1066 NEC for one time grant is confusin

Forum|Forum|1 year ago
January 30, 2025
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We are retired and have only SS and retirement related income . Last year I completed a Hazard Fuel Reduction project on our 21 acres (cutting trees and brush to reduce likelihood of forest fire). The agency provided a per acre incentive and I received a check for $6000 after completing the project on my property. I am not a business, just a guy with time and a tractor trying to make my little piece of the forest less likely to be part of a conflagration!

My problems: 1) this is skewing my income tax immensely - it appears to be taxed at a rate of over 30%,

2) I started inputting the information and it lead me down a path of being a business (which I am NOT).

3) I tried to enter the expenses incurred by using my tractor for the project (I tracked the hours and fuel expenses on my spreadsheet). But since a tractor is equipment, not a vehicle, it doesn't really fit in the forms.

TT keeps trying to turn me into a business with amortization of equipment etc...not really what I want to do. I finished all the property so I will never do this again...truly a one time deal

Big Question: Can I take credit for the expenses of using and operating my own tractor, chainsaws to offset some of this income which is being taxed at an exorbitantly high rate. I have about 150 hours of tractor use and over $1300 of fuel and maintenance expenses for this project. I only see that this can be done as a business, which I am not. Thanks for your help.

Best answer by BillM223

Thank you. I see that the state of Montana does make these grants to private land owners. However, you will note that every other potential applicant is a government body or a non-profit entity.

So long as the agency gives you a 1099-NEC, TurboTax (and the IRS) will think that the agency has identified you as a for-profit or non-profit operation. You might call the program manager at that agency and ask why they gave you a 1099-NEC instead of a 1099-MISC (which would have been appropriate for a private landowner). It's possible that it never occurred to them that this might be a problem.

If they will rescind the 1099-NEC and issue a 1099-MISC, that would be great, because you can enter the 1099-MISC without seeming to be a business.

Otherwise, the things you state are true - if you are a business, then your tax rate will appear to be over 30%, because you are charged 15.7% in unemployment taxes.

Talk to the program manager first about getting that 1099-NEC changed to a 1099-MISC.

BillM223

So this project was done on your homestead? The FEMA website states (If I have the right program):

"Must be a local government, Tribe, or Private Nonprofit (PNP*)."

That is, FEMA normally makes these payments not to home owners but to government and NPO (nonprofit organizations).

The fact that you received a 1099-NEC means that FEMA think you are a business.

I see that there are some other agencies in the government that make these grants, the Idaho Department of Lands, for example. Can you confirm what agency you applied to and got this 1099-NEC from?

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KMM144Author

Thanks for your thoughts.

Montana West Economic Development partners with MT DNRC (Department of Natural Resources and Conservation) on the Forestry Assistance program for Flathead County. The treatment of hazardous fuels is one of the most proactive ways to reduce potential loss of life and property in the event of a wildland fire. (directly from their web page).