A 1099nec sent to me reports nonemployee compensation of 632$ which was my commission for writing insurance policy for 2 mo. How do I report this?

[mniyyati-gmail-c]

When I entered the 1099nec info in turbotax for the above I was told I qualify for 117 dollar deduction as qbi...does this sound right with the info I gave above ( writing insurance policy for 2 months)?

[ErnieS0]

Yes. The qualified business income (QBI) deduction amount is correct.

Your QBI is 20% of $632 - $45 adjustment for 1/2 of self-employment tax = $117.

[Hal_Al]

Although it may be news to you that you “have a business” (and most of the other people who get their first 1099-NEC); The IRS considers anything on a form 1099-NEC to be self employment income. Enter the 1099 income, at 1099-MISC and Other Common income / income from a 1099-NEC . TurboTax (TT) will complete Schedule C  for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security & Medicare) on any profits greater than $432. These types of payments are frequently done this way. 

This income qualifies for the QBI deduction. 

If this was a "one time gig", you haven't written insurance policies in the past and don't intent to do it in the future, you can report the income as sporadic "other income"  instead of self employment. 

[mniyyati-gmail-c]

To clarify. My husband wrote insurance policy for 2 months in 2022 and received commission for 632 dollars from the employer. The employer sent a 1099nec form to report for tax. He does not intend to do this again even thought he can. If he ever goes back to the insurance world he will go back as an employee and not as a commission. How should we report this given that he has a 1099nec to report. If he reports as sporadic income then how do you deal with 1099nec?

[Hal_Al]

After entering your 1099-NEC, you will encounter a screen titled "Does one of these uncommon situations apply".  Check the box "This is not money earned as an employee or self employed individual; it is from sporadic activity or hobby".

Checking that box will put the income on line 8z of Schedule 1 as "other income on a 1099-NEC" 

Q. How should we report this given that he has a 1099nec to report.

A. TT will enter the description "other income on a 1099-NEC"  on line 8z.  That tells the IRS that you have reported  the 1099-NEC.

Q. If he reports as sporadic income then how do you deal with 1099nec?

A. A 1099-NEC reported as anything other than self employment is a red flag at the IRS.  But $632 is a pretty small flag.

You say he doesn't plan to do this in the future, but you don't say whether he did it in the recent past.  If writing insurance is his regular line of work, Schedule C is the more appropriated option. 

[bbwasmund]

I too received several 1099NECs and my Turbo Tax (TT) software indicated that I qualified for a $87 QBI, however when I went and searched on google and searched for "Does commission income qualify for QBI deduction" the reply given was" It is not QBI. You will need to answer yes to that question, and the income will be treated as wages which are not eligible for QBI." So do I submit my 2022 TT return that has a $87 QBI deduction, or do I modify my TT return? If I was to modify, what do I need to change?

[DianeW777]

Yes, submit your return with the qualified business income (QBI) deduction. A form 1099-NEC in and of itself indicates self employment which in turn means self employment and a business activity. 

You do not need to change anything.

• What is QBI?

[bbwasmund]

Hello DianeW777,

Thank you for your feedback.  Can you tell me why I received the following feedback when I googled "Does commission income qualify for QBI deduction" the reply given was" It is not QBI. You will need to answer yes to that question, and the income will be treated as wages which are not eligible for QBI?"

Regards,

Bill Wasmund 

[phone number removed]

[AliciaP1]

Your Google query is assuming you received "commissions" for a W2 job likely in sales.  If your income is from the same business you receive a W2 from, you need to enter the form into TurboTax differently.  If it was self-employment income, you are, in fact, entitled to the QBI deduction.  See Am I considered self-employed? and What self-employed expenses can I deduct? to report your self-employment income.

If you need to change how your 1099-NEC was entered you will need to delete the form and re-enter the information.  To do this in TurboTax Online you can follow these steps:

1. Within your return in TurboTax Online search for Schedule C.
2. Click the Jump to Schedule C link in the search results.
3. If you get to a self-employment summary screen, delete the self-employment income line with the trash can icon.
4. If you get to the question Did you have any self-employment income or expenses? answer No. 
5. Click on Tax Tools on the left side of the screen.
6. Click on Delete a Form. 
7. Scroll down to your Schedule C and Schedule SE and click Delete if they are still there.
8. Search for 1099-NEC and select the Jump to link.
9. Enter your 1099-NEC according to the form you received and click Continue.
10. On the Describe the reason... screen enter "Commission"
11. Choose XXX employer reported this extra money on a 1099-NEC but it should have been reported on a W-2 and click Continue.

@bbwasmund