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Typically, a 1099-NEC will flow to a Schedule C (self-employment income). If it does not flow to a Schedule C, it usually goes to Other Income, which is a line on the return that could also reflect unearned income. In order to eliminate kiddie tax, you should have your child's 1099-NEC flow to a Schedule C. 

For tax purposes, self-employment income includes any part-time businesses or "side work" performed in which you are in business for yourself, rather than another person. You are also considered self-employed if you engage in business-like activities where you intend to make a profit. If a 1099-NEC is entered without a corresponding Schedule C, then it is assumed to be unearned due to these guidelines for the purposes of calculating "kiddie tax".

To assign your 1099-NEC to a Schedule C, please follow the steps below: 

1. Open your return.
2. Search for 1099-NEC with the magnifying glass tool at the top of the page.
3. Click on the Jump to 1099-NEC link at the top of the search results. 
4. Click Edit next to your 1099-NEC.
5. On the page titled Guess what? You can deduct expenses for the example work choose Yes, I have expenses to deduct.
6. On the page titled Self-employed 1099-NEC Income select the Schedule C, you can add a new business on this screen.

To confirm your 1099-NEC was linked to your Schedule C, please follow the instructions below:

1. Open your return.
2. Search for Sch C with the magnifying glass tool at the top of the page.
3. Click on the Jump to Sch C link at the top of the search results. 
4. On the page titled Your 2020 self-employed work summary, you should see your 1099-NEC listed with the corresponding amount. 
5. Click review next to the income from your 1099-NEC. 
6. Follow the on-screen instructions on the following pages. 

A Schedule C for your child's 1099-NEC will eliminate the kiddie tax. 

@PPD123