1099-NEC for university stipend - Tax software added Schedule C and slashed my refund!

I could use some tax advice about my 2025 situation. I made around $17,500 from my regular jobs (W2 income) and received about $3,200 from participating in a university research project that sent me a 1099-NEC. When I started doing my taxes using FreeTaxUSA, my expected refund was showing around $1,150. But then I entered the 1099-NEC information and suddenly my refund dropped to $580! The software automatically added a Schedule C and is treating my stipend like I'm running some kind of business. Is this right? Since this was just a one-time project where I participated as a subject/contributor, should it really be filed as self-employment income? Also, if I'm stuck with this Schedule C situation, can I at least deduct some of my home expenses since I did all the project work from my apartment? Would I be able to claim electricity, internet, or part of my rent as business expenses? I tried redoing everything in H&R Block's software instead. Their system actually gives you options for how to categorize 1099-NEC income - either as Self-Employment or as "Other Income." When I listed it as a hobby/sporadic activity instead of a business, my refund only dropped to $950 rather than getting cut in half. That's a pretty big difference between tax programs for the exact same situation!

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18 comments

Freya Johansen

•8M

You've discovered one of the quirks of tax software interpretation! The 1099-NEC form is typically used for independent contractor/self-employment income, which is why Tax Slayer automatically routed you to Schedule C and applied self-employment taxes. For a university stipend, the correct classification can sometimes be tricky. If this was a one-time project where you weren't operating as a business and didn't have a profit motive, you might be able to report it as "Other Income" on Schedule 1 instead of Schedule C. This would avoid self-employment tax (the extra 15.3% that's cutting your refund). If you do need to report it on Schedule C, then yes, you can deduct legitimate business expenses that were ordinary and necessary for this work. For home office deductions, you'd need a space used regularly and exclusively for this work. The simplified method allows $5 per square foot up to 300 sq ft without documenting actual expenses. H&R Block seems to have given you the correct option by allowing you to classify this as "Other Income" rather than self-employment, assuming you weren't in business providing these services regularly.

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Freya Johansen

•8M

The key distinction is whether you're engaged in an activity with continuity and regularity with the primary purpose of earning income or profit. For occasional gigs without intention to create a ongoing business, "Other Income" can be appropriate. The university likely issued a 1099-NEC because that's the form they're required to use for non-employee compensation, not necessarily because they consider you self-employed. For your freelance writing, if you're doing it with some regularity and a profit motive, even if part-time, that would typically be reported on Schedule C as self-employment. Occasional one-off projects without intention to continue could potentially qualify as "Other Income," but regular freelancing, even if sporadic, generally belongs on Schedule C.

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Chloe Wilson

•8M

I was in the exact same situation with a research study stipend last year! I found this amazing tool called taxr.ai (https://taxr.ai) that actually helped me figure out how to properly classify my 1099-NEC income. You upload your documents and it analyzes them to give you the right classification options based on your specific situation. For me, it showed that my university stipend shouldn't have been treated as self-employment income since I wasn't providing services as a business. I was able to correctly file it as "Other Income" on Schedule 1 instead of Schedule C, which saved me from paying the additional self-employment tax. The tool explained that just because you receive a 1099-NEC doesn't automatically mean you're self-employed - it's about the nature of the work relationship. It also suggested some legitimate deductions I could take for the minimal expenses I did have related to the project. Totally changed my return!

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Chloe Wilson

•8M

It works independently of whatever tax software you're using. The tool analyzes your documents and gives you guidance on how to properly classify your income and what deductions you qualify for, then you apply that knowledge in whatever tax program you're using. It was super helpful for figuring out how to correctly input things in my software. The tool doesn't just look at the forms themselves - it asks clarifying questions about your specific situation. For example, it asked about the nature of the university project, whether it was ongoing or a one-time thing, if I had control over how/when I did the work, etc. These factors help determine the correct tax treatment according to IRS guidelines. It's not about what I "want to hear" - it's about applying the right tax rules to my specific circumstances.

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Anastasia Romanov

•8M

I wanted to follow up about that taxr.ai site. I was skeptical (as you can see from my previous comment), but I actually tried it with my own complicated tax situation. I had a mix of W-2 income and a couple of 1099s for some focus groups and product testing gigs that my tax software was totally misclassifying. The tool asked specific questions about each income source that my regular tax software never bothered to ask. It correctly identified that my product testing payments shouldn't be treated as self-employment income since I wasn't in the "business" of product testing - they were just one-off gigs. I was able to properly reclassify those 1099-NEC payments as "Other Income" which saved me about $400 in self-employment taxes I shouldn't have had to pay. It also identified some deductions I was missing for my actual freelance work. Pretty impressive - sorry for being so skeptical before!

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StellarSurfer

•8M

If you're still stuck with the IRS classification issues, I highly recommend using Claimyr (https://claimyr.com) to get connected directly to an IRS agent who can give you an official answer. I was in a similar situation with misclassified income and couldn't get through on the regular IRS line after trying for weeks. Claimyr got me connected to an actual IRS representative in about 15 minutes when I had been trying for days on my own. The agent confirmed that my research participation stipend should be reported as "Other Income" on Schedule 1, not Schedule C, since I wasn't engaged in a trade or business. She also told me what documentation to keep in case of questions later. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Instead of waiting on hold for hours or getting disconnected, I actually got through and resolved my question quickly. Totally worth it when you need an official answer straight from the IRS.

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StellarSurfer

•8M

It uses a system that continuously calls the IRS and navigates through their phone tree until it reaches a human agent. Once it gets through, it calls you and connects you directly to that agent. It's not "magic" - it's just automating the frustrating process of calling, getting disconnected, and calling again that most of us do manually. I was skeptical too, which is why I didn't mention this, but the IRS actually doesn't have a consistent queue system. When their call volume gets too high, they just disconnect callers rather than putting everyone in a proper waiting line. Claimyr's system keeps trying until it gets through during one of the windows when the IRS is accepting calls. I was surprised how well it worked - I had been trying for over a week on my own without success.

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Zara Malik

•8M

I need to eat my words about Claimyr being a scam. After posting that skeptical comment, I decided to try it myself since I've been trying to reach the IRS about a missing stimulus payment that was affecting my return. I had literally called the IRS 20+ times over two weeks and could never get through - always got the "due to high call volume" message and disconnected. Used Claimyr on Tuesday and got connected to an agent in about 25 minutes. The agent was able to confirm that my payment had been applied to a past tax debt instead of being sent to me directly, which explained why I never received it and couldn't claim it on my return. This saved me from filing an incorrect return that would have caused problems later. The agent also put notes in my file confirming we had discussed this, which gives me some protection if it ever comes up in an audit. Sometimes you have to admit when you're wrong - this service actually delivered what it promised.

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CosmosCaptain

•8M

Thanks for mentioning the QBI deduction! I hadn't even thought about that possibility. The project was definitely a one-time thing where I was basically a research subject/participant for about 3 months. I didn't have any real business expenses except maybe using my home internet a bit more than usual for uploading responses and attending a few zoom sessions. Based on everyone's advice, I'm leaning toward filing it as "Other Income" since I wasn't running a business. Does that seem right for my situation?

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Luca Greco

•8M

Based on what you've described, classifying it as "Other Income" on Schedule 1 rather than self-employment income on Schedule C seems appropriate. The key factors are: it was a one-time project, you were more of a participant/subject than a service provider, and you didn't have the intention of creating an ongoing business activity. For future reference, keep documentation about the nature of the project in case there are any questions. The university likely issued a 1099-NEC simply because that's the form they use for any non-employee payment, but that doesn't automatically make you self-employed for tax purposes. The substance of the relationship matters more than the form used to report it.

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