How is gross income calculated for self-employed people?

Question by Wendy B: How is gross income calculated for self-employed people?
We’re doing our taxes online. Some programs list his self employment income (which was reported on a 1099MISC) as the whole amount he earned. Other sites list his gross income as the amount on his 1099 less the costs of doing business.

Obviously, this one difference makes a big difference in our taxable income. Why would it differ from service to service online and which is the correct way?

Best answer:

Answer by SmartA$ $
Many standard tax software programs do not properly handle self employment income. For example Turbo Tax deluxe does not do self employment, you have to upgrade to the “home and business” version. Its likely that you are using a lower grade software, and since it does not know how to handle self employment income, its treating the 1099 income just like a 1099-INT (or similar) which would add it to your gross income without consideration for expenses.

The correct way is to file schedule C to report self employment income, and then deduct your expenses. The net profit or loss on schedule C (after expenses) is added to your 1040 as income. Make sure your software handles self employment income and recognizes the difference between a 1099-MISC and other types of 1099 income.

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How is gross income calculated for self-employed people?

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