My fiance and I are in the music industry. We were issued a W-2 for a gig. We then had to issue a 1099-misc (non-employee compensation) for commission paid to a manager. The amount that we paid him was in excess of $40K, thus our actual income decreased by $40k. Will our income be adjusted by this exact amount? Is this considered an itemized deduction? No one seems to explain from the perspective of the issuer. I'm trying to understand how this all works exactly. Someone said that we may not be able to get any of that money back and that we still may owe the government money! I can't understand how that could be...how could this not affect our agi?