I assume this is a bug?
I've added several 1099 NECs to my business income. Now, I'm trying to add 1099 NECs under my social security number in Personal Income and it is forcing me to put it under a new business or an existing business. It's not tied to a business, it's tied to my social security number.
What's going on?
TurboTax Home & Biz 2021
A 1099-NEC is always business income (self-employment). It doesn't matter whether it's issued to your Social Security number or to an EIN. You personally and your sole proprietorship or single-member LLC business are one and the same. If the 1099-NEC is not related to the same business as your other 1099-NECs, then it is indeed for a separate business. What is the nature of your business, and what is the 1099-NEC for that you are trying to make "personal"?
I have 1099s tied to my social security and 1099s tied to my business TIN. This is the first time TurboTax is attempting to tie my SS based 1099s to my business TIN. This is the first time ever in decades of using TT that it's attempted to do that. Does that sound right?
It's a 1099 tied to my SS that has to do with network marketing sales, which has nothing to do with my business LLC.
@djlex2 wrote:
I have 1099s tied to my social security and 1099s tied to my business TIN. This is the first time TurboTax is attempting to tie my SS based 1099s to my business TIN. This is the first time ever in decades of using TT that it's attempted to do that. Does that sound right?
Yes, it sounds right. As I said above, if your business TIN is for a sole proprietorship or a single-member LLC, it makes no difference whether a 1099-NEC is issued to your Social Security number or to your business TIN. It's all business income to you.
Form 1099-NEC has only been in use for a few years, not decades, so whatever TurboTax does with it is obviously somewhat new.
Your business TIN is an EIN.
@djlex2 wrote:
It's a 1099 tied to my SS that has to do with network marketing sales, which has nothing to do with my business LLC.
Then you have two separate businesses: a network marketing sales business, and whatever your LLC business is. It still makes no difference whether a 1099-NEC is has your SSN or your EIN on it. On your tax return you assign each 1099 to the business that the income is for, no matter what number is on the 1099.
I get that the 1099 NEC is a new thing. But this is the first year TT has tied 1099s from the Personal section to the Business section.
Furthermore, why would it attempt to distinguish between 1099 NECs entered in the Business Income section vs Personal Income section if it's going to tie them together anyway. Why would it tell me to go to the Business section to enter a 1099 that's related to a business if it's just going to tie it to a business? It seems like a either a bug, or bad interface design.
To make matters worse, there is a bug in this interface as it doesn't allow you to pick an existing business it you fill in the prior field for "Describe the reason for this 1099-NEC".
I may be reading into the term "business" too much. To me, that means an entity. And this would be the first year I've seen them manage it in such a fashion. It's a fairly big change.
Thanks for your replies. I appreciate it!
This now creates a new problem. My wife has an LLC that gets paid, and the LLC pays her via 1099 to her social security. Now that it ties her Business Income to her personal income, it has DOUBLED the gross income. That can't be right.
@djlex2 wrote:
This now creates a new problem. My wife has an LLC that gets paid, and the LLC pays her via 1099 to her social security. Now that it ties her Business Income to her personal income, it has DOUBLED the gross income. That can't be right.
This is an entirely separate issue. If your wife has a single-member LLC, the LLC can't pay her. The LLC IS her. A single-member LLC is a "disregarded entity." It is not treated as a separate entity. Your wife and her single-member LLC are one and the same as far as income tax is concerned. Saying that the LLC pays her is saying that she takes money out of her pocket and puts it back in the same pocket. You wouldn't report that or issue a 1099 for it. The income that her LLC receives is her income.
You and your wife are trying too hard to separate personal income and business income, or, as you said, you are reading too much into the word "business." An individual person can have business income.
@djlex2 wrote:
I may be reading into the term "business" too much. To me, that means an entity. And this would be the first year I've seen them manage it in such a fashion. It's a fairly big change.
Thanks for your replies. I appreciate it!
Your ongoing business activities make it a business, not a particular legal structure. It sounds like you have two separate businesses with different activities and income streams, one of which is organized as a single member LLC and the other is an unorganized sole proprietorship. You need two schedule Cs on your tax return, one for each business activity.
Your spouse also needs a schedule C for her LLC (if it is a single member LLC) so if you are filing jointly, you will have 3 total Schedule Cs attached to your 1040.
No one here can see your return so we can't see if you have done something wrong to cause your income to double. You may need to clear and start over or contact customer support who can do a screen share with you.
@djlex2 wrote:
This now creates a new problem. My wife has an LLC that gets paid, and the LLC pays her via 1099 to her social security. Now that it ties her Business Income to her personal income, it has DOUBLED the gross income. That can't be right.
Your wife's LLC should not issue a 1099 to her for money she withdraws.
Background: LLCs are creations of state law, the IRS does not recognize them as different kinds of entities. To the IRS, a single member LLC is a disregarded entity, the same as an unorganized sole proprietorship. The person is the company and the company is the person, they are the same thing. The LLC can't pay the member as an employee or as a subcontractor. (Jane's LLC could pay John as a subcontractor if John did work for the business, instead of making John a partner, but Jane's LLC can't pay Jane.)
An LLC with more than one member is treated by the IRS as a partnership and must file a separate partnership return.
So you need to cancel the 1099 issued by Jane's LLC to Jane the person. The LLC and the person are the same thing.
May I ask.....is this the first time using the Home & Business version? It just has a separate tab for Business but it's all your personal income and goes on Schedule C in your personal return. Just enter the 1099NEC under the Business tab.
And actually you can just enter it as Other self employment income or as Cash or General income. You don't need to get a 1099NEC or 1099Misc or 1099K. Even if you did you can enter all your income as Cash. Only the total goes to schedule C.
You said.......It's not tied to a business, it's tied to my social security number. But it is your own business. When you are self employed you are in business for yourself. You don't have to have an official business set up. You use your own info. The people or company that pays you is your customer or client. You are considered to have your own business for it. YOU are the business.
"YOU are the business."
It's called sole proprietorship.
Still you need to file Schedule C.
Thanks for your replay. I've been using TT for decades. 2021 is the first version of TurboTax which is forcing me to apply a businesses to a 1099-NECs sent to my SS#.
In the past, I receive 1099-NECss under my SS# as well as my business TIN. The 1099s for my LLC get entered in the Business Income section, and the 1099s with my SS# get entered in the Personal Income section. This year they changed it so the 1099s entered in the Personal Income section MUST be attached with a business, and then they automatically move to the Business Income section.
Even though the 1099s are attached to my SS#, my only option is to attach them to my existing businesses. Again, a big change since the last version with no documentation to explain the change. Plus, the entire part of that program on the Mac is buggy. I was on the phone with Intuit and we basically discovered that we shouldn't use that section at all as it causes too many problems.
I get I am the business, but tying a 1099-NEC with my social security number to a business entity with a TIN seems like a strange move. But that's what I'm doing just to move forward.
Then first set up the second Schedule C before entering the 1099NECs so you can assign them to the right one.
@djlex2 wrote:
I get I am the business, but tying a 1099-NEC with my social security number to a business entity with a TIN seems like a strange move.
It's not strange. It's the correct way to report it. You should have complained last year when TurboTax did not connect the 1099-NEC to a business. This year they have fixed it so that it's handled correctly.
Are you sure that what you had in previous years was a 1099-NEC and not a 1099-MISC? They are not the same. In previous years, when you entered a 1099-NEC (not a 1099-MISC) as "personal income," where did the income show up on your Form 1040 or Schedule 1?
Thanks for your reply.
I was on the phone for 2 hours today with Intuit. I demonstrated a few bugs in the interface, and discovered that adding NECs in the "Personal Income" section causes problems. And, I still don't think the workflow is correct. But I do get the concept now.
There's been a transition period between 1099-NECs and 1099-MISCs which is why this new workflow is showing up in the 2021 TurboTax. But the bugs and the workflow issues were not something I wanted to guess at, and wanted to make sure I was doing things properly... regardless of how TT was handling it.
I understand all of the responses to my original question, but most of the responses were little help in the correct way to deal with the issue WITHIN the TurboTax workflow.
In the previous years, I'm pretty sure the 1099-MISC ended up on the same schedule C of my business entity... which is what I decided to do for 2021. The interface could have easily had me creating a Schedule C for each 1099-NEC that was assigned to my SS instead of my business entity... which would have been unnecessary in this situation.
The IRS allows a sole proprietor to file its Schedule C using either its SSN or (if it has one) its EIN. Either way, sole proprietorship income is business income and is reported on Schedule C.
Form 1099-NEC came into existence for tax year 2020. Prior to that, "Non-employee compensation" was reported in Box 7 of Form 1099-MISC. When a 1099-MISC with an amount in Box 7 was entered into TurboTax, the program correctly generated Schedule C, regardless of whether the 1099-MISC showed an SSN or EIN. This was not only correct, but also advantageous to the taxpayer in the sense that Schedule C allows the deduction of the sole proprietor's business expenses.
In fact, there used to be frequent questions on this forum from users who had entered a 1099-MISC with a Box 7 amount, and then didn't understand why a Schedule C was being generated.
what you need to do is to create three separate businesses on the business tab, and then enter the income for each business one at a time. Business income includes 1099 income but it also includes cash and other income not reported on a 1099. I would not rely on TurboTax to correctly associate your 1099s with the different businesses. If you are inside a particular business, then income you enter should be assigned to that business, and then if you exit that business and enter a new business section, you would enter income for that business only.
If you are using TurboTax online (I don’t know if it is open yet) I would consider switching to the desktop program installed on your own computer from a CD or download. If you are already in the desktop program, you may want to clear and start over. Create the businesses in the business tab first, and then enter the income and expenses for each business separately.
The simple answer is that the income reported on Form 1099-NEC is business income, not non-business income. TurboTax used to allow the option to treat a Form 1099-NEC non-business income, a carryover from the way Forms 1099-MISC used to be handled before Non-Employee Compensation was split off from From 1099-MISC, but TurboTax developers removed that option because Forms 1099-NEC report income (compensation for work) that must be treated as business income.
If in the past you treated income from a Form 1099-NEC as non-business income, you've been filing an incorrect tax return and have been underpaying self-employment tax.
@dmertz wrote:
The simple answer is that the income reported on Form 1099-NEC is business income, not non-business income. TurboTax used to allow the option to treat a Form 1099-NEC non-business income, a carryover from the way Forms 1099-MISC used to be handled before Non-Employee Compensation was split off from From 1099-MISC, but TurboTax developers removed that option because Forms 1099-NEC report income (compensation for work) that must be treated as business income.
If in the past you treated income from a Form 1099-NEC as non-business income, you've been filing an incorrect tax return and have been underpaying self-employment tax.
Part of the problem is that turbotax changed the handling of 1099 forms when the 1099-NEC was introduced. It was definitely buggy the first year and it sounds like it might still be buggy. If you enter a 1099-NEC, the program will try to link it to a schedule C but it doesn't always work correctly. Hence my suggestion to create the businesses first and enter the business income from inside the business section, instead of entering the business income in the personal section and hope the program links it correctly.
Separately of course, the taxpayer has misunderstandings about their spouse's SMLLC and about how to handle their work for hire that is outside their SMLLC, but I think we have thoroughly discussed those issues.