Form 1099-MISC No Self-Employment Tax

The amount shown on Form 1099-MISC Box 3 is usually from one of these:

-Prizes and awards

-Payment you received for serving jury duty

-Medical research participation payments

-Legal damages

This list is not exhaustive. Basically, box 3 reports any income you receive from an endeavor that you didn’t engage in for profit, and that’s a gray area.

Box 3 payments are still taxable income and must still be reported on line 8 of Schedule 1 with the Form 1040. You would then enter the total amount on Schedule 1 on line 7a of Form 1040. But they're not taxed in quite the same way as earnings that appear in box 7 of Form 1099-MISC, "Nonemployee Compensation".

Unfortunately, you can’t deduct work-related expenses from the total of your Box 3 income.

Self-employed individuals—those with earnings reported in box 7 of the 1099-MISC—can still deduct their costs of doing business on Schedule C, but then they have to pay the self-employment tax on the profit.