1099MISC for bonus

[Unregistered]

Situation:
Secretary/Client for for a statewide insurance company that is membership based. The W-2 comes from that company. Inside the local office the lead insurance agent (who is appointed by the statewide company) has his own business "XXXXXX insurance agency" . He issues a 1099MISC for a bonus each year. Some of the business that comes through the office each day is for both of these companies. This 1099 income seems to be based on profits because it even has cents on it. However, I do believe that the bonus is the same amount for all employees in the same job class but the amount is different each year. I have been reporting this on a Sch C because I felt as if it would be considered as worked for and subject to SE tax just as it would be if it were from the employees employer and put on her W-2 due to the businesses being so closely related and the secretaries dealing with all clients. I feel it would be impossible to say that no work was performed for this income.

I have always put bonuses on Sch C if there was any way that the income could be related to work performed. Am I right about this? Other tax preparers have not treated this income the same way.

[rosieea]

I think you're correct, because services were performed for this income. Your client is in the business or profession of being a secretary, and that is what she earned her bonus for.

[lsmith]

1099misc

The company is wrong by issuing a 1099 and it is also subject to a 25-28% withholding. Some companies get out of the payroll requirement by issuing a W2. Since it is not for nonemployee purposes, it goes on line 21 not subject to self employment taxes. Identify it as a bonus incentive.

[Mark Goldberg]

My take

If your client gets the bonus due to her work as an employee, then it is not SE income. You have two choices. If the 1099 calls it NEC then wash it off Schedule C and put on line 21 or use Form 4137 to claim that it is employee income and pay the employees share of Fica and Medicare (this procedure is outlined in TTB I believe).

[Unregistered]

The 1099 is not from her employer

The 1099 is not from her employer. It is from the office manger who has his own business within the business. Some money that comes through the building is designated as the company business (her employer) and some is designated as business for this office manager's business. Her W-2 is from the company and the 1099MISC is from the office manager's business. It is all insurance. I believe that car insurance, house insurance, etc. if for the large company and life insurance is under the manager's business.

[S T]

Office Manager should also be Employer

Sounds very suspect. Your taxpayer is an employee for either one.

I think the Office Mgr should also be an employer, they could be a sub agent of the Main Employer. Payroll Taxes, Work Comp etc should be paid and collected for employees of either the Main Employer or this Office Mgr's business.

As a result the employee is being charged additional fica and Mcare tax and not receiving credit for the State disability or Unemployment insurance.

Otherwise the office mgr should 1099 the main employer and the main employer pay the appropriate wages to the employees and pay the appropriate payroll taxes, etc.

Sandy

[OldJack]

If your client gets the bonus due to her work as an employee, then it is not SE income. You have two choices. If the 1099 calls it NEC then wash it off Schedule C and put on line 21 or use Form 4137 to claim that it is employee income and pay the employees share of Fica and Medicare (this procedure is outlined in TTB I believe).

Insurance companies get away with 1099's for commissions instead of W2. If this person treats it as form 4137 they should first look for a new job as the Manager is going to be unhappy when the IRS contacts him about the other half of payroll taxes.