1099-NEC ... Sch C, Sch F, Wages, Other Income?

[ddub808]

I helped out a friend that runs a graphic design company that paid me $2000 in 2020. (I am not in the graphic design business. I was just helping a friend who is.)  I received a 1099-NEC.  When that goes into TurboTax (Deluxe), I am given choices for Schedule C, Schedule F, Wages, or Other Income. Which would I select? I just helped out on a couple of projects and graphic design is not my business, so is this just considered "Other Income"? Since I am not in the graphic design business, would I have to pay SE tax on that amount?  Any help would greatly be appreciated. Thank you!

[MinhT1 · Accepted solution]

Income reported on form 1099-NEC is self-employment income, even if you are not in the graphic design business. It should be reported on Schedule C.

You can deduct any ordinary and necessary expenses and will be taxed (income tax and self-employment tax) on the net income. To deduct expenses, you will need to upgrade to TurboTax Self-Employed.

Please read this TurboTax article for more information.

[ddub808]

Thank you for your explanation. 

Questions...

1. Do I check the OTHER INCOME box?

2. Do I qualify for the QBI deduction?

[ThomasM125]

It isn't necessarily self-employment income just because it is reported on a form 1099-NEC. When you enter the form in TurboTax, it may be classified as Other Income depending on how you answer the questions. If you just did this as a one time thing and it is not related to your normal vocation, TurboTax may classify it as Other Income. Just answer the questions truthfully and you will get the proper treatment.

[gilg1117]

I helped a friend who owns a business with a woodworking project, and I received a 1099 NEC. How do I report it? I am not a business owner. I entered it under 1099 NEC and it automatically went under business income, I think this is correct. I selected this is not money earned as an employee or self employed, it is from a sporadic activity or hobby (this is not common). Is that wrong? It stayed under the 1099 NEC area. I think has to go under business income. I need help, please.

Thank you.

[AliciaP1]

You can enter the 1099-NEC as other income, but you will not be able to deduct any expenses against it.  In actuality, if you accepted a "contract" to complete a project or assist with the project, you are considered self-employed to the IRS as an independent contractor.  

See What self-employed expenses can I deduct? for information on how to reduce your taxable income in this situation.

To report your 1099-NEC as self-employment income you can follow these steps:

1. Open or continue your return in TurboTax
2. Search for self employed income (use this exact phrase, don't add a hyphen) and select the Jump to link at the top of the search results
3. Answer Yes on the Did you have any self-employment income or expenses? screen
   • If you land on the Your 2022 self-employed work summary page, select Review next to the work you're adding income for
4. Answer the questions on the following screens until you arrive at Let's enter the income for your work
5. Select the form that applies to your situation and Continue
6. You can enter the info from your 1099 form on the following screens

To enter your 1099-NEC as other income and not deduct expenses you can follow these steps:

1. Within your tax return click on Wages & Income in the black menu bar to the left
2. Click the dropdown for Other Common Income and Start for Form 1099-NEC
3. Answer the questions until you get to the Does one of these uncommon situations apply? screen
4. Click This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common).
5. Click Done and continue entering/reviewing your return

@gilg1117

[gilg1117]

Thank you very much.

[gilg1117]

Now it is asking for my accounting methods. I helped a friend. Cash, accrual or other. Now what do I enter?

[GeorgeM777]

Given your prior posts, it is the cash method.  Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay the expenses.  Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received.

If you determine that the work you performed for your friend was akin to hobby income, then any expenses you incurred in connection with the work would not be deductible.

@gilg1117