been paid is the self-employment part. If this is less than $10,500, do we still pay taxes on it even if everything added together (W2 and 1099) is greater than the standard deduction?

Answer 1

There is no connection between the two. Self Employment income is taxed the same way as wages--you owe employment tax on it before deductions.

Answer 2

You still owe taxes.



1. The standard deduction does not affect self-employment taxes. It only affects "income" taxes. You must pay self-employment tax on all the self-employment income, even if it is less than the standard deduction.



2. The amount taken out of your wages may not be enough for all of the income tax. The amount taken out of your W-2 wages is calculated based on the assumption that you will be using the standard deduction for your W-2 income, and do not have self-employment or investment income.



3. Even if you do not owe taxes, you must file anyway (so that the IRS can verify that you do not owe).



4. The correct way to determine if you owe is:

i. Add everything together. Subtract the standard deduction. Compute the "income tax" on the remaining amount.

ii. Compute the "self-employment tax" on the self-employment income.

iii. Add the "income tax" plus the "self-employment tax".

iv. Subtract the amount already withheld from your W-2 income.

Answer 3

You are required to file an income tax return if you have self-employment income of at least $400. Even if your total income is less than your standard deduction plus personal exemptions, you still will have the self-employment tax on the net income from filing the Sch. C. The federal income tax you have withheld will help offset this SE tax, so you could still receive a refund, or possibly owe a balance due. Also there are other credits that you may be eligible for.



So you are going to have to file a form 1040, Sch. C, and possibly Sch. SE.



Laura H – H&R Block – Senior Tax Advisor 5

**This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided.

Answer 4

you are able to take the huge-unfold deduction while you're self-employed. in spite of the undeniable fact that, the huge-unfold deduction basically impacts the ordinary federal income tax, not the added self-employment tax. There are 2 taxes to contemplate: a. Self-employment tax. Multiply your "income" with the help of 0.9235 to discover your income subject to this tax (you multiply with the help of 0.9235 because of fact 7.sixty 5% of income is exempt from this tax). Multiply the product with the help of the 15.3% tax fee. the effect is the self-employment tax. on your case, it quite is going to likely be approximately $1500. b. Federal income tax. upload your self-employment income plus all your different taxable income. Subtract the huge-unfold deduction, the exemptions for your self and your dependents, and a million/2 of the self-employment tax. in case you have not any taxable income different than the unique $11,000, then the relax quantity would be basically some thousand money, and the tax would be 10% of that. upload the two taxes mutually. It your case, it quite is going to likely be between $1500 and $2000 while you're unmarried or married submitting one after the different, probably much less while you're married and report at a similar time. Now subtract any credit for which you qualify, such because of fact the earned income credit. something is the quantity you would be wanting to pay.

Answer 5

Yes, you'll pay income tax based on the total income (1099 and W-2) minus ONE standard deduction. You'll also owe self employment tax of around a net 14.1% on the se income.

Answer 6

The standard deduction does not apply to self-employment taxes. You will owe Self-Employment tax on net SE income over $400.