Getting a 1099MISC When You’re Not Self-Employed

Portrait Of A Mature Man On Painting Wall With Roller

 

If you receive a 1099MISC document in the mail, and there’s a dollar amount listed in box 7 for Non-employee compensation, the IRS treats that as self-employment income and you’re supposed to pay self-employment tax on that income.  If you own your own business, that’s perfectly normal.  By the way, I’ve got lots of blog posts and tax tips for self-employed folks on this web-site so be sure to check those out.  I’ve got a list at the bottom.

 

But what if you’re not self employed?  Really not self-employed.  You’re stuck with a document that basically requires you to pay extra tax, what do you do?

 

First, only dollar amounts in box 7—count as non-employee compensation.  If you received dollar amounts in box 1 for rents or box 3 “other income” you don’t have to worry about the extra self-employment tax.  The rent goes on your Schedule E for rental income and the other goes on line 21 of your 1040.

 

But let’s get back to that non-employee compensation again.  What did you do to earn that money?  Is it in your field of work?  If the answer is yes, then it’s going to count as self-employment income even if you don’t think of yourself as being self-employed.

 

I’m going to use my friend Rick as an example.  He works for another tax company and he’s very good at what he does.  Every year, Rick gets laid off on April 15th.   My company stays open all year round and sometimes I’m super busy in September and October.  I could probably use some extra help around then.  If I hired Rick to help me with some tax returns, I’d give him a 1099MISC for the money I paid him and he’d have to report that as self employment income.   Even though Rick normally works for another company, he’s still in the business of preparing taxes.  The money I pay him for tax prep would definitely be considered self-employment income.

 

But let’s say I hire Rick to paint my office instead.  Rick’s not a painter, he doesn’t do that as a business, he’s just helping me out because I need my office painted and I’m helping him out because he needs the money.  We’re friends.  Painting is not his line of work.  So technically, he’s not self-employed and he shouldn’t have to pay self-employment tax on that income.  It’s a one shot deal never to happen again.  How do you account for that?

 

Well, it used to be that if you received a 1099MISC for non-employee compensation for under $1000 and you put that amount on line 21 of your 1040—the IRS would let that slide and not audit for self employment tax.   But starting with 2013 tax returns, the IRS has announced that they will send notices to anyone with 1099MISC income (with non-employee compensation) on line 21 instead of putting it on a Schedule C—where it will be taxed with self-employment tax.

 

There’s no box to check or form to fill out with your 1040 to say, “Hey, I’m not self-employed!  I shouldn’t have to pay self-employment tax!”  So what do you do?

 

You’ve basically got two options:

 

One:  Claim the income as business income and write off any and all expenses associated with the job.  This is going to be the best choice for people who have expenses with a job like mileage or supplies.

 

Or, two:  File your 1040, pay the self employment tax, and then file an amended return 1040X taking the income out of self employment and putting it on line 21 with the explanation that you are not self-employed and the income should not have been subject to self employment tax.

 

Why do this as an amendment instead of doing it that way the first time?  Because the IRS has already announced that they are sending letters out to anyone who puts 1099MISC for non-employee compensation income on line 21.  And they charge fines and penalties for underreporting your tax.

 

By filing and paying the self-employment tax first, then amending, you’re giving the IRS the opportunity to examine the situation and make a determination.  You may win, you may lose.  But if you win—the case is closed and they won’t come back at you.  If you lose—it doesn’t matter.  You already paid the tax and they can’t fault you.  No harm, no foul.

 

Most people who receive a 1099MISC for non-employee compensation are going to be considered self-employed by IRS standards.  You may as well file the schedule C with your tax return and pay the self-employment tax.   If you think you might be an exception give us a call, we can help you sort out your options.

324 thoughts on “Getting a 1099MISC When You’re Not Self-Employed

  1. Hi Gianna,
    I agree with you, you should not put that income with your other self employment income. I would create a second schedule c with only that iincome, no expenses, and I’d just code it 999999 in the business category.
    Now that’s the safe plan, but I’m thinking that you should not have to pay self employment tax on that income. If I were preparing your return, I’d make a claim that you’re not required to pay self employment tax on that money. (The safe way is to pay the tax and then amend the return later if you’re filing your own return.)

  2. Hi Jan,

    First, thank you for answering all these questions! I read them all hoping to find something similar to my own predicament. I found nothing that fits so, here goes.
    My ex-husband has his own business and received a financial settlement a number of years after the fact for a project that was done during our marriage. He then made a settlement agreement with me to provide me 45% of that settlement as my “sole and separate property.”
    I received a 1099-misc from his business at the end of the year with my portion listed in box 7. While it is not completely unreasonable to me that I would pay taxes on my portion, I do not know what to enter in the tax software for the business description, business category, and business code since I never did any kind of work for it. I have my own business working as a special needs therapeutic companion, but it doesn’t seem right to add the money to that business since it has nothing to do with being a companion.
    What would you do?

    Thank you!
    Gianna

  3. In reference to my post above the amount was $500-$7,000 depending on the year. Thank you

  4. My sister in law’s son has been working on a farm for 3 years now. He started when he was 14-15. His employer has gave him 1099-Misc. each year ranging from $500-$7,00. He had no idea what they were and his “employer” told him to do whatever he wanted to with them, they were just for his records. My question for you is should he have been filing on these? What age are you responsible for taxes, and what he needs to do from here. He is currently 17. I feel as he was taken advantage of because he was an employee and should have never received these from the beginning. Thank you

  5. Hi Shannon,
    Number one–you are no longer under the table. Your boss got caught and he’s got to report you.
    Plus, tips that are on credit cards really have to be reported. The IRS is doing credit card audits right now. I’m guessing he got busted.

    But I’ve never heard of a bartender being paid as contract labor. That’s totally new to me, but I’m in Missouri. But watch out, I’ve seen restaurants get audited and then all of the bartenders and wait staff get audited too. So–since your boss just got his hands slapped–you could be next. Do you report your bartending income? What about the tips?

    What’s worse is that the IRS has really good statistics about what you make. Scary good statistics.

    So, just keep that in mind.

    But what I’m concerned about is that your boss is taxing you 10% on your tips–is that for back taxes or is that for the tax he’s going to have to pay from now on? Because I’m fine with him paying tax now–that’s the law, that’s okay. But he can’t take 10% out of your money to pay off his own debt.

    It sounds like you need a staff meeting and he needs to explain what’s going on, or have his accountant explain everything.

    I’m pretty sure that you’re going to have to start paying tax–that makes sense. But you need to know that you’re paying YOUR tax, not HIS.

  6. Hi Granny Ralls,
    So your son is your personal assistant. And he provides more than 50% of the support for his niece and nephews. So you’d like for him to be able to claim them for EIC since he’s getting audited.
    I’m feeling like I’m missing information here. So I’m thinking that the best advice I can offer is to talk to a local professional in person. I cannot stress how important talking to a professional in person can be, but I think that may just be what his situation requires.
    You can find an enrolled agent at the NAEA website: https://member.naea.org/naeassa/rflssareferral.query_page?p_vendor_ty=EA

  7. I don’t think this question’s been asked but how does my 21 year old son who’s lived with me all his life and been my Personal Assistant (PA) via our state’s Home & Community Based Services program for almost 4 years get the EITC, CTC, Head of Household and Caregivers Expenses credits since the IRS Notice 2014-7 now made his sole income excludable? My 3 grands (his niece, and twin nephews) have lived with us all that time with him paying over 50% of their upkeep PLUS he pays almost $400 a month for medical expenses of mine that aren’t covered. I believe that those folks who live with their customers, have no other income and these types of deductions are being wronged. PAs who have kids and don’t live with their customer are still able to take their deductions. That seems discriminatory based on relationship with a person with disabilities and familial status (ie having kids in ones household) Please respond because he’s being audited and we’re not sure what to do.

  8. Hi,
    I am a bartender/server at a bar in California . There is about 5 bartenders (we all work a solo shift, rarely together) anyway. We are all under the table, and apparently the owner had to pay taxes on our cc tips (because they are documented, so he says)then, he started saying that he was going to tax us @ 10% on our tips at week end as to compensate the tax that he had to pay. CA law states that they cannot withhold any tips longer than 24 hours. Now he is trying to get us all to sign 1099 forms. We are all scheduled and paid $9 an hour. Some bartenders get a check written to them, some take it out the drawer, and some still haven’t received their tips in over 1 month. We are all very confused on how to go about this

  9. Hi Crystal P,
    I’ve been working on a similar case myself. It sounds like your boss used to work for the company as a contract laborer and somewhere along the line she bought the company–at least that’s what happened in the case I’m working on.
    The 1099MISC income will be reported on her Schedule C and you’ll write off her business expenses in the same way you’ve been doing for her owning the business. That’s how a 1099MISC get’s treated, it makes you a business owner, even if you never think of yourself that way.

  10. Hi Devon,
    It sounds like you’ve done everything right. It’s probably best to just pay the $909 to get the IRS off your back, because this will take a while to solve.

    That said–there’s always door number 2. (This is my favorite door so note that I’m biased here.) Amend your tax return. Claim expenses against your self employment. Obviously Devon, you own your own business. You must have a home office, you need a cell phone for the company to call you and you have business miles to claim against that business income.

    Excuse me, but did you wear a uniform? You paid to clean it, maybe you even paid for the uniform. Write off every expense you can think of.

    You see, you may still lose this fight, so if you lose, you’ll want to reduce that amount you’ll have to pay to as low a number as possible. Personally, I like to make that number look like the IRS owes you a refund. I’m not sure you can make the number that good, but that would be perfect if you could.

    Figure what you’d owe if you were to amend the return, pay the IRS that dollar amount (but don’t file the amended return because then you’re saying it was self employment.) Then, if you lose, then file the amended return showing that you’ve already paid the tax. If you win, the IRS has to pay you. All is good.

  11. You are so wonderful to respond to all of our comments and questions! The IRS sent me a CP2000 stating I owe $909 because my employer filed me as a nonemployee. I’m baffled by this!!! I worked for a restaurant/bakery/farmers market as a server and cashier. In no way, shape, or form was I an independent contractor. I no longer work for the company and just requested copies of all my pay stubs from the owner, they should be here Monday. I’m positive that I had taxes taken out of my paychecks, which is why I want copies of my stubs. What do I do? I’ve already filled out a form SS-8 and plan on submitting that. Will my former employer have to pay some of this $909? Should I just go ahead and pay it myself while waiting for the problem to be resolved? I’ve been on hold waiting to talk to the IRS for an hour and a half 🙁 Thank you so much for your advice!

  12. I am doing my bosses taxes going ten years back. She owns her business now but did not own the business in 2009. She worked at the business in 2009 and got a 1099-Misc. I am a little confused on where to put the 1099-misc and what forms need to be filled out. Please Help.

  13. Hi Fiona,
    That’s a really good question. You do pay into social security when you’re self employed and have a profit. But if your self employment income shows a loss, then you’re not paying into social security.
    When you look at your 1040 tax return, line 57 is for self employment tax. If you’re paying taxes on that line, then you’re paying into social security.
    If you haven’t been getting your social security statements, you should contact social security and ask them to send you one. You can check to see that your self employment income is being counted towards your earnings.

  14. Hi Jan,

    I’ve gotten 1099-MISC forms for a few years from my current part time job. I also haven’t received the letter from Social Security Office which used to mail me a summary about my working points, all tax returns I filed and the filed amounts when I was on my full time job. Is it because I didn’t pay for Social Security taxes on my 1099 MISC any more since I got my part time job? Is there a way to start paying for Social Security taxes when filing my 1040? I have a quarterly automatic withdraw for federal taxes from my account set up. My ultimate concern is that, am I gonna be eligible to get social security benefits when I retire next year based upon the fact that I have 1099 MISC that has no social security deductions?

    Thank you,
    Fiona

  15. Hi Amy,
    That’s a great question. You’re an employee, but you hire a contract worker. You would deduct the expense on the contract laborer on form 2106. That ties to your schedule A and the deduction is limited. Any employee business expenses you write off would have to be more than 2% of your adjusted gross income before they even counted. (Not a great deduction, but that’s the one you get.)

  16. Hi Roy,
    I would recreate our records and claim the expenses to the best of your ability. Is there a risk of an audit? Well, yes, but I think that if you do a good job of trying to be accurate, you should be okay. Besides, you’ll be filing an amended return so once that passes inspection, it’s unlikely to be audited later.
    Remember, as a bartender, you can write off spying on other businesses to enhance your bartending skills. (Translation: for you, going out and drinking could be considered a deductible business expense. Lucky you.)

  17. Hi Chris,
    To quote my husband, “If you don’t ask you don’t get.” And I think might have a case. (Although I an argue the other side too so you don’t have a slam dunk.)

    But here’s the side you’re going to take:

    Whatever type of business that is that gave you the stock option, you are not in the business of doing that. (Counter argument, at the time, you were an attorney for them and you were in the business of being an attorney.)

    You have not been associated with that firm for several years, and have not been performing attorney services for several years. (Counter argument, you were given the options when you were an attorney and performing services for that company.)

    Now the nice thing about an amended return is that you’ve already filed an paid the tax. This puts you in the good graces of the IRS. You are asking them to reconsider how that income was taxed. So there’s no downside–no fines or penalties if you don’t win. There’s only upside if you do win.

    Here’s my take on the taxes: normally in a stock option scenario like the one you presented, when the option is exercised, the payroll taxes are taken out and it shows up on the employees W2. You still report it on the Schedule D, but it’s taxed with the W2 at the ordinary income tax rate an FICA is withheld. So–I’m thinking that putting that income on a 1099MISC really was the right thing.

    But–the beauty of an amended return is that you can at least try. If you get an IRS agent who sees it your way, you win! If not, you haven’t lost anything. My opinion is that the option was reported correctly and you should have to pay the self employment tax. (I just really would like to be wrong about it.)

  18. Jan,

    If I work and receive a W-2 from my employer but I have hired my own assistant to do some administrative work for me to help me with that job and I have paid them out of my W-2 wages. I am not self-employed and do not own my own business, but I would consider the person I hired as an independent contractor since they set their own schedule etc. Do I fill out a 1099-MISC for them, if so where would I deduct that amount on my own taxes? Thank you.

    Amy

  19. Hi, Jan. Thank you for answering all of these questions, it’s incredible.

    I am a bartender. I have an old 1099 for tax year 2012. My employer gave us all the 1099s unexpectedly, and well after everyone had already filed their taxes. Now the IRS is finally catching up to us. I haven’t received a bill yet but a couple of other coworkers have. None of us would have ever considered ourselves “self-employed,” at all.

    Now based on some of your previous answers, it seems as if our only options are to file an SS8 and risk getting fired (or at the very least making things extremely tense at work) or filing as self-employed and trying to write off expenses. I actually would have had plenty of expenses to write off, like mileage, home office (I do some work at home—schedules, menus, event planning, etc.), travel (every trip I take is in part research for my job), etc. Problem is, this was 2012 and I simply don’t have receipts for any of it. Should I estimate and run the risk of an audit? Is there even much risk of being audited for someone who, for that year, only made about $13k on paper? I’m really irritated that my employer gave us 1099s simply to get out of paying their share, but what can I do at this point? Back then, I didn’t fully understand what was going on.

    Thanks for helping everyone on here!

  20. Hi Scott,
    Take a pay cut. Seriously.

    It costs an employer an extra 7.65% to turn you into a wage earner. And then, on top of that are the unemployment taxes. So if I pay an employee $100, it really costs me, $100 for the wage, plus the $7.65 for the social security and medicare taxes that are my employer’s portion (in addition to that tax that I’ll be withholding) and then I’ll also pay an additional $3.51 cents for my Missouri state unemployment tax.

    So, let’s say you make $10 an hour as a contract laborer. You would divide $10 by 1.1116 to get $9.00 an hour.

    (7.65 FICA tax plus he 3.51 unemployment tax = 11.16 converting it to a percentage you get .1116 and then you have to add 1 to make the equation work.)

    If you make $15 an hour, you’d need a wage of $13.49.

    But before you go there. Is that the right thing for you? Because, as a contract laborer, you can write off all of your job expenses. Which–may or may not be a good thing. So you really have to make sure that’s what you want before you make the switch. Employees have a real hard time writing off their job expenses.

    I suggest running the numbers both ways. Also, make sure you take into account the numbers for your area. I used my Missouri unemployment tax rate. Different states, different numbers–different taxes.

    Good luck.

  21. Hi Jan,

    Thanks for this blog, this is great. I was a corporate attorney and know about taxes in general but my question is a bit arcane.

    From 2003 to 2007, the law firm I was working at had a public company client for which I had been the main attorney. In 2007, I left the practice of law for a new profession. When I resigned, the firm’s client issued me a stock option (an NSO) as essentially a parting gift. It is highly unusual for attorneys to be issued an option by a firm’s client.

    Since I was not working as an attorney any more, this option was not in compensation for or an incentive for future services, unlike most option grants, nor was it compensation for my past services. I did not have any direct relationship with the client; I was an employee of my law firm, which was engaged by this client. My law firm billed the client fees, including for my time, and the client paid the firm; this option was not part of the firm’s arrangement with the firm; I was paid a salary by my firm and this option was not part of my compensation with the firm. It was an unexpected parting gift from the client that I had not asked for or expected.

    From almost the date of grant until January 2014, the company’s stock price did not do well and the option was underwater. In January 2014, the company was suddenly the subject of a tender offer and the option was in the money. I exercised it and immediately publicly resold the stock. I recognized a fairly significant short term capital gain (by my standards, which are low).

    In February 2015, the company issued me a 1099-MISC with the gain on the option reported in box 7 as non-employee compensation. I expected to pay federal and state short term capital gains but not self employment tax. I filed my tax returns using TurboTax, and only when I printed out the returns after filing did I realize I had paid a hefty self-employment tax as well.

    Given that I did not perform any services for this company after being granted this option, it was not in compensation for my prior services, and it was more in the nature of a gift, do you think I have a plausible argument for filing an amendment and claiming it was not self-employment income?

    Thanks,

  22. Hi,

    The small company I work for is (I’m it’s only employee) is taxing me as a 1099 contractor instead of an employee. I’m NOT in anyway a 1099. What’s my recourse here? / What do I need to say to get them to see I should be taxed as a W-2 employee?

    Thanks,

    S.

  23. Hi Mike,
    you’re receiving income based upon commissions for work that you did while you were still employed by that company. Even though you retired, you’re still getting paid on that work. It still counts as self employment. And–congratulations on generating income after you’ve already retired. That’s a winner in my book. (Yeah, you’ve got to pay taxes on it, but you’re still winning!)

  24. Hi Shawn,
    I would put those referral fees in box 7. That’s my opinion. I’m not familiar with the citation you got from the IRS agent. If your vendor doesn’t want to report the income as self employment, they can use the citation to avoid the self employment tax.

  25. Hi Fred B–
    Hmmmmmm. Usually, students receiving a stipend get a letter saying they receive a stipend. The stipend is actually reported on line 7 of the 1040 like wages.
    (I do a lot of those because of Washington University here in St. Louis uses the stipend program quite a bit.)
    Now student teachers, on the other hand, usually are paid as W2 employees. (At least the ones that I’ve worked with.)
    I don’t like the idea of student teachers being paid as 1099 contract labor. That’s worth checking into a little further.
    If the school won’t budge on that–then I’ve be very aggressive in the expenses–for example, writing off her tuition as a job expense.

  26. Hi Susanna,
    You received a bonus from your company on a 1099MISC instead of on your W2. Personally, I believe that your company should pay your bonus on your W2, but it seems a lot of companies do the 1099 bonus. You’re going to get stuck paying that self employment tax. Sorry.

  27. Hi Shan,
    So you received a CP2000 because you and your husband didn’t report the income he received from detailing cars.
    It’s harder to go and claim he was an employee when you never claimed the income in the first place. By not reporting the income, you’re kind of saying he was “getting paid under the table” so you know it wasn’t a wage type job.
    I say just pay the tax and be done with it.

  28. Hi Brian,
    First–you are self employed. But you know that.
    If sounds like the landscaping and office jobs are two completely different businesses. (Maybe the cleaning makes a third? Or maybe it goes with the landscaping? I don’t know.)
    And it’s quite possible that you spent $19,000 this year on equipment. So you have two choices–use the Section 179 deduction to fully write off your lawn mower and other equipment. Or, depreciate them over their natural lives.
    Now, if you expense the lawn mower, etc–and then don’t do the landcaping business next year, you’ll need to recapture that expense. So remember that when you write stuff off about the recapture rule.

    If you depreciate over 5 years, then you won’t have to recapture the expense if you close the business, but you won’t have that nice $0 balance due tax return either.

    Personally, I would split your business into different Schedule Cs, because they are unique businesses. If you have crossover customers, you can receive just one 1099, but you’ll need to allocate the income between the businesses.

    Or you could have your customers issue separate 1099s–but that’s harder on them and you know the rule, keep the customer happy!

  29. Hi Gina,
    The work you do for the photographer does count as self employment. You may have some expenses for that job, but probably not a lot. You will pay self employment tax on that.

  30. Hi Claire,
    Your Dad does a little side work for Company B with no expenses to speak of. Sorry but there’s not much I can help you with. It does count as self employment and he is subject to self employment tax.

  31. Hi Beth,
    I’d go back to the accountant again and ask for the 1099. Or, now (since I’m writing this in late April) you can even contact the IRS about the W2. The accountant claims to have mailed one.
    If nothing else, you have your old stubs and can prove that taxes were withheld. You can file a form 4852 Substitute W2. Here’s a link: http://www.irs.gov/pub/irs-pdf/f4852.pdf
    But the extra 1099 stumps me. Unless maybe they had you as contract labor for part of the time you worked there? I really don’t know. Sorry.

  32. Hi Robert M,
    You want to know if you can claim your wife’s sister as a dependent? You say she is a student, but I don’t know how old she is Also, if she’s 23 or under, what about her parents? There’s information missing in the scenario.

  33. Hi Angela,
    Your husband received back wages from 10 years ago? That would throw me for a loop too! Oh, but you mean the tax paperwork. Yes, that’s weird too.

    First, he did get a W2, that’s good. That means they did it right. The W2 is for the back wages.

    The 1099 with the amount in box 3, that’s other income–that’s the part of the lawsuit that’s not wages. That goes on line 21 of the 1040. It’s taxable, but not taxable as self employment.

  34. Hi Araceli,
    Your egg donation was paid on line 3 so that’s other income. (That’s correct, it should not be listed as self employment.) So it should only be taxed at 25% not the self employment rate.
    When you’re in Turbo Tax, check your screens to see if you hit the box to include this as self employment. The money in box 3 should flow directly to line 21 of the 1040. You may need to click a box to tell it to go there.
    But you are right, it is not self employment income and you should not pay self employment tax on that.

  35. Hi Jeanne,
    Your soon received a 1099MISC from his job working at the church. This is made even harder because he used to receive a W2.
    This is a tough call. As things stand, he needs to file a Schedule C and pay the self employment tax. He could fine a complaint with the state or federal government to be labeled as an employee–but do you really want to file a suit against your church?
    Because he was previously a W2 employee–he’d probably have a good case. He he wants to go that route, he’d need to file form SS8. http://www.irs.gov/pub/irs-pdf/fss8.pdf

  36. Hi Bridgette,
    Vacation pay or back pay paid by the union in lieu of time off is still considered to be income subject to FICA–so if it’s not on a W2 then the social security and medicare tax still needs to be paid.
    That said, I’ve seen some accountants put those funds on line 21 and then still prepare the self employment tax forms. Personally, I find it easier to just prepare the schedule C because it’s automatic in my software. Instead of a business name, I just say “Back pay” or whatever.
    But the bottom line is that there is still self employment tax that must be paid.

  37. Hi Joel W,
    First, renting your classic car to a movie studio? How awesome is that? Sorry, that’s just too cool.
    Okay they should have put your payment into box 3 on the 1099 and that should go on line 21 of your 1040.

  38. Jan,
    I’ve read most of your conversations and you obviously know your stuff! so here’s my rather quirky situation:

    I have a dear freind who is in the tax certificate business. I fund the purchase of tax certificates and we split the profits when either (1) the certificate is paid, (2) the certificate is converted into a deed and the property is sold, or (3) the property is sold and financed – with the P&I representing another revenue stream that we split. Because I only have indirect ownership in the properties through his company, this does not qualify for a K-1 or other traditional real estate investment reporting tool – thus he sends me a 1099-MISC statement with the income reported in Box 3: Other Income.

    So, this is definately NOT a self-employment issue, but my tax preparer is struggling with how to file, and Turbo Tax does not have “direct” a means to deal with it.

    Can you share your thoughts on this?
    Thanks,
    Martin

  39. Hi Jan!
    What about a payment (that is basically a commission) that continues to be paid to me after I have retired? I get paid for ten years on my old customer accounts. I am not in the insurance business. I don’t do ANYTHING to earn it, and provide no service to my old employer. I just get 4% of the income. The former employer sends me a 1099 and it is shown as Non-Employee Compensation. (1) Is it subject to self-employment tax? (2) If not Jan, how should my former employer be reporting the payments they make to me in retirement? (3) I.e., does it go on a 1099 or is it some kind of deferred compensation that should be reported to me on a form W-2 as deferred compensation? THANKS !

  40. I am an in home 1099’d sales rep. I have a client that previously made a purchase from a contractor I sell for that is now referring business my way. Their normal line of work is engineering. Our line of work is solar. I reported the referral fees he sent me in box 1099 misc box 7. His wife called me and said their accountant advised them I should’ve put it in box 3. I called the IRS and one agent confirmed it’s box 7. I called back again and another agent said it was box 7 but then did some research and found revenue ruling 80.61 is what she labeled it that states what she said allowed banks that paid their customers an “incentive” for sending them new business to report that income in box 3. Obviously their hangup with me placing it in box 7 is that they don’t want to file a schedule c. I think it would probably be to their advantage to file one and reap the write offs but I’m more concerned with what is the correct box as they don’t agree. I tried to research and find the revenue ruling the 2nd agent cited but could not do so. My worry is that it only applies to customers that have bank accounts or to customers that buy directly from me which they dont.

  41. Hi Jan, I am hoping you can help me. I received a 1099MISC from an Insurance company for a settlement awarded to me. This settlement was not for lost wages, and was considered for “pain and suffering”. I was told by my lawyer and the Insurance Agency that this income would not be taxable. The amount is in Box 3 “Other Income”. Will I have to shell out all this money in taxes (that I obviously don’t have, considering I was told I would not have to pay taxes on these monies). How do get around claiming this as income and being taxed? Have I completely misunderstood? Everything I am seeing online about how to file this is leading me to believe I will have to pay income tax on this settlement.

  42. My daughter is in a program that is coordinated jointly between a graduate school of education and a local public school system. She splits her time between graduate courses in education and student teaching at one of the local schools. Part of her financial support from the program is a “training stipend” paid by the school system. She also gets scholarship and other aid from various sources, including the graduate school itself.

    For the 2014 tax year, the public school system sent her a 1099-MISC for the portion of her “training stipend” paid in that year. The income was recorded in Box 7 Nonemployee compensation.

    As a student teacher, she is heavily supervised in the teaching work that she does. Also, it is hard to see the income as deriving from a trade or business, since she has never done it before and will only receive the stipend for the one academic year that the program lasts.

    Any thoughts on this set of facts?

  43. Hi.I was a 9-4 mon-Fri employee at a bakery in my town for 6 months. My boss gave me a 1099misc. and told me to file as an independent contractor. I was DEFINITELY an employee. She called all the shots.
    I feel as if I’ve received the wrong file. Am i correct to feel this way?
    I’ve recently been let-go, so I’m not worried about loosing my job.

  44. I settled out of court with my ex-employer and this is what is in the settlement……”Compensatory damages in the amount of xxxxxxx compensatory damages representing emotional distress and additional costs Employee incurred in association with purchasing a home, which shall be reported on IRS Form 1099.”
    My ex-employer put this in box 7 and I think it should be in box 3.
    Can I have ex-employer change this?
    Thanks

  45. Hi there.

    I work full time for my company. My company is in the business of real estate and often has entities set up for each project that we work on. Well last year when they sold one of the projects, they decided to give all of us employees a bonus from that sale. The name on the check said my company’s name, not the entity’s name. So I’m wondering why my company gave us a 1099 Misc Form with my bonus in box 7, “nonemployee compensation”. I’m filing my taxes right now and because of that form, that bonus is showing as money earned from self employment which isn’t true, I work full time with salary for this company. My W-2 from this company doesn’t show the bonus we got. What should I be filing my bonus as?

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