Hello there,

In addition to our regular wages, I had done some contract work as well. When I plug in the information in turbo tax I get results that don't make any sense. For Ex: if I put contract income as $0 my total tax is a credit of $3500 (approx). If I put contract income as $10000 my total tax is negative $320 (I owe) and when I put contract income as $17500, it jumps to $4800 as amount owed. Looks like the percentage on the income varies tremendously. Can anyone clarify my doubts please?

If without any contract income I expect a credit of $3500, and then adding contract income with a business tax of $3200 wouldn't that mean I should get $3500 - $3200 = $300? How does it end up jumping so much that I owe $4800? (almost $8000 difference from initial $3500 credit expected with no contract income)

Thanks!

Tech27

On the contract income you pay SE tax at 15.3% plus income is taxed at your regular rate. Make sure to report the contract income.

Contract Income: You will report your income and expenses on schedule C or C-EZ (Form 1040). Then you put net income (or loss) on line 12 of Form 1040. This income is subject to SE tax at 15.3% (this is shown on line 57 of Form 1040). Half of SE tax is deductible on line 27 of Form 1040. Read: Your U.S. Tax Return: Tax Filing by Self Employed Sole Proprietor or Independent Contractor (http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html)