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cross-marcella
Level 1

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

There is no place on the online TurboTax Delux to state whether the 1099-NEC income was earned or unearned. It seems that the automatic entry is unearned which causes an error when this income is put into the roth-ira since that income must be earned. I need to classify my 1099-NEC income as earned to prevent this since my work was independent contractor work.
13 Replies
SamS1
Expert Alumni

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

It sounds like there is an input issue with the 1099-NEC.  I would recommend deleting it and starting over.  Go to the search at the top of the screen the enter "Form 1099-NEC" in the search box.  You will see a "Jump to" function that will take you to the 1099-NEC screens.  Delete the form you have there by clicking on the trash can then re-enter by clicking the "Add Another" link.

 

It sounds like the amount is getting picked up as miscellaneous income.  If you have an old 1099-Misc form in your income section, you need to delete it and add the 1099-NEC.  The 1099-Misc is not used for non-employee compensation in 2020.  

VolvoGirl
Level 15

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

Line 12 where?  1040/1040SR line 12 is for the Standard Deduction or Itemized Deductions.  Where is the checkbox for no/yes?  I don't recall ever seeing that anywhere.  Do you have the Desktop program and looking at worksheets? Do you have a Schedule C for it showing the Net Profit?

 

If you have Schedule C be sure it and the IRA contribution are listed for the same person if you are married.

cross-marcella
Level 1

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

Thank you for your reply. I am using the online deluxe version of TurboTax. To find the location Line 12 on the 1040-SR I downloaded/printed the draft form using the tools tab to view where my income was being classified as unearned rather than earned. I am unable to get the online TurboTax into forms mode where I could change that checkbox to yes. I am filing single and as a person claimed as dependent on someone else's tax return. The only form I have received from my employer is the 1099-NEC and not a Schedule C. Does this help clarify my question?

 

Thanks!

Opus 17
Level 15

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

I think, that if you enter the 1099-NEC and check the box for "I have expenses for this income", that will create the schedule C.  Online Deluxe can't prepare a schedule C with expenses so you will need to upgrade to the self-employment program.

 

You can also get this to be earned income on a schudule C if you upgrade to the self-employed version and create your business first, then enter the 1099-NEC as your business income.

 

This seems to be a design problem.  We've notified the moderators of our suggestions and I think it is being looked at by the program quality team, but I don't know when it might change.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Frank McCormick
Level 2

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

I tried the proposed solution of deleting the information that was imported and typing in new information on my honorarium for consulting, but TT still insists I have zero earned income and so cannot contribute to a Roth.

KathrynG3
Expert Alumni

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

It does not appear to be properly recognizing Form 1099-NEC as earned income.

 

If you already changed the input to be directly in the Self-employment income & expenses section, try reporting the income as received in the COMMON INCOME section, but in the alternative section, Other self-employed income, includes 1099-K, cash, and checks.

lemarw1
New Member

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

If I understand correctly, this is a bug in TurboTax...correct? Do you know when this is going to be fixed? 

 

I am trying to file for my daughter and she has earned income on a 1099-NEC. TT seems to incorrectly interpret that income as unearned income and then tells me the she must file a Form 8615 for unearned income. 

 

The only workaround at the moment seems to be to claim that she has deductible expense associated with that 1099-NEC income and then requires her to fill out a Schedule C. That doesn't seem like a proper workaround

VolvoGirl
Level 15

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

1099NEC is self employment income and she  HAS to file it on Schedule C, especially to be counted as earned income.  You need a Net Profit on Schedule C to show earned income.

 

Just enter it as Other self employment income or as Cash or General income.  You don't need to get a 1099NEC or 1099K.  Even if you did you can enter all your income as Cash.  Only the total goes to schedule C.

 

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version.  Or use any of the Desktop CD/Download programs.

 

How to enter income from Self Employment

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

 

DANCVA
Level 1

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

HI VolvoGirl,

I ran into the same problem doing my son's taxes. When I put his 1099-NEC income in, the program bug popped up. So I took your advice and entered it as business income. However, the amount of taxes TurboTax says he owes shot up from $788 to $1221.  Does that seem right to you?

 

I deleted the earlier 1099-NEC so that income only shows up in the business section. 

VolvoGirl
Level 15

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

Well a 1099NEC is for self employment income and gets reported on Schedule C.  Then you pay self employment tax on the Net Profit on Schedule C in addition to any regular income tax on it.  So sure you can owe more.

 

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

DANCVA
Level 1

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

Thank you! 

jbpattor
Returning Member

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

My wife has 1099-NEC income, which has correctly created a Schedule C in the TurboTax Self Employed desktop program.  We both have made the maximum Roth IRA contributions (for over 50), but the program is not carrying over the Schedule C net profit (line 31) to the Roth IRA Contribution Limit Worksheet (lines 5 or 7), so TurboTax is telling us that we are not eligible for Roth IRA contributions.  However, IRS Pub 590 clearly states that self-employment income is included in compensation.  In addition, the "Kay Bailey Hutchison Spousal IRA limit" states that both of our contributions would be fully eligible, as long as the combined income is over the contribution limits.  In addition, she is not subject to the self-employment tax as a notary.

I believe this is an error in the TurboTax program that apparently carries over from last year's version from comments I've seen, including this one I'm replying to.  

BillM223
Expert Alumni

For earned income from a 1099-NEC, how do I select earned, not unearned? It shows up on form 1040-SR, Line 12 as earned income over $750 but is checked no instead of yes.

Thank you for telling us this. We are investigating this issue. Unfortunately, I cannot think of a workaround that would not cause more trouble. If you have TurboTax for the desktop, you can go into Forms mode and place overrides (right-mouse click on the field and enter a number), however, I am afraid that this will prevent you from e-filing. In this time of the IRS being 24,000,000 returns behind (see The Washington Post), I would encourage you NOT to print and mail your return.

 

So the best thing would be to give TurboTax some time to review this issue and see if there is a resolution.

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