Where do you report referral fee income on a US tax return?

US individuals generally report referral fee income on Schedule C when making introductions is a regular, profit-seeking business, and on the other income line of Schedule 1 when it is a one-off. Schedule C profit is also generally subject to self-employment tax. Report the fee for the year you receive it, whether or not a form arrives.

The short answer: Schedule C or Schedule 1

For most US individuals the choice turns on one question: are you in the business of making introductions? If you make them regularly and with the aim of earning a profit, the income generally belongs on Schedule C (Profit or Loss From Business), where ordinary and necessary business expenses can be deducted. If the payment is a genuine one-off, it generally goes on Schedule 1 of Form 1040 as other income, with no business deductions and no self-employment tax.

Either way, the fee is taxable. IRS Publication 525 explains that income is taxable unless a law specifically excludes it, so treat any referral fee as taxable unless your tax adviser tells you otherwise.

This is general information, not legal, tax or financial advice. Confirm with your own tax adviser before filing.

What to gather before you start

The date each referral payment reached your account, taken from your bank statement rather than the date the deal closed.
Any Form 1099-NEC the payer sends. A business may have to file one to report payments to independent contractors (IRS guidance on reporting payments to independent contractors), but thresholds change, so never rely on receiving one.
Records of expenses tied to the activity: travel to meet owners, software, a share of phone and internet costs, professional advice.
Notes on how often you make introductions and how you run the activity, which support the business-or-not decision.
Your partner agreement, which shows whether the payee is you personally or your company.

Step by step: reporting a referral payment

Confirm who was paid. If the reward went to your LLC or corporation, how it is reported depends on how that entity is taxed; see receiving referral fees through an LLC or S corporation. The steps below assume you were paid personally.
Decide whether the activity is a business. Regular, continuous activity pursued for profit points to Schedule C. A single introduction made as a favor points to Schedule 1. Write down your reasoning.
Pick the tax year by the payment date. Most individuals use the cash method, so income belongs to the year it is actually received or credited to you without restriction. A reward for a deal that closed in November but reached you in January belongs to the January year.
Enter the income. On Schedule C, report it as gross receipts and choose the principal business code that best describes your services. On Schedule 1, enter it on the other income line with a description such as "referral fee"; recent forms have labeled that line 8z, but check the current year's form. In tax software, search for "Schedule C" or "other income" rather than "referral".
Deduct expenses only where allowed. Schedule C permits ordinary and necessary business expenses. Other income on Schedule 1 does not carry business deductions.
Work out self-employment tax. Net Schedule C profit generally flows to Schedule SE, which calculates Social Security and Medicare tax for self-employed people.
Reconcile any 1099-NEC. The amount you report should tie to any form you receive. If the form is wrong, ask the payer for a corrected one rather than ignoring it.
Plan for next year. A large one-off payment can leave you underpaid during the year; see estimated taxes on referral income.

Common mistakes

Mistake	Why it hurts	Fix
Waiting for a 1099 before reporting	The income is taxable whether or not a form arrives	Report from your own payment records
Reporting in the year the deal closed	Cash-method income follows the date of receipt	Use the date the money reached you
Putting a regular introductions business on Schedule 1 to skip self-employment tax	Classification follows the facts, not preference	Decide on regularity and profit motive, and document it
Deducting expenses against Schedule 1 income	Other income does not carry business deductions	Use Schedule C only if the activity is genuinely a business
Reporting a fee your firm is entitled to	The payee named in the agreement controls	Confirm the payee before the first payment
Forgetting the state return	State income tax may also apply	Check your state's rules

Illustrative example: two partners, two schedules

Illustrative and fictional: Priya, a fractional COO, made three SourceX introductions in one year as part of her advisory practice, which she runs as a sole proprietorship. One referred company licensed its data, the buyer paid, and her reward reached her bank account in early January of the following year. She reports it on Schedule C for the year she received it, alongside her advisory income, deducts the mileage and software she used for the activity, and pays self-employment tax through Schedule SE.

Her former colleague Tom, a salaried engineering manager, made a single introduction as a favor and has no plans to make more. He reports his payment as other income on Schedule 1 for the year it arrived, with no deductions.

If you are not a US taxpayer

These schedules apply to US individuals. Partners can join from any supported country, and their own country's rules decide how the income is taxed: see Canadian tax on referral fees from a US company and India GST and income tax on referral commission from a US company.

Next step

Keep each payment record with your partner agreement and the payout conditions on the rewards page, so the timing of every reward is easy to document at filing time. If you have not joined yet, register as a partner.

Step 1Share your linkSend your personal link to a company you know.
Step 2Company appliesThe company applies itself at /apply.
Step 3Buyer selects and paysThe buyer selects and pays for the data and SourceX receives its fee.
Step 4You get your rewardYour share of SourceX fees becomes payable.

Common questions

Is referral fee income subject to self-employment tax?

Generally yes when it is business income reported on Schedule C, because net self-employment earnings flow to Schedule SE. A genuinely occasional fee reported as other income on Schedule 1 is generally not. The deciding factor is whether making introductions is a regular, profit-seeking activity for you, so document how often you do it and how you run it, and confirm the classification with a tax adviser.

Do I report a referral reward if I never received a 1099?

Yes. The obligation to report income does not depend on receiving an information return. Payers file forms only in certain circumstances, and the thresholds have changed in recent years, so a missing form tells you nothing about whether the income is taxable. Report the amount from your own bank records for the year the payment arrived, and keep those records with your return.

Which tax year does a referral payment belong to?

For most individuals using the cash method, the year the money is actually received or made available to you without restriction. The year the referred company signed, or the year its buyer paid, does not decide it. A reward that reaches your account in early January is reported for that new year, even if the underlying licensing deal closed the previous autumn.

Can I deduct expenses against referral income?

Only if the activity is a business reported on Schedule C, where ordinary and necessary expenses connected to it can be deducted. Typical examples include travel to meet business owners, software and a reasonable share of phone and internet costs. Expenses cannot be deducted against occasional other income reported on Schedule 1. Keep receipts and notes linking each expense to the introduction activity.

What should I enter in tax software for a referral fee?

Most consumer tax software does not have a referral-fee screen. If the activity is a business, look for the self-employment or Schedule C section and enter the payment as gross receipts. If it is a one-off, look for other income or miscellaneous income and describe it as a referral fee. If a 1099-NEC arrived, the software may route it to Schedule C automatically, so check where it lands.

Free resources

Client data licensing eligibility checker — A transparent preliminary screen for one company.
Enterprise value calculator — Enterprise value from equity value, debt and cash.
Earnout scenario calculator — Probability-weighted earnout value and its present value.
All free tools · MCP resource center

By SourceX Partnerships Team · Published 2026-10-09 · Updated 2026-10-09

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