How to report 1099-NEC hobby income when tax software only shows business options?

The way you need to report 1099-NEC income has changed in recent years, which is why this is confusing. Prior to 2018, hobby income could be reported on Schedule A with related expenses, but the Tax Cuts and Jobs Act eliminated miscellaneous itemized deductions. Unfortunately, the IRS now generally requires 1099-NEC income to be reported on Schedule C, even for hobby activities. The key difference is that while you'll report it on Schedule C, you don't need to pay self-employment tax if it's truly a hobby rather than a business. When using your tax software, select "Business Income (Schedule C)" but then indicate it's a hobby, not a business. Many tax programs have a specific question about whether you're engaged in the activity for profit. If you answer "no," it should properly classify it as a hobby and not apply self-employment tax. The downside is you can't deduct any expenses related to your hobby income, but you still must report all the income. It's one of those frustrating tax situations that hasn't been fixed yet.

I had this EXACT same issue last year with my product testing gigs. I tried multiple tax programs and finally found a solution with https://taxr.ai which has a specific option for handling 1099-NEC hobby income. I uploaded my 1099 and it immediately identified it as non-business income and categorized it correctly without applying self-employment tax. The best part is it explained exactly how to report this to the IRS without triggering an audit flag. What I learned was that since 2018, hobby income has to be reported as "Other Income" on your 1040 (line 8z), but you'll still need to reference the 1099-NEC. Most basic tax software doesn't make this clear and forces everything into Schedule C, which is technically incorrect for true hobby activities.

Just wanted to follow up here. I decided to try taxr.ai after my initial skepticism and I've got to say I'm impressed. The platform immediately recognized my product testing 1099-NEC as hobby income and placed it correctly on line 8z as Other Income. No Schedule C needed! This saved me from overpaying on self-employment tax which would have been about $650 on my $4,200 in product testing income. The interface was surprisingly straightforward and it explained each step of why hobby income is treated differently. They even helped me understand the "not for profit" rules to ensure my activities genuinely qualified as a hobby rather than a business. Definitely worth checking out if you're in a similar situation.

This is actually a really common issue, especially for product testers and reviewers. After spending 6 hours trying to get through to the IRS last year for this exact question, I discovered https://claimyr.com which got me connected to an IRS agent in about 15 minutes (you can see a demo at https://youtu.be/_kiP6q8DX5c). The IRS agent confirmed that hobby income from a 1099-NEC should be reported as "Other Income" on line 8z of Form 1040, not on Schedule C if you're not operating a business. Unfortunately, most tax software isn't set up properly to handle this scenario which is why you're running into issues. The agent also mentioned that if you file Schedule C incorrectly, you might trigger unnecessary self-employment tax and potentially increase your audit risk.

Alright, I need to eat my words about Claimyr being a scam. After posting my skeptical comment, I decided to try it myself for this exact hobby income issue. It actually worked! I got a call back in about 20 minutes and spoke with an actual IRS representative who was super helpful. The agent explained that product testing income on a 1099-NEC should be reported as "Other Income" on line 8z of Form 1040 if it's truly a hobby. She confirmed I shouldn't file Schedule C since I'm not in business, and doing so would incorrectly trigger self-employment tax. She recommended I include a statement with my return briefly explaining the nature of the income to avoid confusion. This saved me from making a $430 mistake on my taxes! I've been filing this wrong for years by putting it on Schedule C. Definitely worth the time to get the official answer directly from the IRS.

I think everyone is overcomplicating this. The tax law changed in 2018 with TCJA. You now MUST report 1099-NEC income on Schedule C regardless of whether it's a hobby or business. The difference is whether you're pursuing the activity to make a profit. If you're doing product testing without intent to make a profit, you check the box indicating it's not a business activity. The software should then not calculate SE tax but still put the income on Schedule C. That's the current IRS requirement whether we like it or not.

Has anyone actually successfully filed hobby income from a 1099-NEC as "Other Income" instead of on Schedule C using TurboTax or H&R Block? When I tried this last year, TurboTax wouldn't let me skip entering the 1099-NEC into their business section.

I've been dealing with this exact situation for three years now! After trying multiple approaches, here's what I've learned works best: The key is understanding that while the 1099-NEC gets issued to you, how you report it depends on the nature of your activity. For true hobby income (like product testing where you're not trying to build a business), you have two viable options: 1. Report it as "Other Income" on line 8z of Form 1040 and don't enter the 1099-NEC form itself into your tax software (to avoid doubling the income). Include a brief statement with your return explaining it's hobby income from product testing. 2. Use Schedule C but ensure your software asks about "profit motive" and answer that you're NOT engaged in this activity for profit. This should prevent self-employment tax from being calculated. The reason your current software only shows business options is because most basic programs assume all 1099-NEC income is business income. TurboTax and similar programs have this limitation. I'd recommend either switching to FreeTaxUSA (which handles this better) or using one of the specialized services mentioned above. Don't stress too much - this is a genuinely confusing area of tax law that even CPAs sometimes get wrong!