If you receive income as an independent contractor, freelancer, consultant, or self-employed individual, the IRS generally requires that income to be reported on Schedule C (Profit or Loss From Business).
Why Did I Receive a 1099-NEC Instead of a W-2?
If you received a Form 1099-NEC with income reported in Box 1, Nonemployee Compensation, the payer treated you as an independent contractor rather than an employee.
Unlike employees who receive a W-2, no Social Security or Medicare taxes were withheld from your payments. As a result, you're generally responsible for paying both portions through self-employment tax.
By reporting the income on Schedule C, the program can automatically generate Schedule SE and calculate the correct self-employment tax.
How Do I Report a 1099-NEC or 1099-K?
- 1099-NEC: After entering the form, you'll be prompted to either add the income to an existing Schedule C or create a new one.
- 1099-K: If the payments reported were related to your business activity, the income should generally be reported as business income on Schedule C.
To access Schedule C:
- Go to Federal
- Select Income - Select My Forms
- Choose Profit or Loss From Business (Schedule C)
Completing Schedule C for 1099-NEC Income
When creating a Schedule C, you'll be asked for information such as:
- Business name
- Business address
- Business code
- Business description
If you're creating the Schedule C solely because you received a 1099-NEC, the only required entry is generally the business description. Most taxpayers simply enter the type of work performed, such as consulting, freelance writing, rideshare driving, or handyman services.
Use Schedule C unless the income is related to farming activities, in which case it belongs on Schedule F.
What If I Report the Income as Other Income?
If income that should be reported on Schedule C is entered as Other Income, self-employment tax may not be calculated correctly.
This could result in:
- Underreported Social Security and Medicare taxes
- Additional tax due
- IRS penalties and interest
What If My 1099-NEC Is Hobby Income?
If the income is from an activity not engaged in for profit, report it as Other Income instead of entering the Form 1099-NEC itself.
To report hobby income:
- Go to Federal > Income
- Select Less Common Income
- Choose Other Income
- Select Activity Not Engaged in for Profit Income
- Enter the amount from the 1099-NEC
This prevents the program from creating a Schedule C and calculating self-employment tax.
Additional Information
For more information on the Schedule C, please click here