1099-MISC reported as self employed income on my tax return - how to handle properly?

But doesn't the IRS specifically use 1099-NEC now for self-employment/independent contractor work? I thought that was the whole point of them creating that form a few years ago - to separate non-employee compensation from truly miscellaneous income. Also, would OP need to worry about a potential audit if they don't file Schedule C for this?

Yes, the 1099-NEC was reintroduced specifically to report non-employee compensation, which used to be in Box 7 of the 1099-MISC before 2020. This change was made to help separate true independent contractor payments from other types of miscellaneous income. If the referral bonuses are truly in Box 3 of the 1099-MISC as "Other income," then the issuer is categorizing it as miscellaneous income rather than compensation for services, which supports reporting it on Schedule A rather than Schedule C. The audit risk is relatively low for small amounts reported as other income if there's a reasonable basis for that classification, especially if that's how the payer reported it. The key is consistency with how the issuer categorized the payment.

How does this service work exactly? Do they just give you advice or do they actually help you fill out the forms? I have a similar situation but with Coinbase referrals and I'm completely lost.

Is it really worth using a service for something this small though? Seems like overkill for a $780 issue. Couldn't you just call the IRS helpline and ask them directly?

They do a complete analysis of your documents and give you specific instructions on exactly where to report each item in your tax software. They don't fill out the forms for you, but they tell you step-by-step what to do and provide screenshots so it's super clear. For Coinbase referrals, they'd analyze it and tell you the right tax treatment based on how Coinbase classified it. As for whether it's worth it, I initially thought the same thing, but getting hit with self-employment tax is around 15.3% which would be about $120 on $780. Plus, knowing the right way to file gives peace of mind that you won't have issues if you're audited. The IRS helpline is notoriously difficult to get through on - I tried for days before giving up.

How exactly does this service work? Seems fishy that they can somehow get through when nobody else can. Are they using some kind of special line or insider connection?

This sounds like a scam. There's no way some random service can get you through to the IRS faster than calling yourself. They probably just keep you on hold themselves and then charge you for the privilege.

They use call automation technology that continually redials and navigates the IRS phone tree for you. It's the same process you'd do manually, but their system keeps trying different IRS numbers and pathways until it finds an open line. When it gets through, it calls your phone and connects you directly to the IRS agent. No special access or insider connection - just persistence and technology. It's definitely not a scam - they don't handle the call themselves or act as intermediaries. You're connected directly with the IRS representative, just like if you had called yourself and gotten through. I was really skeptical too, but after spending hours trying to call myself with no success, it was worth trying something different.

Wouldn't that approach be risky though? If you're not actually running a business of making referrals, couldn't claiming business expenses trigger an audit flag? Seems like you'd be creating a bigger issue just to save a small amount on SE tax.

You make a good point about the potential risks. While you can legitimately deduct expenses that were ordinary and necessary for earning that income, you're right that claiming business deductions against a small amount of referral income could draw more scrutiny than it's worth. The key issue is really whether the activity rises to the level of a "trade or business" rather than just a one-off or occasional activity. If these were just a few referrals made to friends without any systematic approach or intention to continue generating income this way, the stronger position would be reporting as other income on Schedule 1 rather than creating a Schedule C business that doesn't really exist.

I had a similar situation and the amount was in Box 3. I had to manually tell TurboTax to report it as "Other Income" on Schedule 1 instead of letting it flow to Schedule C. There should be an option somewhere to change how the income is categorized.

You're right - I double-checked and it is indeed in Box 3 for Other Income! I didn't realize TurboTax might be automatically categorizing it incorrectly. Do you know where in TurboTax I can override this to make sure it goes on Schedule 1 instead of Schedule C? I'm definitely not running a referral business, these were just one-time bonuses for getting a few friends to join the platform.

In TurboTax, you should be able to find the override option when you're in the section where it shows your 1099-MISC. Look for something like "Review" or "Edit" next to the form, then there should be an option to change how the income is categorized. You might see choices like "Business Income" vs "Other Income" - make sure to select "Other Income" so it flows to Schedule 1 instead of Schedule C. Since it's in Box 3, you're absolutely right that this shouldn't be treated as self-employment income. The investment platform clearly categorized it as miscellaneous income rather than compensation for services, which supports your position that these were just occasional referral bonuses and not a business activity.

Thanks for this clarification! I was dealing with the same confusion about Box 3 vs other boxes. Just to confirm - if the referral income is in Box 3, there's basically no scenario where it should trigger self-employment tax, right? It sounds like TurboTax and other tax software might have a default setting that's causing this misclassification for a lot of people with investment platform referrals.