Question

I received a 1099-NEC for completing online surveys. Is this reported as income on my tax return, even though I consider it a hobby. I am receiving gift cards.

Forum|Forum|4 years ago
February 5, 2022
1 reply
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I consider this a hobby, not self-employment. What is this considered on my 1040 income tax? I am not working

TurboTax Online

AliciaP1

The IRS has specific rules regarding treating income as business or hobby income.

To determine the difference the IRS considers these questions:

Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

Also, the IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

So, depending on if this is the first year you have received a 1099-NEC for this you may be able to report this as hobby income this year.

To enter your 1099-NEC as hobby income in TurboTax Online please follow these steps:

Go to the Income & Expenses section of your tax return
Click Edit/Add for your form 1099-NEC
Input the details of your 1099-NEC and click Continue
Answer the questions and Continue until you get to the Does one of these uncommon situations apply? page
Choose This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common) and click Continue

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blwolfe14Author

I did exactly like you said. What is throwing me off is this--- Before I added the 1099-NEC box 1 $ which is $730.60 to my income on turbotax, my federal refund was $231. Now that I added the 1099-NEC compensation of $730.60, my federal refund was reduced to be $96. Which is a difference of $135 less that I am receiving in my federal refund. When I look at the tax tables, adding $730.60 should have reduced my federal refund by $65, not $135. Not sure what turbotax is doing that my federal refund was reduced from $231 to $96 just by adding the 1099-NEC compensation of $730.60.

Please help me understand what turbotax is doing.

VolvoGirl

In addition to paying regular income tax on it you probably owe self employment tax. Which should be $103.

You pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is 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. It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.