1099-NEC but not self employed

[Guwei6263]

• Thanks for your quick response. 
  when I get in rental income section, there are 3 options to choose: 
• should I choose 1099-misc , then enter 1099-nec box 1 amount into 1099- misc box 1 (rants)?

[DianeW777]

You can do that or you can simply enter cash rental income by selecting 'Cash, checks, Form 1099-K, etc.'.  As long as all of the rent is entered on your Schedule E, then you are covered. Keep your documents showing why you received the payment so if you do need to explain to the IRS later, you will have all you need.

[Guwei6263]

Thanks so much! You are the best

[Guwei6263]

Hi, I am back. 
how can I reach out the 1099-nec issuer to ask them for the correction? I was trying to call the IRS but they are not receiving calls. 

[DianeW777]

You would have to contact the agency listed on the Form 1099-NEC, but it's not really necessary since you know what the payments are for and you include them in the rental income. If you feel better you can contact them, but they may not be willing to reissue on a Form 1099-MISC.  By contacting them it may make them think about their reporting procedure next year which would be good.

Keep the information with your tax return as I indicated and there's no need for concern.  You have lease agreements, you have proof of payment for rent, not a self employed business (residential rental is not the same thing and the income is not treated the same).

@Guwei6263

[Guwei6263]

Great! Thanks for your assistance! Best regards 

[WitchHazel]

My wife had a small sole-propreitor business but closed it at the end of 2020.

In 2021 she did some paid consulting work in a related field, and received a 1099NEC.

I tried the work-around you describe here (putting that income as "miscellaneous" but TurboTax apparently detects the business from 2020, and still shows that income under the "business." 

For us it's not the SE tax per se (although it seems ridiculous for a person age 75 with retirement income reflected on the same return) but the fact that it perpetuates a record of a "business" that no longer exists. So I guess there's no way to avoid that? 

[LenaH]

Technically, your wife received self-employment income in 2021, which is why it should be reported on a Schedule C.

Generally, for tax purposes, self-employment income includes any part-time business or "side work" performed in which she is in business for herself, rather than another person. She is also considered self-employed and needs to file a Schedule C if she engages in business-like activities where she intended to make a profit.  This would include money received from doing consulting work. 

Since the consulting work is for a related field, you can use the same Schedule C that was in your 2020 return. 

@WitchHazel

[zqwtax88]

Following your instructions to put data for 1099-NEC by indicating this is from  sporadic activity or hobby (this is not common). But, Turbotax premier software still shows Self-Employment income tax rate (I tested different indications, no changes from Federal Tax Due. Is that possible there is a software bug from TurborTax Premier?

[zqwtax88]

Did the way as you suggested. However, I don't see any difference from Federal Tax Due by checking the box that says This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common.)  or other boxes. How do I know the income will not be subject to self-employment tax? I expected Federal Tax Due should reduce by checking that box comparing to other boxes.

[DawnC]

You can't enter a 1099-NEC in TurboTax without it going to business or rental income.   You can report it as a 1099-MISC, however, you will likely receive an IRS inquiry.    Who gave you the 1099-NEC (non-employee compensation) and what was it for?    If you were trying to earn money, it is self-employment even if sporadic.    @zqwtax88.   

Self-Employment income should be reported on Schedule C - directions here.    When you report income on Schedule C, you can lower that income (and tax) by deducting expenses.   If you report the income as hobby income - you cannot deduct any expenses and will likely pay more in tax because of that.   

Hobby Income can be reported in Miscellaneous Income, which is the last item in Less Common Income.   

[zqwtax88]

@DawnC Thank you for response. 1099-NEC was issued by real estate broker for referring fee.

[JohnB5677]

Consider posting the 1099-NEC this way

1. Wages & Income
2. Other Common Income
3. Select Income from a 1099-NEC
4. Enter the payer's name
5. EIN Number
6. Amount you received
7. Describe the reason for this 1099-NEC = State what it was for
8. Does one of these uncommon situations apply?
9. Click This is not money earned as an employee or self-employed individual, 

[WitchHazel]

That's what I did, but Turbotax will (as law requires) still create a 1040 and calculate self-employment tax.

This leads to a new question, though, for me:

The IRS says if you take in any income whatever on a 1099 NEC, you are self-employed. OK.  But maybe there is a silver lining here for seniors. If we are "self-employed." and have to file a Sched C, and made a profit, doesn't that mean that we can deduct Medicare premiums paid?

[JulieS]

Yes, if you report self-employment income, you can deduct your Medicare premium as self-employed health insurance. 

You may also be able to claim Earned Income Credit, depending on the amount of your other income.