Business Income and Expenses (Sch C)

[cesguzman]

I am working on my sisters taxes helping her out. She was working for the LA Court last year she was hired by them as a legal assistant for a fellowship before law school. She never got W2 forms so instead the provided her with a 1099-NEC so she has to pay for all the taxes at the end of the year. That being said my sister does not have a business or is part of a business or any of that. I tried submitting her taxes for federal and state for CA last night and it would not let me because it kept asking me for schedule C and business code and she has none of this she does not have a business. How i remove this so that I can submit with no issues. Please Help

[Bsch4477]

Generally, when you earn income working it is as an employee and you get a W-2 or you are self employed and you get a 1099-NEC. Since she received a 1099-NEC she is classified as self employed (independent contractor) and is in business. Her business can be in her own name and the tax ID for it can be her social security number. She reports her income and any business expenses on Sch C. 

[VolvoGirl]

A 1099NEC is for self employment income.  Yes you are the owner of your own self employment business.  You are in business for yourself.  Use your own info.  The people or company that pays you is your customer or client.  You need to fill out schedule C for self employment business income.  You are considered to have your own business for it.  YOU are the business.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  Here's a Schedule C  https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

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 self employment income

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

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small and if you don't get the 1099NEC.

You use your own records.  You are considered self employed and have to fill out a schedule C for business income.   You use your own name, address and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all income is At Risk.   

After it asks if you received any 1099Misc or 1099NEC it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

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 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.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 15.  The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

[MayaD]

The 1099-NEC is the new form to report nonemployee compensation.

The nonemployee compensation reported in Box 1 of Form 1099-NEC is generally reported as self-employment income and likely subject self-employment tax.

You would report the income as Self employment income on Schedule C. You can deduct business expenses to reduce taxable income. What Can I Deduct?

• Log in to your account.
• Select Federal from the left menu.
• Go to Wages and Income then select Income and Expenses.
• Go to Self-employment income and expenses and click start. you'll be asked some general questions about your business. After you answer them, you’ll be taken to enter your Income and Expenses.