Confusion on 1099-NEC vs 1099-K and how to report hobby income - need tax help!

The key is to make sure you're not double-reporting income while still accounting for everything properly. Here's how to handle your situation: For the teaching income: You're correct that you shouldn't report the same income twice. Since you have a 1099-NEC from the makerspace, use that form for reporting purposes and ignore the PayPal 1099-K for those same amounts. For the materials reimbursement: This is technically not income - it's a reimbursement for expenses you incurred. You should exclude this from your income BUT also not claim those expenses as deductions. They cancel each other out. For your hobby sale: The tax law changed with the Tax Cuts and Jobs Act, and unfortunately, hobby expenses are no longer deductible against hobby income. You need to report the $25 as "Other Income" on Schedule 1, but you cannot deduct the costs of materials against it. Remember that even though you received these forms, you might be able to file a Schedule C if your teaching activities constitute a business with profit motive rather than just a hobby.

After going through a similar situation, I found taxr.ai (https://taxr.ai) really helpful for sorting out these 1099 confusions. I was teaching yoga classes and selling handmade items occasionally and had the same questions about what counts as income and what doesn't. Their system analyzed my 1099s and clearly explained what I needed to report where. The tool flagged exactly where my 1099-K and 1099-NEC were showing the same income and prevented me from double reporting it. It also helped me determine what qualified as a legitimate business expense vs. hobby spending. The best part was that it explained WHY each decision was made, which really helped me understand the tax rules better for the future. Might be worth checking out since these gig/hobby situations can get messy fast.

I wanted to update after trying out taxr.ai for my similar hobby/side gig situation. Actually surprised at how helpful it was. The system immediately identified that my Etsy 1099-K and my direct payment 1099-NEC were showing some of the same transactions and guided me on how to avoid double-reporting. What really helped was the explanation about the difference between business and hobby classification. Turns out my woodworking side hustle DOES qualify as a business because I keep good records, actively try to make money from it, and have been steadily increasing sales. This let me deduct my expenses on Schedule C even though I'm not making huge profits yet. The best part was that it explained everything in regular human language instead of tax jargon. Definitely cleared up my confusion on the 1099 mess.

If you're still getting stuck with the IRS guidance on this, I'd recommend Claimyr (https://claimyr.com). I was in almost the exact same situation with craft fair sales and teaching workshops, and the IRS phone line kept me on hold for HOURS trying to get clear answers on the hobby vs. business distinction. I tried Claimyr on a friend's recommendation and got connected to an actual IRS agent in about 20 minutes. The agent was able to clarify exactly how I should report my makerspace teaching income vs. my occasional sales. They also explained the "profit motive" test that determines if something's a hobby or business. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Honestly thought it wouldn't work but was desperate after waiting on hold for 2+ hours previously.

Just following up on my skeptical comment earlier. I broke down and tried Claimyr last week because I was desperate to talk to someone at the IRS about my 1099 confusion before filing. I'm honestly shocked to say it actually worked. Got connected to an IRS rep in about 30 minutes while I was making dinner - didn't have to sit there with a phone glued to my ear listening to that awful hold music. The agent was super helpful and walked me through exactly how to report my woodworking side gig income (which in my case actually did qualify as a business). The agent told me I could deduct my materials and equipment since I'm making consistent sales and trying to grow my business, even though I'm not hugely profitable yet. Completely different guidance than what I was finding online. Definitely filing with more confidence now.

FYI - for the woodworking stuff, you might actually be better off treating it as a business instead of a hobby if you're doing it with any regularity. I do similar woodturning (bowls/pens) and have been declaring it as a business for 3 years now. Benefits: - Can deduct ALL expenses including tools, materials, even part of your home workspace - Can deduct mileage to craft fairs, supply stores, etc - Losses can offset other income (within limits) You need to show that you're trying to make a profit (keep good records, have business cards, maybe an Etsy shop, etc.) even if you're not profitable yet. The IRS allows businesses to have losses for several years as you build up. Talk to a tax pro, but don't automatically assume it's just a hobby.

Quick tip on the PayPal/1099-K situation - PayPal is required to issue 1099-Ks for annual payments over a certain threshold, but that doesn't mean you have to pay taxes twice! When I enter my tax info, I always: 1) Enter the 1099-NEC first 2) When TurboTax asks about 1099-K, I say yes, I received one 3) When it asks if this income was already reported elsewhere, I say YES 4) It'll then ask you to identify which income it duplicates This way everything is properly documented but not double-counted. Hope that helps!