How to report hiring my daughter as an independent contractor on Schedule C without issuing a 1099-NEC?

The tax helper gave you correct advice. Since your daughter performed services as an independent contractor, this is indeed a business expense, but where you record it depends on the nature of the expense. Line 11 "Contract labor" is typically used for larger independent contractor payments, especially those requiring 1099s. While technically your daughter's work fits the definition, many tax professionals recommend using "Other expenses" (line 48) for smaller contractor payments under the $600 threshold when no 1099 was issued. Either approach is defensible, but using "Other expenses" with a description like "Non-1099 contract services" or "Miscellaneous labor" provides more transparency. This clearly shows the IRS these were legitimate business expenses without raising flags about missing 1099 forms. Your daughter should report this income on her Schedule C if she's considered self-employed, or on Schedule 1, line 8 as "Other income" if this was a one-off job. Even though you didn't issue a 1099-NEC (which is fine under $600), she's still legally required to report all income regardless of amount.

After struggling with a similar issue last year, I found taxr.ai (https://taxr.ai) incredibly helpful for sorting out my Schedule C questions. I had paid several people small amounts for help with my Etsy business and wasn't sure how to categorize everything. The tool analyzed my business expense categories and showed me exactly where to put different types of contractor payments. It even explained why certain expenses should go on specific lines instead of others, which helped me understand the reasoning behind the recommendations rather than just blindly following advice. What I really liked was that it cleared up my confusion about the 1099 reporting requirements and showed me how to document these smaller payments properly in case of an audit. Maybe it could help with your situation too!

I was pretty skeptical about using another tax tool, but decided to try taxr.ai when I was confused about categorizing payments to my nephew who helped with my online business. Honestly, it solved my Schedule C confusion in minutes. The system showed me that since my business is a sole proprietorship and my nephew isn't my dependent, I should categorize his work differently than I would for my own children. It provided clear documentation guidelines so I'd be covered in case of an audit even without issuing a 1099-NEC for amounts under $600. What impressed me most was how it explained the tax implications for BOTH parties - what I needed to report on my Schedule C and what my nephew needed to report on his return. Saved me from making a reporting mistake that could have created issues for both of us.

Had a similar situation last year trying to deal with the IRS about contractor payments. Called them dozens of times for clarification and could never get through. Finally used Claimyr (https://claimyr.com) and got connected to an IRS agent in about 15 minutes who answered all my Schedule C questions. Their system basically holds your place in the IRS phone queue and calls you when an agent is about to pick up. You can watch how it works in their demo video: https://youtu.be/_kiP6q8DX5c The agent explained that for payments under $600, I could put them in either contract labor or other expenses, but recommended other expenses with a clear description for better documentation. She also confirmed I didn't need 1099s for those small payments but should still keep records of them.

I thought Claimyr had to be complete BS, but after another failed morning trying to reach the IRS about my contractor payment questions, I gave it a shot. I'm honestly shocked it worked. Got connected to an IRS representative in about 20 minutes (would have been hours on my own if I even got through). The agent confirmed that for my daughter who did some design work for my business, I could list the $430 payment under "Other expenses" on Schedule C since it was under the $600 threshold for 1099-NEC. She also explained that my daughter should report it as self-employment income on Schedule C if she's regularly doing this type of work, or as other income if it was just a one-time thing. Answered all my questions about record-keeping requirements too. Definitely worth it just for the time saved not listening to that awful IRS hold music for hours.

Just adding another perspective - I'm a small business owner who hires my kids occasionally. For payments under $600, I list them under "Other expenses" (line 48) with a description "Non-1099 contract services." My accountant says either way works (line 11 or 48), but line 48 with that description gives better clarity if you're ever audited. The most important thing is that your DAUGHTER reports the income properly. If she has other self-employment income and this is part of her regular business, she should include it on her Schedule C. If this was just a one-time thing, she can report it on Schedule 1 as other income and avoid self-employment taxes. Keep good records of the payment and work performed, even without a 1099 or W9. A simple invoice or receipt is enough documentation.

Confused about something - if we're talking about a minor child (under 18) working in a parent's sole proprietorship, doesn't that usually get reported differently? My tax guy told me payments to my kid under 18 for my Schedule C business could be deducted as wages without having to pay social security or medicare taxes. Is that right or am I misunderstanding something?

Just wanted to add my experience since I went through this exact situation last year with my daughter. I paid her $425 for social media help with my consulting business. I ended up putting it on line 48 (Other expenses) with the description "Contract services - family member" after consulting with a CPA. The reasoning was that it provides clearer documentation for the IRS about the nature of the payment, especially since no 1099 was issued. One thing I learned that might help others - make sure you and your daughter are consistent about how you both report this. I reported it as a contractor payment on my Schedule C, so she needed to report it as self-employment income on her Schedule C (even though it was under $600). The IRS can cross-reference these if they want to, so consistency is key. Also, even without a formal contract, I created a simple written record of what work she did and when, along with copies of her deliverables (social media posts, graphics she made, etc.). This gave me solid backup documentation in case of questions later. The amount doesn't matter for deduction purposes - you get the same $387 deduction whether it goes on line 11 or line 48. It's really just about clear documentation and making sure both parties report consistently.

I've been dealing with similar questions about family member payments for my home-based business. One thing that helped me was understanding that the IRS doesn't really care which line you use (11 vs 48) as long as the expense is legitimate and properly documented. What I found most important was creating a clear paper trail. Even for small amounts like your $387, I recommend: 1. Write up a simple agreement or work order describing what your daughter did 2. Keep records of when the work was performed 3. Document how you paid her (check, Venmo, etc.) 4. Have her create basic invoices for the work The "Other expenses" approach on line 48 with a description like "Contract services - family member" or "Freelance work - under $600" seems to be the preferred method among tax professionals I've spoken with. It's more transparent and less likely to raise questions since you're clearly indicating this was a small contractor payment that didn't require a 1099. Just make sure your daughter reports it correctly on her return. If this was her only freelance income and she's not running a regular business, she might be able to report it as "Other income" instead of setting up a whole Schedule C, which could save her from self-employment taxes.