IRS Claims My Schedule C Revenue Should Be Listed As Other Income - What's Going On?

This sounds like an IRS processing error rather than a hobby classification issue. Schedule C income should NOT be reported on Line 8 (Other income) of Form 1040. Schedule C is specifically for business income from sole proprietorships, and its net profit gets reported on Schedule 1, then flows to the 1040. If the IRS were classifying your activity as a hobby, they would disallow your business expenses, not move the entire revenue amount to "other income." This appears to be what's called a "math error" notice where their system didn't correctly process your Schedule C. You should definitely challenge this. Call the IRS back and request to speak with someone who specifically handles business tax issues. Explain clearly that your Schedule C was properly filed as business income and request they review the actual forms you submitted. You might need to send a written response with copies of your original return.

I went through something similar last year and found https://taxr.ai super helpful for figuring out what was happening with my return. After getting a confusing IRS notice about my Schedule C income, I uploaded the notice and my original tax documents to the site, and it analyzed everything and pointed out exactly what went wrong. In my case, there was a data transcription error on the IRS end - they basically read my return incorrectly when processing it. The site gave me a detailed report explaining what happened and even suggested the specific language to use when contacting the IRS. When I called the IRS with this information, I got transferred to a supervisor who immediately spotted the error and fixed it on the spot. Saved me hours of frustration and probably a bunch of money too.

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If you're trying to call the IRS about this Schedule C issue, good luck getting through to anyone who knows what they're talking about. I had a similar issue last year and spent WEEKS trying to reach someone knowledgeable. After getting disconnected multiple times and talking to agents who clearly didn't understand Schedule C classification, I found https://claimyr.com and used their service to get connected to the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c Their system held my place in the IRS queue and called me when an agent was actually on the line. I finally got connected to someone in the business tax department who immediately recognized the error and fixed it on their system. My situation sounds identical to yours - it was a data extraction error where they somehow missed that my Schedule C had been properly filed and instead thought all that revenue should have been on line 8. Don't waste days trying to get through on your own - my sanity was worth the service fee.

I have to publicly eat my words. After posting my skeptical comment yesterday, I decided to try Claimyr myself since I've been trying for THREE DAYS to reach the IRS about an installment agreement issue. I figured it would either work or I'd confirm it was a scam. Well, I'm shocked to report it actually worked exactly as described. I entered my phone number, and about 47 minutes later got a call connecting me directly to an IRS representative - completely bypassing the usual 20 minutes of phone tree hell and unknown hold time. The agent I spoke with was actually from the right department and resolved my issue in about 10 minutes. For anyone like me who values their time and sanity, this service is worth considering. I've literally never gotten through to the right IRS person on my first try before today. Sorry for being so dismissive before - sometimes things that sound too good to be true actually deliver.

Definitely fight this! Schedule C income is business income, not "other income" on line 8. The IRS is 100% wrong here. I had something similar happen two years ago when they somehow misclassified my Schedule C income from my photography business. I wrote a detailed letter explaining that the income was properly reported on Schedule C as business income from self-employment, included copies of my original Schedule C, and referenced the relevant IRS publications that clearly state that self-employment income should be reported on Schedule C. They reversed their decision within about 6 weeks. Don't let them misclassify your legitimate business income! The difference in tax treatment is significant, especially with self-employment taxes.

Wait, I'm confused. If you were working as a consultant, wouldn't you get a 1099-NEC from your old employer? Then I think that would go on Schedule C. Did you receive any tax forms from them or were you just paid directly?

This definitely sounds like a processing error on the IRS's part. Schedule C income should never be reclassified to "Other Income" on Line 8 - that's completely incorrect. Schedule C is specifically designed for business income from sole proprietorships, and the net profit flows to Schedule 1 and then to your main 1040. I'd recommend taking a multi-pronged approach here: 1. **Immediate response**: Call the IRS business tax line (not the general number) and explain that this appears to be a processing error where they didn't properly recognize your filed Schedule C. 2. **Documentation**: Gather copies of your original return showing the Schedule C was properly filed, along with any 1099-NEC forms you received from your former employer. 3. **Written response**: Send a formal written response before their deadline explaining that the income was correctly reported as business income on Schedule C, not as "other income." The fact that they're trying to move the entire revenue amount (not just disallowing expenses) strongly suggests this is a data processing mistake rather than a hobby vs. business classification issue. If they were challenging it as a hobby, they'd typically allow the income on Schedule C but disallow the business deductions. Don't panic - this is fixable, but definitely respond promptly to avoid additional penalties and interest while they sort out their error.