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.
As sole beneficiary of my brother’s estate, I inherited a monthly income from sales of carving patterns he created. The patterns are sold by XXX Technologies, Inc. They do everything connected to the sales. I have no part in any aspect of their business. XXX shares half of the income from their sales with me. I get a check for varying amounts each month. If there were to be a month during which no sales were made, I would receive nothing. LHR sends me a 1099-MISC with Box 7 containing the annual amount for each year. The IRS is now claiming I am self employed. Total sales per annum averages around $2000. I have been claiming the income as ‘other’ on line 21 of Form 1040. What should I be doing? Is there a way to report this without being self-employed. Again, I do not participate in any way other than depositing the checks I am sent. I am a retired industrial machine repairman.
Thank you for providing such a great service here. I’m receiving a form 1099 Misc with other income put in box 7, but it should be in box 3 as the income is from a hobby and not self employment. Your website says everyone will get an IRS notice if income from box 7 is entered on line 21, based on an IRS announcement. Can you please point me to that announcement? Thanks.
Hi Rhi,
Damages for emotional distress are taxable, but they should not be listed on box 7, they should go in box three. You should only have damages in box 7 if it’s for lost income. But we’re talking punitive damages here, not lost income.
Now, if you require medical care because of this emotional distress, the portion of the damages awarded should be reduced by your medical expenses. (If there are any.)
Also, you may be able to deduct the legal fees you incurred in this case. That deduction goes on Schedule A under Miscellaneus deductions, it doesn’t get netted against your settlement income. (Which means it’s not really a great deduction, but claim whatever you can!)
It’s not your job to tell the lawyers how to write the settlement agreement. They should be following the proper rules anyway (that’s what you pay them for, right?)
Hi Sonja,
You sell something and earn a commission of $1000. Let’s say you sell ten things and you get a 1099MISC that says you earned $10,000 right? But, when you sell these items, you’ve paying a referral bonus of $300 – so really you didn’t make $10,000, you made more like $7000. Right? Am I understanding you correctly?
What you need to do is claim that referral bonus that you paid as an expense. Keep track of who you paid those bonuses too in case you get audited. If you pay anyone $600 or more, remember that you’ll have to issue them a 1099MISC.
Don’t forget to claim any other expenses that you have for selling your product as a business deduction as well.So instead of paying tax on the $1000 minus the $300, you’ll also expense out your mileage, or advertising, or other expenses as well. This is an old post, but it might be helpful: http://robergtaxsolutions.com/2010/11/small-business-basics/
Hi Jan,
I’m getting a punitive damages settlement. This has been classified as payment for emotional distress, there is no physical injury. I believe that this should be reported in 1099-MISC Box 3, correct? What type of tax liability, issues would I see if they send me a 1099-MISC with the amount in Box 7 instead of Box 3? Is this something I should have specified in the settlement agreement?
Hi, I was wondering if you could answer this question. What if you are working with a company, not as a W2 employee, but self employed and you sell something? If you make $1,000 in commission for every sale, and offer a referral bonus to your customers. Let’s say you give them $300 per referral, and you do this over and over again with different customers. You have to report all of the income that you earned with the company to the IRS, right? So how do you claim or report the referrals that you give out? I mean, since you’re not actually making the $1000, and spending some of that on referrals, there has to be a way to claim that instead of paying taxes on money that you technically didn’t really bring in, right? I hope you understand what I’m trying to say because anyone I ask just starts talking about something that I didn’t ask, so I’m guessing that they don’t understand what I’m saying.
Hi Alex,
The HOA only reimbursed the condo owner, they didn’t pay the condo owner for services so there is no 1099 for the HOA to provide.
Hi Julie,
Manufacturer incentive payments are reported on line 21 of your 1040 tax return as other income and they are not taxed as self employment. Here’s a link to an IRS publication about that: https://www.irs.gov/pub/irs-pdf/p3204.pdf
I want to point out that the publications specifically says, Do not report that income on a Schedule C! Although, if you read Jess’s comments, you’ll see that the IRS has been trying to tax her husband on that payment. But still, they write the rules and they say it goes on line 21 and that’s how I think it should be reported.
Hi Jan,
How about this situation. I’m working at a condo management company. One of the condo owners paid a vendor $1,200.00 for tree trimming with his money and the condo HOA (which is an entity) reimburses him for that expense. Whom should get a 1099-Misc? The owner or the vendor ?
My husband received bonus incentives from an automobile manufacturer. These were always reported in box 7 on the 1099 form and we paid the self employment taxes. He was not employed by the manufacturer, but by an automobile dealership. After researching 1099s for someone else it appears that this income may have been reported incorrectly. He was not self employed.
Hi Jan,
Thanks for the response, is there any tax code that I can cite in the letter? It might make it more solid if I can show them where it states the issue.
Hi Steve,
That’s exactly what I’d do. Write a letter to the IRS – using the address on the letter they sent you, explaining that you are not in the business of installing computer systems, this was a one time event, and you should not be subject to FICA tax.
Hi Jess,
Hi Jess. I like you! Would you like a job? You did your research and you’re right! Here’s the thing that you probably don’t know. The IRS doesn’t have to believe what they write in their manuals. Yes, you read that right. There’s like an open exception- you can’t win a legal argument with the IRS based on one of their pamphlets. How stupid is that?
Now, most of the time – you quote the manual, you show them that and they’re fine. But every so often you get “one of those” types at the IRS. I went round and round once over the stupid date on a tax return. I was right. I tried appealing the case but my issue was so obvious that we couldn’t find the revenue ruling because it was too stupid to argue. Everybody I talked to at the IRS agreed with me (but the one in charge of the issue.) I never did find that revenue ruling – I took another IRS agents advice and used, “it’s what it says on the front of the form”. (I thought I was being gracious by not saying, “duh!”)
Anyway, sorry for rambling, what you need is some good IRS language. Try this: As per Revenue ruling 70-337, manufacturer incentive payments are not subject to FICA.
I took that from the New Vehicle Dealership Audit Technique Guide of 2004. That’s old, but I’m not finding anything newer. If the law has changed, then ask your auditor to provide you with a more current revenue ruling. Here’s a link to the audit guide: https://www.irs.gov/businesses/corporations/new-vehicle-dealership-audit-technique-guide-2004-chapter-14-other-auto-dealership-issues-12-2004
Hi Tia,
You say you don’t want to burn any bridges – if that’s the case, then I suggest you amend your tax return, file a Schedule C for your 1099 income, and claim all of your expenses- including your home office, you mileage, you internet expense – which you needed to research your home schooling lessons, and any other business expense you had for that job. That’s my suggestion anyway.
But, if you’re willing to burn a bridge, you can file an SS8 – here’s a link: https://www.irs.gov/pub/irs-pdf/fss8.pdf determination of worker status. The IRS will contact your former employer about whether you were contract labor or not. It sounds to me pretty much like you were a household employee and can probably prove it. But – you’d have to file that with the IRS. The one problem with filing the SS8 is that you can pretty much assume that you will never work for that employer again. So – you need to decide what’s best for you.
Hi,
I had the same issue, but in my case I actually filed a regular 1040 and now the IRS is saying I owe money from 2 years ago when I did a side Job helping someone install a computer system (not my regular job). How would I respond to their letter?
I don’t want to file an amended return and then file another amended return after that. Do I just send them a letter explaining that it is not my regular job?
This is a great post! I’ve gone through the comments/thread and found some helpful information.
My husband worked for a car dealership and the managers receive bonuses, or “spiffs” as they call it, for selling certain products. Employees typically receive a 1099 MISC from the Product Manufacturer NOT the Dealership of which he is an employee and receives a W2.
For the tax year in question, my husband never received the 1099 MISC from one of the Manufacturers and thus we received a CP 2000 claiming we owe additional taxes. I submitted an amendment with the 1099 MISC as other income and made note it is not subject to self-employment tax per IRS Publication 3204 and Publication 525. However our amendment was not approved because the 1099 MISC the IRS has on file from said Manufacturer lists the income as Non-employee compensation Box 7.
IRS suggested we contact the Manufacturer to correct the 1099 MISC/submit a letter saying or challenge the income by completing an SS-8.
My concern is according to the IRS’ own Publication 3204 – this income should not be subject to self-employment tax. I provided this explanation and copies of the publication with my 1040X, but they are saying the computer still recognizes the income as non-employee compensation subject to self-employment. I will try to reach out to the manufacturer, to obtain a copy of the 1099 MISC and have it corrected, but I doubt they’ll agree to the change.
Thoughts? Advice? Should we just take the loss and file the amendment with “business related expenses” even if my husband wasn’t self-employed and this income is a manufacturer incentive payment?
Thanks!
https://www.irs.gov/pub/irs-pdf/p3204.pdf
Manufacturer incentive payments. You must include as other income on Form 1040, line 21 (or Schedule C or Schedule C-EZ (Form 1040) if you are self-employed) incentive payments from a manufacturer that you receive as a salesperson. This is true whether you receive the payment directly from the manufacturer or through your employer. Example. You sell cars for an automobile dealership and receive incentive payments from the automobile manufacturer every time you sell a particular model of car. You report the incentive payments on Form 1040, line 21. [from Pub. 525]
Hi. This is the first time I ever received a letter from the IRS and it is regarding 2015 possible liability for self employment taxes. When I was hired I was looking for W2 employment and was told the position came with benefits. They have a poor reputation for not treating people well they hire and try to keep as many as ICs to save money, most likely. I was put under probation initially and though it would change at repeated requests but it never did during the year in question. After two years or so I finally got my W2 status at the beginning of 2016, never received any benefits; but am no longer working for them as I put in my notice, but I am trying to leave on good terms and have left a few months ago. I was hired as a private home school tutor. My co-worker is an IC by preference for the deductions and my employer even claims her as a dependent when she’s not. I have worked as a teacher with W2 wages for many years before taking this position. I never wanted to be an IC and did not claim any deductions as IRS says there are none for home schooling, though my co-worker and employer take them. I did not use schedule C and filed as misc income. I had a key to the home, worked only at one location, was provided any and all materials and reimbursed for any I paid for up front. I was given some instructions/guidelines on what the parents expected, though I had freedom to teach in the manner I wished. I cleared everything I did with them first, to get their okay. I worked under recording audio and visual cameras, worked regular hours that they set and commuted daily. I keep plenty of records of our accomplishments/school work and left all with them when I left. They were pleased with my work and I with working for them and would like to not “burn the bridge” in case of future work arrangements. I even got “salary status” at some point in 2015 and was paid for full weeks when my employers were on vacation, etc. I’m open to any feedback on this matter and how to respond to the IRS letter. In my mind, did not file as self employed as I never wanted to be though I think they might have had me sign something initially (but she would never discuss nor follow up with me at my repeated requests until I put my foot down at the beginning of 2016) and filed as just providing this service until I could get my W2 status from them. Thanks very much for any help!
Hi Christina,
Yes, it is considered self employment. I don’t know why your employer did that (but he’s not the first and certainly won’t be the last.) But – as far as I’m concerned, since he did stick you with a 1099–you may as well right off your employee expenses against that income.
I work for an employer who has several entities. I receive a salary from one of the entities & at year-end receive a W-2. In 2014, my employer gave bonus/commission for which no taxes were held out on. The check was written from another one of his entities other than one I receive regular salary from. At year-end, I received 1099 for the bonus I received. Is this considered self-employment and will I need to pay self-employment taxes on it or just regular taxable income?
Thank you Jan. I see that I need to form a sole prop. and issue the children a W2. Here is the next wrinkle, and they don’t make it easy when you read the tax codes.
With the W2 comes the W3 form. I assume I have to apply for an EIN number even though I am only employing my children??
Also, the W3 asks for the “kind of payer”. Since they are my kids and my only employees I won’t be withholding taxes. Therefore, I’m not a 941 payer. The other option would be “household employer” but when looking at the IRS definition I don’t think that applies. The household employer would be easier for me and if I’m ever challenged I can say I don’t file quarterly 941s because I only employee my kids and I don’t withhold any taxes. They might force me to file a zero 941 each quarter but that makes no sense.
Hi Sam,
Technically you issue a W2 – not a 1099-MISC. You don’t want to issue a 1099-MISC as then your child would be subject to SE and that’s what you’re trying to avoid.
Dear Francine,
On behalf of all the 501(c)(3) organizations out there that so desperately need help from people like you, please do not let this stop you from helping that camp! It’s not their fault that they have to issue you a 1099. And qualified swim coaches are really hard to find!
That said – you really aren’t in business to be a swim coach. If ever there was a case to be made for not being a Schedule C – I think yours is a winner. I would put the income on line 21 (other income) and just be done with it. If the IRS bothers to send you a letter about it, just explain what you said in your post here. That should be good enough. But given that the amount is so low – you may not even get a letter from them.
Go do the camp and have a great time! (You know they’re going to want you back! Once a charity gets you to volunteer, they’re not going to want to let you go!)
Hi Rebeccabritt,
You should record your income as self employed.
Hi Janice,
I’ve heard that story so many times it drives me crazy! You work someplace, they can’t live without you, and then after years of being a W2 employee they count you as a contractor. The problem is – technically, now you are! So no, you really can’t get back your self employment tax that you paid. But–did you write off all of your expenses? Granted, maybe you didn’t have many. But I would claim a home office – because if you are self-employed, you should have a home office. (Oh yeah, I realize you didn’t think you were self employed, but now that you know you were, that little home office of yours is now deductible!) Then, since you had a home office, that would make the mileage between those two offices – yours and the company’s, deductible as well. Any other expenses I’m missing? What about your self employed health insurance? If you worked there for 50 years, you might already be getting Medicare. The part that you pay out of your Social Security check becomes deductible also (at least as much as your business has a profit.)
So even though you can’t get your self-employment tax back, there may be some good reasons to amend your return anyway if you haven’t already claimed every deduction that you’re entitled to. Good luck.
Hello, what is I hired my child through my sole proprietorship. Since it’s my child they are not subjected to FICA taxes and if under the standard deduction, not subjected to Fed Tax. They only pay any State and Local tax.
Do I 1099-MISC my children or W2 them? I assume it’s easier for me to 1099 them but would a Schedule – SE get automatically filed? If so, they are exempted since they are working for me and under 18.
I was asked to be a swim coach for a 503C organization for a one week camp held once a year. They will give me free lodging and meals (a value of $798) and perhaps an additional $400 if they meet budget. I am retired from state employment, not a swim coach and this is the only time I will be doing this. They are requiring that I sign a independent contractor agreement form so they don’t get penalized for not classifying me as an employee and will be issuing me a 1099-MISC. I assume this means box 7, but I am not sure. From my standpoint, this is purely a hobby, but do II still need to file schedule C and pay SE tax? Or file and amend etc? I will definitely never do this again if I have to deal with all this IRS reporting. Hadn’t even thought about it until they sent me the independent contractor agreement form to sign. I*s this agreement going to indicate that I am in this business and not in a “hobby?”
If I do research studies for a living ,do I report on line 21,or self employed
Hi Jennifer,
I would still issue a 1099MISC. The bonuses are all tied to work so it’s still taxable that way. I actually worked on a case similar to this – a fellow received a bonus and like you said-he didn’t work for that company and wasn’t self-employed, but they did pay him a bonus and the IRS did hold that he was subject to the self-employment tax. I’d collect W9s and issue 1099s if I were you.
I worked for a company for 50 years and retired a couple of years ago. They called me back to help out for a couple of weeks which I did. For my tax return they sent me a 1099-Misc rather than a W-2. I paid the self employment tax but don’t understand why I had to do that. Could I file an amended return and get that back? Thank you for your help!
I work for a contract and permanent placement staffing firm. There are instances where we would like to issue a sign on bonus for a contractor we placed permanently but didn’t employ directly. They are not “self employed” and they were never an employee of ours. In other instances we offer referral bonuses if an outside party refers a client or potential candidate. Would we as a company need to collect a W9 and issue a 1099 to the recipients of these payments at the end of the year?
Hi Tiffany,
I agree with you that the IRS is sending notices to everyone with 1099MISC income listed on line 21 of their return.
Personally, I have a bias towards claiming self-employment. I like claiming all the deductions and write offs that go with self employment and I think your husband could do well with that. I also think it’s easier to win with the IRS that way.
But – being fair, I think you’ve got a pretty good argument. This was a one shot deal, your husband is not in the business of being a mentor, and he was mentoring business plans, not mentoring a sales class. So the argument is there. Now, he did make $7,500. I have a mental threshold of $5,000 – that’s sort of where I draw the line about “business” versus “non-business” income. But that too is my personal line. There’s no official IRS guideline about that.
So if I were you, I’d respond to the IRS letter telling them exactly what you’ve posted here – he’s not in the business of mentoring, it was a one time event, etc. See if they accept that premise. Either they will – great you’re done, or they won’t. If they won’t accept your argument, then you got back and amend your return and file the schedule C and claim all the expenses you possibly can to offset the income and the self employment tax. Good luck.
Jan, I think you may have point, I have to find out if I paid after tax or before or if company paid it I guess. NO it was Cigna and they gave to my employer and they 1099misc’d it. I am in argument with IRS now about it. No lawyers involved, I am pretty good fighter. I am not going to pay the self-employment tax for sure. WIll check on the rest. thank you. I just don’t know how I can get IRS realize that there is no self employment…
My husband is employed full time in tire sales. In 2014, he was asked to be a mentor for a group of students at a local college who were working on a business plan. This mentoring work paid him $7,500. It was a one time thing. He does not expect to be a mentor for students again, and it is unrelated to his full time employment. When we filed our 2014 return, we did not treat it as self employment income. The IRS has sent us notice that they believe he owes self employment tax, due next month with a little interest. I think he was just flagged because the IRS is sending notice to everyone with 1099 misc income listed on line 21 of their return. What should we do?
Hi Miguel,
Here’s the thing, if you paid the premiums for the disability insurance out of your own money – then the payment to you is not taxable. If your employer paid the premium, then it is taxable to you. If you paid the premium yourself, but it was out of a cafeteria plan – then even though you paid the premium – it counts as your employer having paid it and it’s taxable to you.
Have I confused you yet?
But here’s the thing about your situation that really bothers me – you shouldn’t have gotten a 1099MISC for this! You should not be paying self-employment taxes on this! So, I’m guessing that you’ll have income tax to pay (since this was coming through your employer) but the whole self-employment tax thing seems wrong to me.
So is there a missing piece here? You really had to fight for your disability insurance, right? So I’m thinking lawyers were involved? (Okay,some of my best friends are attorneys, but I usually don’t socialize with them in public ya know what I mean?)
No,seriously. I’m wondering if there was no disability insurance and your employer had to cough up the funds because he never paid your disability insurance? Could that be the case? Was it a pay-off for a law suit, as opposed to an insurance payoff?
But even if that was the case, I still think it would be considered as payment in lieu of wages instead of self-employment.
My other question for you is – did the 1099 equal what you actually received? I just want to make sure because sometimes in lawsuits people receive 1099s for the entire settlement – but a good chunk of that is actually the legal fees and that’s deductible.
Bottom line: although I suspect that your disability payment may be taxable, I don’t believe that you should have to pay self employment tax on it.
Hi Susan,
I so love this post! I wish I could have seen your group! It sounds awesome! (1. I used to march with a parade group when I was a kid so I love parades. 2. I used to live in Boston and I love the Revolutionary War history re-enactment stuff.)
Oh, but you had a tax question. Sorry, I was mentally off and running.
Back to work: Here’s my question to you – what did you do with the money? I’m guessing that you – Susan, didn’t keep $2500 for yourself while the rest of your group got nothing. I suspect that you either shared the proceeds, you you reinvested that money in the group for transportation to the parade, or new uniforms, or something like that. Now if you paid any of the other Minutemen $600 or more, you should have issued them 1099MISC. If you paid them each less than $600, then no 1099 would be required. If you paid of uniforms or other supplies – well, then that also would be an expense you can write off.
So, what I would do Susan, is I would amend your tax return, prepare a Schedule C – and claim all of those expenses (whether those expenses consist of paying the other Minutemen or purchasing supplies.)
I would wager that the cost of being a Minuteman (woman?) is even more than the $2500 that you earned. You might even have a business loss there. Hmmm, the IRS might even owe you a refund after you’re done!
Here’s the thing. Being a Minuteman for you is a hobby, it should be reported as hobby income and as far as I’m concerned, you did everything right. But the problem is – with these 1099MISC rules – it makes hobby income into business income and business income gets hit with business expenses. So – if the IRS insists that your income is for a business – then fine – they win. But you get to claim your business expenses. Which, in this case should exceed any income you made. Hence – you now have a business loss, hence you should be getting a refund once you amend.
I think you’re familiar with the expression, “Don’t fire until you see the whites of their eyes!” Well, right now you can see the whites of the IRS’s eyes. Fire!
well i received a large some of money as short term disabiity insurance money that i had to fight for tooth and nail. the money went from insurance company to my employer and my employer put money in the bank then issued me a check for the amount and 1099misc and now almost 3 years later the irs says i was self employed and charging me a bunch!! what do i do?
I am a member of aMinuteman re-enactment group. We marched in Philadelphia in 2014 and were paid $2500. We did not have a tax-exempt # so I used my own SS #. I filed the money as misc income. Now the IRS says I should have filed it as self-employment and they want $353 in taxes. I am not self-employed. This was money paid for our group to participate in their 4th of july parade. I did file it as income so therefore I did pay some tax on it. Do I have any recourse? I did just look at the W-2 and they did put it under box 7.
Hi Naomi,
You were treated as a subcontractor. So, you’ll want to write off all of your expenses – like getting that TABC license for one.
Here’s my question to you- when you got your first paycheck, do you look at it to check your withholding? Did they take out social security and medicare taxes? My guess is not. That’s the big clue that you’re contract labor – no withholding. And if you don’t bring that up right away, then you’re tacitly approving the situation.
Did they play you for a fool? Probably not. They probably figured you understood the situation. You could file an SS8 with the IRS, but you may be better off claiming your expenses as a deduction and moving on.
Hi Cin,
You could make a good argument. (You are a lawyer, that’s what attorney’s do right?) I’d put it on a schedule C and pay the tax. Then I’d amend the return taking it off the C and arguing that it was a one time thing, a referral, not a legal fee, and see if you win. That way, your behind is covered if the IRS disagrees since you’ve already paid the tax. And if you win–well, then you get your money back.
I received a 1099-Misc form with an amount cited in box 7, and am unsure if that classifies me as an independent contractor. I was indeed not self-employed, as I worked for an established business (a vineyard and tasting room) for about five months before quitting before a move. Under no circumstances was I ever told I would be considered anything other than an employee, so I’m unsure why my income was labeled as nonemployee. I clocked into work, had an hourly wage, sold their product during the day, had to obtain a TABC license with my previous state and everything. Is this the appropriate form, or was I taken for a fool?
I am a lawyer who is fully employed at a law firm and received a one time referral fee to another law firm. I did not even expect a referral fee as I was trying to help out a friend who was hurt in an accident and happened to know a lawyer.
It was just one time and I do not expect to make any future referrals to anyone. Is this considered self employment income?
Hi Susan,
Your brother, as an individual, does not need to issue 1099MISC forms to his caregiver or for his rent
Hi ecc,
I’m leaning towards yes. You’re getting paid every month, this sounds long term, not a one shot deal, so I’m inclined to argue that you do have to pay the self employment tax. Sorry.
As POA for my brother who is now in an Assisted Living, I need to send two 1099 misc for care giving and rent. I don’t want him bothered by IRS letters or such if I do something incorrect. He is the Payee, I will use his name, but my address as POA. Is that acceptable? I have my address listed on his EIN under “exectutor, admin, trustee, care of”.. The mailing address for my brother on the EIN was his old mailing address in another state. Should I also include my name as POA under his? It is a one time deal and I want to do this right the first time but can’t find any help on IRS site. Thanks for your help.
My mom had to come live with me and I get paid every month for taking care of her- It is a substantial amount but it is not my normal line of work. Do i really have to pay a self employed tax?
Thank you.
Well Tiffany,
Did you earn the money or did you get the 1099 by mistake? I’m assuming that yes you earned the money so yes you do have to report it.
Does the business have your social security number? Perhaps they were masking it to prevent you from being an identity theft victim, but they will have the social on the 1099 they send to the IRS, so yes, you have to report it.
But maybe, you never gave your social to the business. You never filled out that W9 they asked you to complete. Well, then they will be required -let me repeat, they will be REQUIRED BY LAW to withhold 28% of whatever they pay you in the future and give it to the IRS.
Oh, so you think you’ll get that back, but wait! They don’t have your social security number, the IRS won’t know that that money is yours. You’ll never see that money again! That totally stinks.
So, back to your question. Yes, you do have to report it. Yes, you should provide proper documentation to the business you worked for if you ever expect to do any work for them again.
I had a client who had 1099 withholding–it took two years to get it cleared up and lots of IRS hate mail with threats of fines and levies and nastiness. (This was not all her fault, the business changed hands and neither the old owners nor the new owners wanted to fix things.) But just sayin’, it’s a headache you don’t want.
I received a 1099 but my social is not on it do I still have to file it
Hi Natali,
I don’t think that you are self-employed. I think you could possibly win the “non-self employment” case.
Hello,
I received a 1099 MISC with some money reported on box 7 for a one time referral fee I provided to a lawyer’s firm. I am an engineer and not in the business of law (personal injury) nor referrals. Should this still be reported as self employment income?
Thank you.
Hi Sarah,
Basically, you’re required to file a tax return if you have over $400 of income on a 1099MISC. So, it looks like your nephew should have filed.
There is no “age” requirement for filing taxes, if he had income, he should be filing.
This is what I would do–I’d contact the IRS and ask for “wage and income transcripts” for your nephew. (He’ll have to do that, you can’t do that for him.) See if the farmer actually filed those 1099s. (I’m wondering if maybe he never filed.)
If there are 1099s issued to your nephew, he’ll need to file tax returns. If he does need to file, make sure he claims all of his expenses for working on the farm–if he has any. That might be tough to claim.