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.
Hi Steve,
My opinion is that it would be a waste of time. I think that the IRS would argue that you are in the business of being a flight attendant and you were getting paid for training in that business. I also think that you could ask another accountant and get the opposite answer. So the big question is – is it worth the hassle? Your self employment tax on $680 is $96. $48 of that is deductible. Is the $96 worth the headache? For me, I’d say no because I think your 1099MISC is legit. But like I said, if you ask another accountant, you’d probably get another answer.
Hello there!
Suppose I am tentatively offered a full-time (W-2) employee position as a flight attendant with an airline beginning January 1st, 2016. In order to qualify for employment beginning January 1st, I was required to participate in the airline’s pre-employment training (provided by the airline itself) for 5 weeks in the last quarter of 2015.
My (future) employer provided me with a weekly training stipend, which was subsequently reported on a 1099-MISC as $680 in Box 7 as Nonemployee Compensation. The training agreement provided to me clearly states that I am NOT considered an employee of the company until after successfully completing the required training program.
The stipend they provide was more than adequate to cover all expenses incurred in conjunction with the training, especially considering that room and board in a hotel and free breakfast and lunch are provided each day for the entire training period.
Should we try to amend my 2015 tax return to re-classify this $680 as other income reported on Line 21, or should it be left on my 2015 Schedule C? It was “non-employee” income, but I’m also not really in the business of attending 60 hr/wk training sessions, so I don’t see how this could ever be considered self-employment income as it’s not really a business.
Thanks,
Steve
Hi Janet,
Oh gee, I hate questions like this. It’s not your fault! It’s just arrrggggghhhh!
Here’s the thing – your husband’s employer shouldn’t give him a 1099MISC. The reimbursements are what’s known as a “non-accountable plan”. That means that it should show up in your husband’s W2 and that money is subject to FICA withholding. His employer is trying to avoid paying the tax (employers pay social security and medicare taxes that are equal to what is withheld from the paycheck.)
So what should happen – is that it should be reported as a wage, and your husband should report his mileage on form 2106 employee business expenses. Should.
But I’m guessing that the company is not going to change their filing.
So technically, you should enter the 1099 misc as non-business income from the rental of personal property on line 21 of the 1040 not the schedule C. Then claim your mileage deduction on the form 2106. It’s subject to 2% of your Adjusted Gross Income, and it goes on your Schedule A. But that’s the right way to do it.
Since the IRS is asking you questions – I think that’s your best route to go.
My husband gets W-2’s and all benefits through his company, but he receives a 1099-Misc each year for the monthly vehicle allowance he gets. We’ve been filing 1040’s and including a schedule C for the mileage expenses he has (over 40,000 miles a year in our personal vehicle). The IRS now wants more info on our 2015 return. When I fill out the C-4, what do I put when it asks for who owns the business? He’s an employee in all other aspects of his job except for the shady way they give him “gas and vehicle expense” allowances. Thank you!
Hi Lindy,
It sounds like you’re an independent contractor now.
Here’s the thing, how much did you make an hour? Let’s say it was $10 (because I like using round numbers.) And you worked for 10 hours. Did you get a check for $100? That’s contract labor – no federal income tax, no social security, no medicare, and no state taxes were taken out.
But let’s say you only got $92.35. That means that your employer took out social security and medicare tax. That would imply that you were being treated as a wage earner. In that case, then you certainly were being deceived.
Im in a wierd situation. I thought I was an employee working hourly wage. Totalling a little over 9000 But my employer said I’ll be receiving a 1099.? I am not a independent contractor, and did not work in self employment, is thus right? Or am I being deceived.
Hi Alisha,
So I’m guessing that the IRS is asking for tax on the $1000 plus penalties. $1200 seems a bit high. Did you also receive EIC? That could mess you up there too.
First, did you even report the $1000 at all? I’m guessing that you didn’t otherwise the tax bill would be much lower. I think your best bet is probably to file the schedule C, but write off your expenses. For example – you can’t get a member recruitment bonus if you’re not in the union so I’d write off those union dues. Then of course is your mileage to the union meetings. So if you have any other expenses for the union, I’d write them off too. Amend your return, showing your expenses. That will greatly reduce the debt. If you still owe the IRS, then pay the tax, and request a “penalty abatement” for the penalties they’re hitting you with. That should at least make it manageable. Good luck.
I received over a 1000 in union member recruitment bonuses. Now I am receiving a debt letter of like $1200 based on this. I’m not even sure if I received all this money or not. But I did receive that letter from the IRS. What should I do should I try dispute the claim from my local union and make them prove to the IRS when they paid his money to me. Please help I do not have $1200.
Hi Karen,
Wow. Your employer was trying to do something nice for you. I’m sure he had absolutely the very best of intentions. Then his accountant got ahold of him. I know, I’m one of the evil accountants. I can hear her now. “You can’t do? I’ll give you some options, because I’m not sure what’s best in your situation.
Option 1: maybe you could ask your employer if that’s what he wants done. Like I said, I don’t know if that’s an okay thing to ask or not. I wanted to give my employees a bonus this year and in order to get the checks to be the right amount, I had to gross up the pay to cover the tax, but that’s how I did it. Now, awhile back, my husband had a job that paid his moving expenses. That’s normal, but they also paid some expenses that turned out to be taxable. We got hit with a pretty steep bill for it. Because my husband’s employer didn’t mean for us to be harmed by that, they paid us for the extra tax that we had to pay. I don’t know if your employer could be approached that way or not. But at least I mention it here, just in case. It seems to me that if he cares enough about you to pay your $2500 for your 25th anniversary, well, he probably wouldn’t want you to be taxed at the 40% tax bracket for it. (Or whatever the extra income is costing you.)
Option 2: Just pay the tax.
Option 3: Treat this money like a job. So – you’ll need to write of the expenses for it. (Okay, there’s a part of me that thinks you should write off your anniversary trip as a business expense, but that’s clearly wrong! Don’t do that. I don’t want you in audit jail because I said to do that.) But, I would write off any job expenses that you had for the year.
But really, I’d talk to your employer first to see if that’s really what he wanted done. I wonder if he knows just how much that gift is going to cost you.
My employer gave me a $2500 check when he found out my husband and I were going to a trip for our 25th anniversary. However, it was reported on a 1099-MISC form as non-employee compensation. Now the IRS is treated the money as if I were self-employed. I have been with the company for 40 years. What are my options?
Hi Carla,
Wow! wow. (Can you see me? I’m sitting here just shaking my head. Wow.
I’m having a really hard time separating my witchy self from my accounting self. Okay sorry, I gotta do it — I think you need to send him an invoice for the $90,802 that he has not paid you. Demand immediate payment. Then, if he pays up – go ahead any pay the taxes on that! If he can’t (or shall I say won’t) pay you, then you’ll have to issue him a 1099C – cancellation of debt – which he would have to pay tax on, but then you would expense the unpaid bill. Yeah, I’m a witch, sorry, but I can’t help it.
Okay so that’s not nice – but seriously? What’s he trying to do? But the good thing is, you do have an accountant and hopefully, she’s not very nice either.
So, can he issue a 1099misc to a spouse? Yes, it is possible. Is there a statute of limitations on 1099s? Well, there are penalties for late filings, but what he’s saving by pawning over $90K onto you is well worth the penalty. You’re not listed as an owner – as a spouse, you may be considered a 2% owner in some situations. There’s lots of stuff there. But – the good thing is, you have your own accountant and you also did the bookkeeping you you know where the money went.
I would gather up all of those old bank statements and start a paper trail of your own. That way you can defend whatever it is that you do claim. Although even now that I’m over my initial witch reaction – I’m still liking the thought of sending him a bill for the unpaid compensation.
Added to on August 18th. Okay, I’ve slept on it and I think I’m a little more sane now. I would file an amended return – 1040X. You will put the 1099MISC in, and zero out the income. In the explanation box on the 1040X, I would write: “Taxpayer has divorced owner of the business. Divorce decree states that ex-spouse is responsible for all self employment tax from his business. Ex-spouse issued 1099MISC as a revenge tactic. Taxpayer received no payment from this business. We are submitting this amended return to account for the 1099MISC that was issued in error.”
Then I’d sit back and see how the IRS responds to that. You may even wish to attach the pages of the divorce decree that outlines that he is to pay the self employment tax to the return. I honestly don’t know if it will work. But that would be my start. Good luck.
Hi Mary,
My best guess is that you’ll be able to just put that on line 21. They should not be sending you a 1099MISC for only $400.
Hi.
My ex-husband was self-employed and refused to file our taxes in 2013, 2014 and 2015. We divorced (in part because I could not get him to listen to me about how important this was) in 2016. As part of our divorce decree, he is responsible for ALL tax liability for his business. We also agreed that we would “have a conversation” about filing 2014/2015 jointly. I couldn’t get him to respond to my follow up questions for months regarding this issue, so I moved on, found my own accountant and have filed 2016. She (my accountant) is also preparing my 2014/2015 returns.
I didn’t work outside the home for 1/2 of 2014 or any of 2015. I did do some basic bookkeeping for my ex’s business during that time but it was very administrative and not more than 10-15 hours a month at that. I did not receive a salary for that work which was fine.
Admittedly, we didn’t do a great job at keeping the business and personal accounts separate. We moved money when needed from business to personal and back (sometimes to cover large payroll runs, etc.).
Yesterday (2017 mind you) I open my mail to find that my ex-husband has issued a 1099 to me listing nonemployee compensation in the amount of $90,802 for the year 2014. I imagine I will also receive one for 2015 as well within a few days.
I’m worried sick about this and have a call into my accountant. But I’m wondering – can a spouse issue a 1099 to a spouse? I wasn’t listed in any way as an owner or even employee of his business. Also, aren’t there time limits set by the IRS as to when a company has to issue a 1099?
Hi. I did once time evaluation work at a 2 day conference- not my regular W2 job but a related topic. Filled out a W-9/contract. Total pay was $400 so I assume they will not send a 1099. Will I be able to simply use line 21 or do I have to worry about sched. C/SE route/ line 21 IRS letter? If I can do line 21 how do I describe it in that small space not to needlessly raise eyebrows (if $400 does such a thing.) What a PITA! Thank you!
Hi Jeff,
If your husband received a 1099misc for income, then you should include that income on your tax return and he should be paying self employment tax on it. I’m not sure if you read the previous post about income not being self employment, if that applies to you, you should check it out.
My husband was laid off before Christmas and got a miscellaneous income 1099 and hasn’t work there for 6 months and sent the paper in March do I need to file it
Hi Ani,
Hmmmmm. This sounds like this really should be W2 income. Is this really overtime? Or is it vacation time and other back pay that she owed you? Although I guess it wouldn’t matter, it should still be on a W2.
I’m guessing that you always received W2s from your employer in the past, correct?
According to the IRS, severance pay and unused vacation pay should be reported on a W2. IRS Pub 4128
I’m thinking that you should file your taxes with a substitute W2 showing how this money was earned as income.
I also suspect though, that you’ll get a few letters from the IRS about it. But I really think that this is wage income, not self employment. It probably wouldn’t hurt to get some help from a professional on this one, but this seems like a case where you really should not have to pay self employment tax.
Hi Lynn,
I’ve seen that happen quite a bit. Your W2 is for teaching, but the 1099misc might be for coaching or tutoring or some other extra curricular activity. Now there have been some law suits in my area about that and a few schools have started putting everything on W2s, but I think there are some times where the W2 and 1099misc still works. (It’s situational.)
Bottom line though, if you get a 1099MISC with the amount in box 7, the IRS counts that as self employment income. I would do a schedule C, and the schedule SE, and I would make sure that I claim all of my business expenses against that income!
Hi Lexi,
Wow. Just wow. I actually sat down and did some research, and there is a court case, Perez v. Commissioner that upholds the taxability of egg donation, but then it goes further and pretty much says that it’s self employment.
Perez was arguing that it should’t be taxable at all, and lost. But the reading of the opinion says a lot about “service contracts” and uses examples that makes it sound like self-employment. I’m personally finding that a little offensive. While I can see the argument – I don’t know, I guess I’m just old-fashioned.
So, yes, your egg donation counts as self-employment. It’s probably just easiest to pay the extra money. Although I would be really tempted to amend your tax return and write it up like a business. If the IRS holds it to be a business – then so be it. I would probably go crazy with claiming expenses – you have to eat right, exercise, whatever. If your “business” requires you to do certain things – well then it’s a business expense.
That said, I don’t want you to wind up in tax court because I gave you wild advice. (I would go wild with this because I’d want to take this to court – but I would never recommend that to anyone.)
Now, you mention writing a letter stating that it was for the sale of body parts. The Perez case expressly does not address the sale of body parts as a capital asset. (I cannot believe I’m even having this conversation.) But I’m going to address that here. Using – farming tax laws. (I’m so sorry to equate you with a cow, I’m sure you are a lovely young woman, it’s just that’s the only tax law that comes close to my mind.)
Okay, sale of body parts. When you sell livestock – there are two ways of handling it. One it as a capital asset – where you would paid capital gains tax. And the other is as inventory – where you would pay ordinary income tax.
Capital assets are like when you buy a steer for breeding purposes and later sell it. You would pay the lower capital gains tax rate on the steer.
Inventory would be – you have calves born on your farm and you sell them.
Your eggs were part of you to begin with. I would argue they would sell as inventory.
And this is where you also lose because if you’re selling inventory – that’s a business and you pay self employment tax on that too.
I’m not finding a win for you no matter how I work this problem out. (Which really stinks because I think you should not have to pay self employment tax on egg donation. But the IRS doesn’t really care about what I think!)
So I’m sorry, but I think you need to pay the tax.
my former employer pay my overtime on 2016 a year after i resign after 3 years of work ( 2012 – 2015) and she sent me 1099 misc. I am not self employed have own business. I am full timer worker. What should I do?
HI
Could I get your advice? We filed a 1040 with line 21 as extra income due to my teaching part time and consulting.
Just received a letter from IRS wanting Schedule SE for self employment tax but I am not self employed.
I have 3 different forms…….1) 1099 MISC with box 7 filled in, 2) same school but for teaching as a W2, and 3) another 1099MISC with box 7 filled in only. IF I am understanding the two 1099MISC forms would need to be used to fill out schedule SE. Do I need to fill out a schedule C as I am not a business owner? THanks for your help.
In 2015 I donated my eggs to an infertility agency twice, the compensation for each time being $8,000. I just received a letter from the IRS stating that i owe back taxes because, though I absolutely claimed the $16,000 on my tax form, I did not claim it as “self employment” – thus, apparently I owe quite a bit more on it, PLUS the interest fine for it being from 2015.
What should my next step be? Just bite the bullet and send a check for the full “owed” amount with the 1040x? Or construct a letter stating what this compensation was for (body parts, not self employment- im a full time massage therapist!) ?
Help, please!
Hi Lou,
Good question. I would still put the 1099MISC income in box 7 because as a small business owner that’s the way I’m supposed to file the 1099MISC for that work. It would up to my friend to decide how he’d deal with it on his tax return. (That’s a really good question though!)
Hi Michael,
Maybe! Commuting is not considered to be a business expense, but if you have a home office, then you can count your commuting. So if there is any reason for her to have a home office – I would put that on the return also. Even without a home office, if she’s traveling between locations is a legitimate business expense. Note: a home office my be a portion of a room or a storage area. It does not need to be a complete room.
And don’t forget to add any other legitimate business expenses she may have had.
Hi Cathy,
if you income is really self employment then it makes sense to list it that way. It’s much easier to show that you have self employment income to the IRS than to try to prove that you don’t have it.
Hi James,
I’m guessing that their accountant said they needed to issue 1099s to anyone they paid – even if it was for reimbursements. Technically, I would think they wouldn’t issue a 1099 for the flight as it would have been an “accountable expense” – meaning that there was probably a receipt and an expense report for it
It might be for the per diem. If they have reimbursed your exact expenses – then they might not have issued the 1099 for that, but since it was a per diem, I could see the 1099 there.
I’m thinking that you should just complete the Schedule C and write off the entire amount as expenses – because all you were paid were reimbursements for expenses anyway.
Hi Jill,
you will receive a 1099MISC for that referral and it will be taxed as self employment income. You may be able to write off a little of that. Maybe a lunch or two, or some mileage or phone expense. But pretty much, most of that $1500 will be taxable. You’ve pay 15.3% as your self employment tax, plus you’ll pay an additional percentage based upon your tax rate. I assume that you’re in the 25% tax bracket – so basically 40% of that will be taxed. (Plus whatever your state rate is as well.)
And yes, you can pre-pay the tax. Make an estimated tax payment. (1040ES.) You can even do that online. Pay Tax Online
Hi Laurie,
I’m not the best expert on payroll type taxes. If I were you, I’d get a second opinion. I’m going to tell you my opinion, but I’m just putting it out there that this is not my strong suit okay?
Here goes, my opinion is that health insurance is a “tax free fringe benefit”. You would put a taxable fringe benefit on a 1099MISC, but at tax free fringe benefit you would not.
I’m using IRS Publication 15-B which is the publication about fringe benefits. And the instructions for the 1099MISC.
There’s talk about reporting medical payments – but those are payments to doctors and medical companies–not payments for health insurance.
I think you’ve got a good argument that it’s not taxable. But like I said, this is not my area of expertise so it would serve you well to get a second opinion.
June 6, 2017
Hi Laurie,
I had breakfast with a former IRS agent/CPA buddy of mine. I got a second opinion for you. He said that he would consider you payment to be a “condition of sale” and it should be taxed as long term capital gain. Technically it should be part of installment sale payments, but since you already sold the business, and I assume you claimed all of the income less the basis on a previous return that you’d claim the income just as gain for 2016 and future years.
I bet if I ask someone else I’ll get another answer!
Hi Dennis,
Technically it is self employment and it does go on a Schedule C. Your daughter should write off as many expenses as she an though – such as mileage to see the students, books and supplies for lessons, her cell phone if she needs it to be contacted with, etc.
Hi Sam,
Your daughter counts as self employed. It was her summer job. Make sure you write off all of her expenses though – like her mileage, her supplies, and anything else she spent money on for that job.
Hi Rick,
So my first question is: Did you ever get that W2 he was supposed to send you in the first place? I’m assuming the answer is no. So then the next question is: Did you report that income that should have been on a W2 on your tax return? I’m guessing the answer her is also no – but if you did, you’d have a much better claim on your side.
But I’m going to assume here that you didn’t report any of that income and go from there. What are your options?
1. Just pay the tax and be done with it.
2. Amend your 2015 tax return. Show the income on a schedule C but write off as many expenses as you can to offset the taxes.
3. File an SS-8 form. You would pay the tax on the wage income and submit the form explaining why you were an employee and not a 1099 contract laborer.
So what you do pretty much depends upon how much work you feel up for versus how much tax you’re being assessed.
Hi Meghan,
I’m seeing this a lot. Especially in Illinois (the state next to Missouri where I am). So yes, technically it is correct.
Here’s what you should do:
1. you do have to pay self employment tax on that income, so you need to complete a schedule C.
2. make sure that you write off any expenses that you incur working for the foundation – such as mileage, phone expense, a home office, supplies, etc.
Claiming your expenses should help defray some of those self-employment taxes.
Hi Bethany,
I’d report the income and expense it as being paid to your employer. (I’m guessing that your employer is a corporation so you won’t need to send a 1099 to your employer.) It will zero out that income and you’ll avoid the SE tax.
I am an attorney and referred a client to a different attorney who practices in a field I do not. That attorney is supposed to send me a $1500 referral fee. I am not self employed and get a w-4 thru the law office i am employed at.
1) What will be the tax liability on this amount. My normal income is between $90,000 and $92,000
2) What do I put this on my tax return as?
3) Can I pay taxes on this early? How?
So, did you send your friend a 1099 misc for the painting and report it in box 3?
My daughters tax return included reporting income from a 1099-MISC with Box 7 for the wages. I did not include the mileage she incurred going back and forth to the locations she had to go. Can this be amended with some form after the fact to account for that business expense?
Hi Jan,
Are there any benefits for employers if they submit misc-1099 box 3 versus box 7?
I got a misc-1099 and my income is listed under box 3. I’m a driver. Can I still fill out schedule C (submit my expenses i.e. Mileage) and pay for SE tax? Is it true you only pay SE tax if the income is listed under box 7? Can I manually correct that? My employer is avoiding me and not responding my request to correct my misc 1099
I volunteer for a professional society. This year I received a 1099-MISC form with a dollar amount in box 7. I have never had this happen in the past 12 years that I volunteered with them. They pay for flights and per diem. However, I have no idea where the money amount is coming from. Very strange. Please advise … Box 7 – Money is under $1,000 and over $500. Thanks!!
I received a 1099-misc with $5200 in box 7(non employee compensation) This was paid by a corporation I sold.The negotiated payment is to cover supplemental Medicare insurance each year for myself and my spouse until our deaths. Was this reported correctly by the corporation? Do I owe taxes on this amount. It is not self employment but does not seem to fall into any of the other misc income categories.
My full time college student daughter worked as a tutor for a non-profit in 2016. She was paid $1965.00 and it is shown in box 7 of a 1099-MISC. Shouldn’t this be in box 3 since she does not do this as a living? And if non-profit sends a corrected 1099 showing the earnings in box 3, can she file it using just a Form-1040?
Hi Jan,
My daughter is a college student majoring in marketing. She had $6000 tuition scholarship from school and also had a summer internship from her church. The internship was teaching kids leadership skills and leading bible study etc. The church paid her about $1300 and send her a 1099-misc with box #7 filled with $1300. She may and may not get a internship from the church this summer. Is she self-employed or not? I had tried a tax software, it indicates that she owes some tax. However choosing the pay is one-time event will make owing much less. Can you please provide some advises?
Thank you very much!
Sam
Hi, Jan. In 2015 i worked for a friend who owns a plumbing business while i was in between jobs. I do have a plumbing background, although i’m removed from the field for a few years. This “friend” 1099’s his entire permanent staff. I told him that i did not wish to operate that way and that if i wasn’t set up for a w-2, this wouldn’t work. He told me that he would not 1099 me and we agreed to a lower hourly rate of pay to compensate him for paying my taxes for employment. I was not an independent contractor. I, as all of his other employees, was paid an hourly rate. Never signed a contract for job. I worked when, where and how i was told. I used the company tools and vehicles. Three month’s into working for, i resigned and took an offer from another company as a sales rep. I never received a 1099, just as i was told that i wouldn’t. In March of 2017 I receive a letter from the IRS stating that i owe penalties for back taxes because this “friend” filed a 1099 with the Irs and never mentioned it to me or sent anything. What can i do?
I work for a student support program that’s funded by a foundation. The foundation pays us an extra stipend for after school work though we are all primarily employed by the school. This year we got 1099-MISCs because we were paid directly by the foundation instead of funneling it through the school. Should this be taxed at the regular rate? For the first time I owe on my taxes and am just wondering if I filled everything out correctly.
We have a complicated situation at my workplace where we have been getting paid honorariums by an outside agency for conducting assessments on their behalf during paid working hours. For a portion of the year 2016, we were required to sign our honorarium checks over to our workplace agency since the assessments we performed also happen to be part of our normal job duties. Later in the year we were able to arrange an agreement that allowed the outside agency to pay the money directly to our agency. However, we were sent a 1099-misc by the outside agency that includes any payments sent to us up until the arrangement was made. For each of us, this amount ranges from $600 to $1200. It is included in Box 7 since this relates to our current job and we are considered independent contractors in their books.
Can we avoid paying the SE tax to begin with, or would we need to try the amended return route? Won’t our agency have to report the checks that we signed over to them, and would it be double taxed if that’s the case?
Hi Tim,
It sounds to me like CalTrans is paying your the privilege of allowing their workers on your land to build a wall. So – I guess that really was rent. Bottom line, they paid you, you took the money, you have to pay tax on it. The up side is that it’s just rent – which is taxed as ordinary income and not as self-employment – so you don’t pay the extra self employment tax.
CalTrans issued a 1099-Misc with the box checked ‘Rent’; the money was to allow the workers to construct a sound proofing wall adjacent to our property. This allows workers to walk on our property… The money I received ($2500) is this to be considered income evern though I did not provide labor just permission….
Hi Angela,
You do not fill out a 1099misc – you received one. You will fill out the Schedule C with your 1040 tax return.
I’m a little confused and can’t find the proper clarification. I do mystery shopping and received a 1099 misc form with amounts in box 7. Do I fill out BOTH the 1099 misc AND the Schedule C ??? If you can reply to my email, please do so as I have no idea how I found this communication chain but see recent responses and can really use the help. Thank you in advance for anyone that can reply. xoxo -Angela
Hi Rachel,
Where is the income reported? Is it box 7 – because box 7 is for self employment. Box 3 is just income. It has to be reported, but it only goes on line 21 and you don’t have to pay self employment tax on it.
I’m thinking that the preschool mileage may have been reported as self-employment. (I personally don’t think it should be, but I don’t make the rules for the county.) Here’s the thing – if they are reimbursing you for your mileage as self-employment, then you should claim the mileage as a business expense – and that should pretty much take care of that.
The escrow reimbursement is weird. They paid you back your own money. There should not be a 1099 for that. I think that’s worth a phone call to the mortgage company.
Hi Colleeen,
You could file a form SS-8 with the IRS. It’s a Determination of Worker Status. Basically, you’re asking the IRS to decide that you are an employee, not self employed.
Here’s the catch – if you do that, you can pretty much assume that you will never work for that employer again.
I don’t think you’ve got the luxury of just filing the 1040X and saying you’re not self-employed.