Employee Received a 1099Misc for bonus

[tonia2021]

Employee received a w2 for the wages he earned in 2008. He also received a 1099Misc from the same company for his bonus for the year. Does he need to put this amount on a Schedule C and pay SE Tax? Doesn't seem fair.

What are our options?

Where would you put this income?

[PIGLEE]

Bonus should have been on his W-2. So I would report it on Sch C, subject to SE Tax.

[BOB W]

Just put it on line 21 and use your "pull down tab" so that it is subject to SE tax.

[JohnH]

It may not seem fair on the surface, but sometimes the whole story is slightly different. I had one similar to this back in 2006. I knew the employer (not a client) so when I had a chance I asked what caused him to report the bonus on a 1099C. He said his accountant told him to do it that way.

When I explained that he should have included it in gross wages and what the cost to him would have been, he said "If I'd known that I would have handled it as wages, and I'd have reduced the bonus by 9% to cover my matching SocSec/Medicare, unemployment tax, and workers comp costs". I subsequently told the recipient they were still coming out ahead, since by paying SE tax they are only out the 7.65% matching portion (slightly less when you take into account the AGI adjustment).

My point is that we sometimes get hung up on the 15.3% in these situations, when in fact the net cost is only the 7.65% employer match because the other half would have been withheld from the payment anyhow if it had been handled as wages. I think it's important to point out the true net cost to the client in these situations.

[Jesse]

Check out this thread

http://www.thetaxbook.com/forums/showthread.php?t=7305&highlight=salesman+bonus

What was the bonus for?