IRS requesting Schedule SE for my 1099-NEC income but I never filed a Schedule C - help!

If OP files an amended return, will they also owe interest and penalties on the unpaid self-employment tax? Also, does the IRS automatically know about 1099-NEC income even if not properly reported on Schedule C/SE?

You'll likely owe some interest on the unpaid tax amount since it was due by the original filing deadline. Penalties depend on various factors, but responding promptly to the IRS notice often helps minimize them. The IRS is generally more lenient when taxpayers voluntarily correct mistakes. Yes, the IRS automatically receives copies of all 1099-NECs from the companies that issued them to you. Their systems can detect when income is reported on a 1099 but no corresponding Schedule C/SE is filed. That's exactly why they're contacting you now - their automated matching system flagged the discrepancy.

How does the document analyzer work? Does it actually fill out the forms for you or just tell you what needs to be fixed? I'm in a similar situation with some freelance income I didn't handle correctly.

I'm skeptical about using third-party tools with my tax documents. How secure is this? What if they misinterpret something and I end up in more trouble with the IRS?

The analyzer scans your documents and identifies what's missing or incorrect. It doesn't automatically fill the forms, but it gives you very specific guidance on exactly what to put in each field. For my situation, it highlighted the exact fields on Schedule C I needed to complete and calculated the numbers I should enter based on my situation. Regarding security, I had the same concern initially. Their site uses bank-level encryption and they don't store your documents after analysis. I researched them thoroughly before using the service. They're not actually filing anything for you - they're just providing expert guidance on what you need to do. The final responsibility for filing correctly is still yours, but their guidance makes it much easier to navigate.

Wait, so what exactly is this service? Are they just calling the IRS for you or what? And does the IRS actually help with filling out the forms or just tell you which ones you need?

Sounds like a scam to me. Why would I pay someone else to call the IRS when I can do it myself for free? I doubt they have any special access that regular people don't.

It's not someone calling for you - it's a system that navigates the IRS phone tree and holds your place in line. When an agent becomes available, it calls you back and connects you directly. Basically skips the 2+ hour hold time that most people experience. You're still the one talking to the IRS agent yourself. The IRS agents won't fill out the forms for you, but in my experience, they were extremely helpful in explaining exactly which forms I needed, what information goes where, and the proper way to submit them. Having a live person walk me through my specific situation was much more valuable than trying to figure it out from generic online advice.

Not a dumb question at all! If your Schedule C shows a net loss (expenses greater than income), you generally won't owe self-employment tax, so Schedule SE wouldn't result in any tax due. However, you should still complete and file Schedule SE with your return to properly document this. A business loss can actually be beneficial because it can offset other income on your tax return. Just be aware that the IRS may give extra scrutiny to businesses that show losses for multiple years, as they have rules about "hobby losses" versus legitimate businesses.

Thanks for explaining! I'm in a similar situation as OP but I think I actually spent more on business expenses than I made. I have good records of everything though. So I'll still need to file an amended return with both Schedule C showing my loss and Schedule SE even though I won't owe additional tax?

Yes, you should file an amended return with both forms. The Schedule C will document your loss, which can actually reduce your overall tax liability by offsetting other income. The Schedule SE will show the calculation that results in no self-employment tax due. Your good record-keeping will be extremely valuable if the IRS has any questions. Make sure your expenses are legitimate business expenses that were ordinary and necessary for your work. If your amended return shows a refund due because of the business loss offsetting other income, the IRS will process that accordingly.

Thank you all SO MUCH for the helpful advice! I'm going to tackle this tomorrow - will start by gathering all my business expenses (which I luckily kept receipts for) and then prepare the Schedule C and SE. Really appreciate everyone walking me through this!

Also, keep in mind that TurboTax and other tax software companies offer "audit support" or "audit defense" for situations exactly like this. If you purchased that when you filed, contact them immediately as they should help you prepare the amended return!

This is really solid advice about the payment plan option! I'm in a similar boat and was stressed about potentially owing a large lump sum. Do you know if there are any fees associated with setting up a payment plan with the IRS? And how long do they typically give you to pay it off?

Yes, there are fees for IRS payment plans, but they're usually pretty reasonable. For online installment agreements, it's typically around $31-149 depending on the type of plan and payment method. If you qualify as low-income, the fees can be reduced or waived entirely. The IRS is generally flexible with payment terms - they often allow 6 years (72 months) to pay off balances, sometimes longer depending on your financial situation. The key is being proactive about setting it up rather than waiting for them to come after you. Interest and penalties continue to accrue, but having an approved payment plan shows good faith and prevents more aggressive collection actions. You can apply for a payment plan online through the IRS website, which is usually faster and has lower fees than applying by phone or mail.