Question

1099-NEC w/o additional issue. Net Profit was $20 USD and it was a job/hobby for my wife. How can I get rid of the 'needs review'?

Forum|Forum|4 years ago
March 1, 2022
1 reply
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It is not a problem if you file your income taxes if the note in 2021 shows in red 'Needs review'

TurboTax Self Employed Online

Once you input your 1099-NEC, you should answer all of the questions after the input screen so it flows to your return correctly. If it has not been assigned to either Other Income or a Schedule C (self-employment income), TurboTax will give you an error message. If you would like to classify your 1099-NEC as hobby income, you will have to report it as Other Income. It is important to note that hobby-related expenses can no longer be deducted.

Please follow the instructions below:

Open your return.
Search for 1099-NEC with the magnifying glass tool at the top of the page.
Click on the Jump to 1099-NEC link at the top of the search results.
Click Edit next to your 1099-NEC.
Continue past the information entered.
Describe the reason for your 1099-NEC.
Choose the option This is not money earned as an employee or self-employed individual, it is from a sporadic acitivity or hobby (this is not common) on the page Does one of these uncommon situations apply?
The amount from your 1099-NEC will flow to Other Income.

Now, your 1099-NEC will flow your income to Other Income (Line 8z of Schedule 1).

Click on Tax Tools on the left hand side.
Click on Tools.
Click on View Tax Summary.
Click on Preview my 1040 on the left hand side.
Search for Schedule 1 - Additional Income & Adjustments to Income.
A description of your Other Income and the amount should be listed in Line 8z.

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G

Gavmister

hi! do you know if a corresponding is ALSO generated? Or if the IRS flags an 1099-NEC without a schedule C?

Basically, I also have a 1099-NEC that I am filing as a hobby. I have a fear that even though I am doing it properly through the website, that the IRS system will automatically flag any 1099-NEC that doesn't have a schedule C. I have been advised from a CPA that the best way to cover my basis, if he was filing, is he would do the schedule C but write off the entire amount, with a note that says "Non SE income, filing as hobby on 1040 as Other income." This way the IRS software isn't confused as to why a 1099-NEC doesn't have a schedule C along with it. But it also would be filing as hobby.

Basically, he just doesn't want the system to AUTOMATICALLY flag a 1099-NEC without a matching schedule C, even if properly adding it to other income on the 1040. I see this question was asked last year though, do you happen to know if there have been any issues with this kind of thing? Or does just fiing it as hobby work this way? I just don't want to get a letter from the IRS all because of a computer system, if that makes sense

J

JamesG1

You are correct that the IRS is expecting IRS form 1099-NEC income to be reported on IRS form Schedule C. See this TurboTax Help.

The method that you outline would:

acknowledge the 1099-NEC as Schedule C income,
would clearly point out that the income was ultimately reported as hobby income, and
correctly report the income as hobby income.

An IRS agent reviewing such a return should appreciate the care and attention that was paid in reporting the income.

Since TurboTax Online requires a higher priced product to prepare an IRS form Schedule C, this method does not appeal to all TurboTax customers.

@Gavmister

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