Why I have to pay $2000 and $973 for SS and Medicare?

Question

For 2 years I have been an independent contractor and get 1099-Misc forms from the company. Last year I entered the amount on the "other income" line and paid a couple of hundred dollars in taxes.
This year, I used the same software -Taxact - and there was no "other income" question. The software had a "are you a business" question and I went through the questions and have to pay $2000 in taxes and $973 in SS and medicare taxes.
Did the IRS change their policy? On the 1040 form there is a line for "other income". Should I just scrap Tax act and do the taxes manually and add the $7000 income on "other income" line?

Answer 1

SS and medicare are completely seperate than income tax's.

All independant contractors must self pay their SS and medicare tax's using form 1040 SE.

You might want to read IRS Publication 505.

It explains how and when independent contractors have to pay tax's and what tax's they must pay.

As an independent contractor, you are required to pay your own SS and medicare tax's.

Answer 2

The IRS didn't change their policy, and Congress didn't change the law. If you were an independent contractor, you were supposed to pay these taxes last year also. The "other income" line is not for income from work - read the instructions, it says very specifically "Do not report on this line income from self-employment...." - it's for things like prizes and lottery wins, jury duty pay, hobby income, reimbursements for items you deducted in previous years.

At some point, especially if those earnings last year were reported correctly to the IRS by the person or company paying you, and you had a 1099 for them, you'll be hearing from the IRS looking for the rest of the money you were supposed to pay last year but didn't.

If the income is on a 1099 as "non-employee compensation", then it does NOT go on the "other income" line - you fill out a schedule C or C-EZ for it and any associated deductible expenses, and a schedule SE to calculate your unemployment tax.

Answer 3

No one changed any rules. Not the IRS or Taxact. You answered some of the questions differently this time. Self employment income, which is what you earn as an independent contractor, is subject to self-employment tax. That is equal to both the employee and employer portions of SS and medicare taxes. You need to amend last year's return to properly report your earnings. I recommend consulting a CPA. You need someone to help you setup a proper record keeping system.

Answer 4

You will be grateful when you pay for ss.Because if you get hurt someday and can`t work it will be there for you.Never say never.Sorry I can`t answer your tax question.