1099 NEC

[Deshkar]

I received a 1099 NEC from our County Natural Resource Department as part of a grant program for habitat enhancement.  The money they paid me under the program was paid to another party for whom I contracted to do the work for me.  If I play along and complete a Schedule C (even though I'm not running a business) what are the ramifications versus checking "This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (This is not common)?  This statement is the truth....it was a one-time activity.

It was a grant....why am I paying self employment & income tax on this type of money?

[PatriciaV]

You are correct to report this as sporadic income, since you're unlikely to be paid this grant again. Go back through the 1099-NEC interview and be sure you checked that box so the income is reported as Other Income on Schedule 1 Line 8z. You can report your expenses on another 1099-NEC, just enter a negative number. This adjustment will also go to Line 8z so you'll be taxed on the net as ordinary income (not from self-employment).

You may also need to delete the Schedule C that you started. The best option is to delete the form directly (Sch C Wks in the forms list). See below.

• How do I view and delete forms in TurboTax Online?
• How do I delete a tax form in the TurboTax CD/Download software?

[Deshkar]

Thank you, Patricia, appreciate the reply.  You said I can report my expense (which would be the same amount of the grant paid to another party) on another 1099-NEC, but I don't have another 1099-NEC.  If I'm paying tax on the grant amount as ordinary income, I suppose it doesn't matter what was done with, correct?  It's not like I'll get a deduction for applying it to the purpose of the grant.  Or, do I misunderstand?

[PatriciaV]

Yes, if you enter the expenses in the same way you entered the 1099-NEC, you will offset the income by the costs you incurred. You don't need to have another 1099-NEC, you are simply reporting the related expenses. Since the granting organization paid the contractor directly, the costs were meant to be covered by the grant (little to no net taxable income).