Trying to Add a 1099 to my personal income - TurboTax forcing me to add it under a new business

[djlex2]

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.

[VolvoGirl]

Then first set up the second Schedule C before entering the 1099NECs so you can assign them to the right one.

[rjs]

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@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.

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@djlex2 

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?

[djlex2]

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.

[TomD8]

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.

[Opus 17]

@djlex2 

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.

[dmertz]

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.

[Opus 17]

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@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.

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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.