eic and 1099's??? Please help!!!?

Question

I was recieving tax deferred unemployment benefits for five months and have since been doing contract work under a 1099. My question is, if I continue doing the contract work, I will owe a boatload of taxes, but since I am eligible for earned income credit, will all the money I owe come out of my refund? BTW.....I am single with one child.

Also, if I continue contracting, can I get a private401k plan?

Answer 1

On the 1099 income you will have the potential for Self Employment Tax and ordinary income tax. On the unemployment income you have the potential for ordinary income tax. When your taxes are calculated you will arrive at an amount of tax owed. What will follow on your return will be the payments. Your withholding if there was any and the EIC are all considered payments. If the payments exceed the tax due, you get a refund. If not you owe. That is the best that we can do without numbers and other information to work with. Also EIC is calculated differently if you have 1099 MISC income so be careful about any estimate you get. They will not be accurate unless all of the final numbers are available.

Answer 2

If your EIC is large enough, it will pay off the taxes you owe. If it isn't, then you'll have to pay the rest. If your question is will the tax you owe come immediately out of your refund including your EIC, yes it will.

And I'm not sure what the tax deferred unemployment benefits are - unemployment benefits are taxable in the year they're received. If you mean that you didn't have taxes taken out of them, that's just more income you'll owe taxes on.

Answer 3

Keep in mind, also, that Unemployment benefits are not considered earned income, so that will reduce the amount of EIC you get.

Answer 4

Tough question, girl! I don't know about 1099 but you do get alot in EIC! You wont see a huge return but it shouldnt hurt you. Contact the IRS

Answer 5

If there is adequate EIC yes they will take the taxes you owe out of that money.