If you own your own business, the IRS requires you to report any income or expenses for that business on your tax return. This also applies if you are working as a contract employee, a consultant, a self-employed individual, etc. You will report this information on your return using a Schedule C.
To create a Schedule C, please follow the steps listed below.
- Federal
- Income(select my forms)
- Profit or Loss from Business
If you received a Form 1099-MISC (prior to tax year 2020) with income reported in boxes 5, 6, or 7, or Form 1099-NEC, box 1 (beginning with tax year 2020), you must report the income on a Schedule C.
If you were to report the income as "Other Income", the Social Security and Medicare taxes would not calculate correctly. When the IRS reviews your return, they would find that you did not report this correctly and you would have to pay the self-employment taxes, and any penalties and interest accrued.