1099 NEC from school district for student IEP related transportation reimbursements. Is this taxable? How to properly enter?

[kmerrikin1]

Kiddo gets IEP related services in adjacent school district. Rather than bus him, we do pickup/drop off and the school district reimburses us something like 40.5 cent/mile. This was reported on a 1099 NEC. My understanding is that IEP related costs are not taxed and I'm a) uncertain about that and b) not sure how to properly account for it in TurboTax.

[DianeW777]

Yes, it is taxable. The form they issued was for the services you provide independently from the school.  The Form 1099-NEC is used for self employment income for the service you provide.  

However, since they pay you well below the allowable federal standard mileage rate (for 2023 it is 65.5 cents/mile) this is not truly engaged in for a profit which is the language the IRS uses to allow you to file as a business and deduct your expenses.  My advice is to report it as other income using the steps below and do not enter the 1099-NEC form itself.

How do you distinguish between a business and a hobby?

Answer

In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. A hobby activity is an activity not done for profit. This includes activities done mainly for sport, recreation, or pleasure. No one factor alone is decisive. You must generally consider these factors in determining whether an activity is a business engaged in making a profit:

• Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
• Whether you have personal motives in carrying on the activity.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

Other Miscellaneous Income: 

1. Go to the Wages and Income  section of TurboTax
2. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
3. Select Other reportable Income > Enter a description (----) and the amount

                          

[kmerrikin1]

I'm not entirely sure I agree. After some digging, this seems to match the situation addressed by irs revenue rule 60-280, which says it's not reportable as income since we're providing a service that the school board has a responsibility to provide (given his IEP). What I can't tell is if we should not have received any form or if it should have been a box 3 Misc instead. The 1099 NEC doesn't seem like the correct one for the circumstances.

[Hal_Al]

Previous discussion at https://ttlc.intuit.com/community/college-education/discussion/i-receive-a-1099-misc-for-school-tran...