NEC income - best way to file?

[Aimee918918]

Hi Community!

I have about $2500 in income from an NEC job. No other income besides unemployment and interest for 2020, I'm sorry to say.

Is it more advantageous to report expenses to bring down the tax burden - OR - to get a tax break by making a retirement contribution for the full amount?

Any thoughts on this?

[RayW7]

You should file and claim the 1099-NEC as income in Schedule C.  

Self-employment taxes start if you earn $400 or more. Therefore you must file a tax return if you gross $400 or more. If you have business expenses that should be taken into account, do not expect the IRS to know that.

This will allow you to deduct any expense(s) associated with this income and reduce your taxable income.

There is no minimum income to file the Schedule C. All income and expenses must be reported on the Schedule C, regardless of how little you earned. If you meet certain criteria — detailed below — you may be able to file the Schedule C EZ instead. There is a minimum threshold of $400 for paying self employment tax.

However, when you reach the end of your interview questions with TurboTax, you will be provided with an option to see how a IRA deduction will lower your tax rate.  It may go to zero if you are eligible.  

[VolvoGirl]

I see you are posting from the Free Edition.  You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version.  Or use any of the Desktop CD/Download programs.

How to enter income from Self Employment

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

Or There is also The Turbo Tax Free File program which is free for federal and state.  And has more forms than the Federal Free Edition, like Schedules A, B, C , D, E, F, EIC, H, K-1, SE,  etc.

To qualify for the Free File website  you just need to meet one of these 3 things.

AGI $39,000 or less.

Active duty military with AGI of $72,000  or less

OR qualify for EIC (earned income credit.)

In order to use the Free File program, you have to start it at a special website.  Try signing in at the top right.

https://freefile.intuit.com/

Do you need anymore help on how to fill out Schedule C?

[Aimee918918]

To clarify - I understand how to file self-employment income and expenses. This is the first time I've had a 1099 NEC (usually I work on 199MISC).

Unlike the 1099 MISC, the 1099 NEC income is earned income that I can factor into my retirement contribution. I've got that logged into my form in progress.  I'm noticing that my tax return grows and decreases with the addition of expenses against that NEC. I'm trying to figure out if I am better off adding as many expenses as I have (which unfortunately reduces my earned income and the amount I can contribute to retirement). 

Trying to figure out which strategy is best for $2000 of NEC income and no W-2s.

[Aimee918918]

Thanks, Ray - I clarified my question below -- perhaps you can assist further?

[ColeenD3]

The IRS requires you to include all your expenses. While the following applies to Paid Preparers and the EIC, it is nevertheless, the law. You can't manipulate Schedule C to your advantage by omitting expenses.

Paid preparers should ensure that the amount of net self-employment income reported is correct.

• Taxpayers sometimes want to over-report or under-report their income to qualify for or maximize the amount of EITC.
• The paid preparer should ask enough questions of clients claiming self-employment income to be satisfied that:
  1. the client is actually conducting a business,
  2. the client has records to support income and expenses, or can reasonably reconstruct income and expenses records, and
  3. the client has included all income and related expenses on Schedule C, Profit or Loss from Business (Sole Proprietorship).

Schedule C Expenses