According to the IRS Instructions for Form 1099-MISC, an entry in Box 7 for Nonemployee Compensation is reported as self-employment income on Schedule C, 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 after entering the income on Schedule C in the TaxAct® program:
If you have already entered the applicable Schedule C information:
If this income (or part of this income) is exempt from Self-Employment Tax, follow these instructions to adjust the self-employment tax:
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:
Self-employed persons, including direct sellers, report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), Schedule SE (Form 1040), 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 Publication 1779, Independent Contractor or Employee.