Why does 1099 income not show up as earned income?

[mbhmx2g]

1099 income from schedule c is not showing as earned income in the deductions section (only w2 wages). how is this corrected?

[ThomasM125]

I assume you are referring to income reported on a form 1099-NEC in line 1. That should appear on schedule C and would result in income or loss as reported on line 31 "Net Profit or (loss). " That amount should then flow to line 3 of schedule 1, and from there show up on your form 1040 on line 8. As such, it would be considered earned income.

It is possible that your business expenses are more than your business income, in which case you would have a loss. If this happened, then you would not have any earned income from the business, since you had a loss.

I'm not sure why you are mentioning the deductions section, if you could elaborate on that it would be helpful!

[mbhmx2g]

Hi Thomas! @ThomasM125 

Yes, income is input on 1099-NEC.  Tax amount due updates and self employment taxes are added.  But, then when I go to Deductions and Credits section, specifically EIC, the credit is not available.  When I click on 'How did you calculate my earned income of $0' it says 'Based on the information you entered so far you did not enter any earned income.'  The business has a net profit that is within EIC eligibility but it is like TurboT will not recognize any self-employment as earned income (only W2 wages).  Any idea why?

[ThomasM125]

It is possible that the EIC is being denied for another reason, such as you having more than $3,650 in investment income or you don't list a dependent, or you haven't entered a valid social security number for a dependent. If you listed another business with a loss it will reduce your net earned income.

Also, it is early in the roll out of the program, so things may not be finalized yet. If you are using the desktop version of TurboTax, make sure you have done updates on the program.

You could try entering another schedule C with just the sales entry equal to your net business income to see if the program will recognize that income as earned. If that worked, you may have to delete the original schedule C information and put it on the new schedule.