NEC Reporting?

[Aimee918918]

Hi Community!

I have about $2500 in income from an NEC job. No other income besides unemployment and interest for 2020, I'm sorry to say.

Is it more advantageous to report expenses to bring down the tax burden - OR - to get a tax break by making a retirement contribution for the full amount?

Any thoughts on this?

[RayW7]

You should file and claim the 1099-NEC as income in Schedule C.  

Self-employment taxes start if you earn $400 or more. Therefore you must file a tax return if you gross $400 or more. If you have business expenses that should be taken into account, do not expect the IRS to know that.

This will allow you to deduct any expense(s) associated with this income and reduce your taxable income.

There is no minimum income to file the Schedule C. All income and expenses must be reported on the Schedule C, regardless of how little you earned. If you meet certain criteria — detailed below — you may be able to file the Schedule C EZ instead. There is a minimum threshold of $400 for paying self employment tax.

However, when you reach the end of your interview questions with TurboTax, you will be provided with an option to see how a IRA deduction will lower your tax rate.  It may go to zero if you are eligible.