To be clear, the schedule C states "An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Schedule 1"
This tells me that I should not be filing a schedule C but instead should be using line 21 on the schedule 1 form. How do I get TurboTax to do this?
Unfortunately, this is Self-Employment income. The fact that you worked and earned money for the services performed, and that you did not get a W-2, leave no other choice.
When the IRS talks of sporadic activity, the following might help explain that.
In Revenue Ruling 77-356, a member of Congress received payment for giving speeches, for which there was no pattern to the number of speeches given, the amount of time they required or remuneration received. During the year in question, the taxpayer made 10 speeches, for which $1,500 was received. Their frequency indicated “a degree of recurrence, continuity, and availability for speech making,” and thus were considered self-employment.
On the other hand, a taxpayer who was paid for an “occasional” speech and did not seek such engagements or indicate availability for them was not self-employed (Revenue Ruling 55-431).
Was the income reported in Box 7 of Form 1099-MISC or Box 3?
Unfortunately, this is Self-Employment income. The fact that you worked and earned money for the services performed, and that you did not get a W-2, leave no other choice.
When the IRS talks of sporadic activity, the following might help explain that.
In Revenue Ruling 77-356, a member of Congress received payment for giving speeches, for which there was no pattern to the number of speeches given, the amount of time they required or remuneration received. During the year in question, the taxpayer made 10 speeches, for which $1,500 was received. Their frequency indicated “a degree of recurrence, continuity, and availability for speech making,” and thus were considered self-employment.
On the other hand, a taxpayer who was paid for an “occasional” speech and did not seek such engagements or indicate availability for them was not self-employed (Revenue Ruling 55-431).
Thank you very much for your answer however I'm even more confused now.
In your quote concerning Revenue Ruling 77-356 "Their frequency indicated “a degree of recurrence, continuity, and availability for speech making,” and thus were considered self-employment". It is the "frequency" which make the work self-employment. If it was one time work performed by myself how does this apply? Thank you in advance for your clarification.
The bottom line is what is the IRS going to want? You can put this on Line 21, but you will get a letter. You will have to explain your reasoning to them. They will want penalties and interest.
Was the one time work one day? Was it once a week over several weeks? Was it every day for a week? Was there a profit motive when you took the job?
Thirty years in the tax business and close to 20,000 tax returns has me advise you to put this on Schedule C.
Sometimes the answer the TP gets is not the answer the TP wants. Good citation by the way.
Okay, thank you for your response. I understand what you are saying it is just a little hard to wrap my head around how one day of work once counts as an "activity with continuity and regularity" (which what seems to be one of the defining characteristic of self employment as described in the instructions for Schedule C). I appreciate your time and help. I will go fill out the form.
Unfortunately, with what developed in the early 1970s with a multitude of conversion of software "employees" to "consultants" the IRS put in new rules with the intent of not losing the collection of Employment Taxes (SocSec, Medicare) so what you may rightfully question is still liable for tax collection.
The work was performed one time in the span of one day. By the IRS' own language, it doesn't belong on Schedule C. Your comment, true as it may be, essentially frames the IRS as the mafia, for whom one must ignore the actual rules in order to placate its insatiable lust for tax revenue.
Question about a 1 time plop from a fire pension. I have received 2 1099-R from pension income in 2024, but should I receive anything else for the plop? The initial check was 20% less for early withdrawal penalty. Not sure if this plan doesn't get a penalty and that's why my tax return workup shows Im getting more than expected back?
If that one time payment was included in the 2 1099-R's that you received then you don't need anything else. The one that was sent early should have code '1' in box 7 and will then be subject to a 10% early withdrawal penalty. If they withheld enough to cover that penalty plus enough to cover the taxes due then that would explain your larger than expected refund.
If the one time payment (or plop - I like that) is not included in the two 1099-Rs that you have received then you should receive another form for that.