I have a taxpayer who received a 1099-NEC and when asking the client what this income relates to he explained that as part of his W-2 Job he sells equipment. When his customer needs financing he refers them to a financing company who works directly with the customer and the financer knows the product and manufacturer and handles financing that the taxpayer's company does not offer. Every time a financing contract is executed (applied and financing approved) my taxpayer receives a referral fee. The financing company issues a 1099-NEC vs 1099-MISC. The annual referral fee is reported in box 1 of the 1099-NEC in accordance with the 1099-NEC instructions.

My question is - Is all income in Box 1 of the 1099-NEC subject to SE Tax? and are expenses allowable to deduct against this income when they are not directly related to the generation of this income.

My taxpayer does not have a business so should not need to file a Sch C as in prior years his tax professional included this activity on Sch C and deducted expenses like his cell phone and internet expense and then paid SE Tax on the net income. Since my taxpayer really does not have a business I do not believe it warrants a Sch C and the expenses that had been deducted on the Sch C are unrelated to the income generated. He is a W-2 wage earner and not in business for himself. The financing company who pays him the fees is an unrelated party. This is customary in his industry but was uncertain if I can enter in ProConnect as Misc Income NOT subject to SE Tax?

Feedback greatly appreciated.