First, you have to understand the difference between itemized deductions and employment expenses.
A person who is self-employed must report their income on a schedule C. They are allowed to deduct “ordinary and necessary“ business expenses also on schedule C. The schedule C calculates the net profit or net taxable income from the business and this flows to the form 1040 where it is combined with any other income, personal deductions and so on.
Personal itemized deductions like charitable contributions, medical expenses, state and local income taxes are listed on schedule a day. All taxpayers have the option of claiming a standard deduction, which is $12,400 for single taxpayers this year, or using itemized deductions, which ever is larger. It is possible to list business expenses as an itemized deduction on schedule a, but this is now disallowed on the federal tax return. The section is still contained in TurboTax because some states allow the deduction, but even then, this only applies to job expenses for W-2 employees. Job expenses for self-employed people should always be reported on schedule C.
So, your son needs to have a schedule C on their tax return which will report all of their business income and deduct all of their ordinary unnecessary business expenses.
To create a schedule C, you need to be using TurboTax self-employed version. This is the most expensive version of TurboTax. If your sons overall income will be less than $39,000, you can use the IRS FreeFile version of TurboTax, which is completely free even for complex returns. This is accessed through a separate website.
https://freefile.intuit.com
you must report all the business income, even if some income was paid in cash or did not result in receiving a 1099. The best way to do this is to set up the business first. Create the business, give it a simple name, and answer a couple of questions about the participation in the business – for example, does your son participate in the business or is he a passive investor. Then you can add business income, both from a 1099 (or more than one 1099) and cash receipts. You will also enter the business expenses there. Make sure to remove the business expenses from the personal deduction section.
You can also create the business when you enter the first 1099 – NEC form, although TurboTax has change their workflow for that this year and I am not exactly sure the best way to make this work. When you enter the 1099 Dash NEC, there should be a series of questions such as “was this work done for profit?“, “Did you do similar work in the past or do you plan to do similar work in the future?“. Answering The Profit questions with yes should create the schedule C job and then allow you to access that job worksheet to enter other business income and expenses.
