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I received an 1099-misc form, from a business I did some work for. I live and worked in Minnesota.
I received $4,250 in box 7, no taxes withheld.
I claimed it as other income when I filed my taxes electronically line 21 of 1040.
I just entered it on the program and it calculated and e-filed for me. Do I need to fill out a 1099-*** and then mail or file that separate with state and federal gov. (or) Do I keep a copy of form with my printed taxes just as record?

[AtlantaTaxExpert]

TerraLiss:

You are not going to like this answer! Just giving you the warning up front.

You reported and filed the Form 1099 income incorrectly. The company paid you the $4,250 as an independent contractor. This makes you liable for Self Employment taxes.

You should have claimed the income (and whatever deductions you could have claimed) on Schedule C, then transferred the net income (the $4,250 minus whatever deductions were allowed) to Schedule SE to calculate the SE taxes. The total SE tax should not exceed $560.

This has no effect on the Minnesota tax return, so it should pass muster.

The good news is that you can fix the problem by filling in the Schedule C and SE on the software, print out these schedules, then amend the return using Form 1040X. If you do this before April 15, 2006, there will be no penalties levied by the IRS for filing a return negligently nor any interest charged.

This, BTW, is a classic example of the GIGO theorum: Garbage In, Garbage Out. Even the best tax software, though often extremely helpful in preparing tax returns, cannot read your mind and sometimes does not ask the correct questions.

Contact me at [email protected] if you have further questions.