Tutoring 1099-misc

[monkatom]

Posting fur my daughter.  Hello I am a college student and do tutoring through a local company.  They sent me a 1099-misc form for the $633 they paid me in 2022.  I am trying to use TurboTax but it seems like the 1099 makes it seem like I have a business?  Is that correct?  The company that hired me never explained this to me.  

[KrisD15]

Yes, if you were issued a 1099-NEC. 

When you work as an employee, your employer withholds and pays your FICA (Social Security) tax. 

When you are paid as a contractor, you need to file as a Self-Employed Taxpayer  (Schedule C) and pay that tax through your tax return. 

You are also allowed to deduct any expenses you paid relating to the income. 

Since it is 1099-MISC, you COULD try to report it as taxable income but not Self-Employment if you considered the tutoring a hobby but it sounds like you did it to earn money, not as a "fun" thing to do. 

You will need to upgrade to report Self-Employment income in TurboTax. You might look into using IRS Free File if that works out better. 

IRS FREE FILE 

[monkatom]

Thanks for the info. It would have been nice if the company explained that. Seems like a lot of extra work filling out business forms schedules etc for such a small amount of income.  

[AliciaP1]

Be sure to review What self-employed expenses can I deduct? before you file.  If the only income is from the "business" and the profit (income minus expenses) is less than $400 she would not need to file.

Also, see Do I need to file a federal return this year? and Am I considered self-employed? for more information.

@monkatom 

[csw44]

I see in many forums TT employees saying that if you receive a 1099-NEC you are a self-employed business, including someone who got paid for playing in a church band. This all seems misguided. IRS says differently HERE: 

Answer:

If payment for services you provided is listed on Form 1099-NEC, Nonemployee Compensation, the payer is treating you as a self-employed worker, also referred to as an independent contractor.

• You don't necessarily have to have a business for payments for your services to be reported on Form 1099-NEC. You may simply perform services as a nonemployee.
• The payer has determined that an employer-employee relationship doesn't exist in your case.

If you weren't an employee of the payer, where you report the income depends on whether your activity is a trade or business. You're in a self-employed trade or business if your primary purpose is to make a profit and your activity is regular and continuous.

• If you're not an employee of the payer, and you're not in a self-employed trade or business, you should report the income on line 8j of Schedule 1 (Form 1040), Additional Income and Adjustments to Income PDF and any allowable expenses on Schedule A (Form 1040), Itemized Deductions. Refer to “Activity not for profit” in Publication 525, Taxable and Nontaxable Income for allowable nonbusiness expenses.

However, TT does not make it easy (or possible???) do follow these IRS recommendations because the interface doesn't provide the option to just edit these fields directly and to ignore the "so, you're a business" assumption made after inputting a 1099-NEC. 

I hope TT can amend this.

[Vanessa A]

TurboTax allows you to make that adjustment by selecting " This is not money earned as an employee or self-employed individual.  It is from a sporadic activity or hobby." This is done right after you enter your 1099-NEC. It does report this income then on 1z, as other income allowing it to be taxed as ordinary income and does not include it as self-employment activity therefore it is not subject to SE Taxes. 

If you want to report it on Schedule 1

[csw44]

Your reply was super helpful and prompt, thank you. I feel like the IRS definition (any labor that is not "regular and continuous" counts as not self-employed/trade) is a lot more inclusive than the TT translation of this as "sporadic or a hobby."  And it would be lovely if rollover text or parentheses explained some of the alignment with the actual form so we could figure out how TT interface aligns with document (8j of Sched 1 etc.).  But timely and accurate answers like this make up for it. Thanks.