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According to IRS Instructions for Forms 1099-MISC and 1099-NEC, an entry in Box 7 for Nonemployee Compensation is reported as self-employment income on Schedule C (Form 1040) Profit or Loss from Business. If you have received a Form 1099-MISC with an amount in Box 7 but are not subject to self-employment tax as discussed below, you would enter a negative adjustment to Schedule SE (Form 1040) Self-Employment Tax after entering the income on Schedule C in the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click Business income or loss from a sole proprietorship.
  3. Click + Add Schedule C to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled We need to know if Taxpayer/Spouse received any of these for their work in 2020, click the 1099-MISC box, then click Continue.
  6. Click + Add Form 1099-MISC or click Edit to review a form already created, then continue until you reach the screen titled 1099-MISC: Enter information on form.
  7. Click Switch to Form Entry (optional) near the top to open the Quick Entry window, enter the applicable information from your Form 1099-MISC, then click Save & Close.
  8. On the screen titled What schedule or form should the income from this Form 1099-MISC be reported on?, select the "Schedule C" option you are currently completing from the Assigned schedule or form drop-down, then click Continue.

If you have already entered the applicable Schedule C information:

  1. From within your TaxAct return (Online or Desktop) select Federal on the left. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Form 1099-MISC in the Federal Quick Q&A Topics menu, click + Add Form 1099-MISC or click Edit to review a form already created, then continue until you reach the screen titled 1099-MISC: Enter information on form.
  3. Click Switch to Form Entry (optional) near the top to open the Quick Entry window, enter all of the applicable information from your Form 1099-MISC, then click Save & Close.
  4. On the screen titled What schedule or form should the income from this Form 1099-MISC be reported on?, select the "Schedule C" option you are currently completing from the Assigned schedule or form drop-down, then click Continue.

If this income (or part of this income) is exempt from Self-Employment Tax, follow these instructions to adjust the self-employment tax:

  1. From within your TaxAct return (Online or Desktop), click Federal on the left. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Taxes in the Federal Quick Q&A Topics menu to expand, then click Self-employment tax adjustments.
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Self-Employment Tax - Adjustments, enter the Other adjustments (+ or -) amount exempt as a negative adjustment, then click Continue.

According to the IRS Website:

My son is a newspaper carrier. I would like to know if this income is subject to social security and Medicare taxes, and if he must file a Schedule C.

As a newspaper carrier, your son may be a direct seller liable to pay self-employment tax. A direct seller is someone who satisfies the following conditions:

  • The person is engaged in the trade or business of delivering or distributing newspapers or shopping news, including directly related services such as soliciting customers and collecting receipts;
  • Substantially all your pay for these services (whether or not paid in cash) directly relates to sales or other output rather than to the number of hours worked; and
  • The person performs the delivery services under a written contract that states that you will not be treated as an employee for federal tax purposes.

Self-employed persons, including direct sellers, report their income on Schedule C, Profit or Loss from Business (Sole Proprietorship), Schedule SE, Self Employment Tax, also must be filed if a person's net earnings from self-employment are $400 or more.

If your son is not a direct seller (i.e., does not satisfy the conditions above), he may still be able to pay self-employment tax if he is engaged in a trade or business.

If your son is not a direct seller and is not engaged in a trade or business, he may be an employee whose wages are subject to income tax withholding, and Social Security and Medicare taxes.

If your son is an employee and is under 18 years of age, his income generally is not subject to Social Security and Medicare taxes. If his income exceeds a threshold amount, he must report it as wages on Form 1040.

For more information on the rules that apply to direct sellers and newspaper carriers and distributors, see IRS Publication 334 Tax Guide for Small Business. For an explanation of the difference between an independent contractor and an employee, see IRS Publication 1779, Independent Contractor or Employee.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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