Doing Taxes Online Alone: Encountering Issues with 1099-NEC, Expenses, and Refund Differences

[acabrales98]

If I receive a 1099-NEC form from Instacart, what happens if I choose not to report any expenses? I did incur expenses like gas and phone usage that could be deducted, but I just don’t want to risk anything if I report too much or too little. How will this affect my taxable income, refund, or overall tax situation, especially considering I didn’t make much from either my W-2 or 1099 income? I’ve uploaded scanned copies of my W-2 and 1099-NEC forms to both TurboTax and FreeTaxUSA, and I received different refund amounts from each platform. In TurboTax, I was also given a qualifying credit for the Earned Income Tax Credit (EITC). Another difference I’ve noticed is that FreeTaxUSA is having me link my 1099 to a Schedule C, while TurboTax isn’t. Is there a reason FreeTaxUSA is asking for a Schedule C in my case, and does choosing not to include these expenses affect my eligibility for EITC or any other part of my return?

[xmasbaby0]

If you have self-employment income and you do not enter your business expenses, what you are doing is artificially inflating the amount of your income to affect/increase the amount of earned income credit you can receive----which is a form of fraud.   You need to enter your expenses on Schedule C, like it or not.

[VolvoGirl]

Yes you have to file Schedule C in your personal tax return and pay self employment tax on the Net Profit.   So you should enter your expenses to lower the Net Profit.

You can fill out Schedule C and enter 1099NEC, Cash or Self Employment Income into Online Deluxe but if you have any expenses you will have to upgrade to the Premium or use any of the Desktop CD/Download programs. All the Desktop programs have the same forms, so you can buy a lower version.  You just get more help and guidance in the higher versions.

How to enter income from Self Employment

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

You will pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C in addition to regular income tax on it.   You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

And you probably should be paying quarterly Estimated payments since you don’t have any tax withholding taken out or you might owe a lot on your tax return.  

[DianeW777]

Question:

How will this affect my taxable income, refund, or overall tax situation, especially considering I didn’t make much from either my W-2 or 1099 income?

• The affect could be wrong and create reconciliation in the future.  It's important to record all of the expenses attributable to allowing you to make the money from Instacart. You will be taxed on the full amount of net profit including self employment tax (social security-12.4%  and medicare-2.9%).  And as noted by xmasbaby0, you are required to include expenses necessary to produce that income.  You cannot inflate or deliberately reduce your income without expecting an IRS review.

Absolutely your credits and tax are directly affected by the income and expenses.  You need to complete Schedule C for self employment income and arrive at your true net profit.  This will reduce your self employment tax and will either increase or decrease your credits depending on the results.  The key is you want to be prepared should you be called into question later on.

• How do I report income from self-employment?
• What is the self-employment tax?

@acabrales98 

[acabrales98]

@VolvoGirl 

Thank you so much for the detailed information! Just to clarify—if I’m understanding correctly, because I’m filing a Schedule C with my personal tax return, the reason I need to link my 1099-NEC income to it is to report my self-employment income properly and calculate the net profit, which will then be subject to self-employment tax, correct?

Also, you mentioned entering my expenses to reduce my net profit. Does that mean I should make sure to track all business-related expenses, even the smaller ones, in order to reduce the taxable income from my 1099-NEC?

Lastly, regarding the estimated quarterly payments, do you recommend setting those up right away, or should I first determine how much I owe for the year before making that decision?

Thanks again for all your help—I really appreciate it!

[acabrales98]

@DianeW777 

Thank you so much for the helpful info! Just to make sure I’ve got it right—when you say I need to fill out Schedule C for self-employment income, does that mean I should link my 1099 income to Schedule C to figure out my net profit and the self-employment tax? I know I need to track my Instacart expenses to help lower the net profit, but I just want to be sure I’m doing it the right way and I'm worried since I'm filing alone online, I don't want to make any mistakes. Unfortunately, I didn't track my expenses or miles but do know that I paid for gas.

[DianeW777]

Yes, you can add it as cash without linking the 1099-NEC. You may want to delete the 1099-NEC if you already entered it, then add it to your self employment income. 

Reasonable, necessary and ordinary expenses for your type of work will not be questioned as much as if you put nothing.

You can probably figure out your mileage if you have your income information for the date you worked.  If not, use your gas expense, however the amount will be calculated based on business miles against total miles on your vehicle for 2024.

Do the best you can and keep notes about how you arrived at your expenses.

@acabrales98