1099-MISC incorrectly issued?

[JohnH]

I agree with Larmil.
It's subject to either SE tax or SocSec/Fica.

[Jesse]

I believe it is subject to SE tax wherever you put it.

Agree. The kid probably should have been an employee so you could go with SS-8/ Form 8919 or leave it be and schedule C.

[Larmil]

Agree. The kid probably should have been an employee so you could go with SS-8/ Form 8919 or leave it be and schedule C.

or line 21 subject to SE tax

[AJsTax]

Se

I agree that it is subject to SE. He was employed on a regular basis to make that much money. Absolutely not line 21 income.

[JohnH]

Further to the point, here's what IRS has to say on the subject:

http://www.irs.gov/newsroom/article/0,,id=176666,00.html

[Larmil]

Further to the point, here's what IRS has to say on the subject:

http://www.irs.gov/newsroom/article/...176666,00.html

I understood that they did want to file SS-8.

[JohnH]

Larmil: (I think you meant to say they did NOT want to file the SS-8). And that is correct.

Becky cares very much about the client and I think she's looking for justification to bypass SE tax on this compensation by asking for more input. She wants to help the client out, which is a noble purpose, but I think at the end of the day she's going to realize it can't be done. I posted the info from the IRS site just to clarify what must be done if she does anything other than Schedule C and SE.

Personally I think the line 21 treatment without the SE will get the return flagged almost immediately, but one never knows - it might just sail right on through. If she goes this route, she just needs to be prepared to explain to the client why they are getting a bill long after this conversation has faded from memory. Once the tax, penalty, and interest notice arrives, clients tend to forget the details even when we tell them up front that the approach is a gray area. And frankly I'm not sure how it could be documented right now. ("We know that using line 21 without Schedule SE isn't the IRS-approved method, but we're going to roll the dice and hope they miss it.") I'm not sure I'd want that note, or something to that effect, sitting in my files.

[Larmil]

Larmil: (I think you meant to say they did NOT want to file the SS-8). And that is correct.

Becky cares very much about the client and I think she's looking for justification to bypass SE tax on this compensation by asking for more input. She wants to help the client out, which is a noble purpose, but I think at the end of the day she's going to realize it can't be done. I posted the info from the IRS site just to clarify what must be done if she does anything other than Schedule C and SE.

Personally I think the line 21 treatment without the SE will get the return flagged almost immediately, but one never knows - it might just sail right on through. If she goes this route, she just needs to be prepared to explain to the client why they are getting a bill long after this conversation has faded from memory. Once the tax, penalty, and interest notice arrives, clients tend to forget the details even when we tell them up front that the approach is a gray area. And frankly I'm not sure how it could be documented right now. ("We know that using line 21 isn't the IRS-approved method, but we're going to roll the dice and hope they miss it.") I'm not sure I'd want that note, or something to that effect, sitting in my files.

Sorry about the typo. I was suggesting line 21 WITH SE.

[mblatour]

Larmil & JohnH,

Thanks for your replies. I do care about the client and her son and so I do want to help. On the other hand, I won't put myself in danger of an audit if I can ever avoid it. I am still a fairly new egg in this biz (only 5 years running ) and I tend to walk a pretty straight line. I rarely like to go the direction of gray.

If I ever take a questionable position, I be sure to have some sort of documentation to back it up. I was hoping you folks would have something more to say about Line 21 and you did. You've convinced me NOT to do it and I thank you for your concern. Rather, I appreciate it.

JohnH, I found that same IRS article and printed it out for myself yesterday, along with about a half dozen others to back up the position I am going to take. Sad but true, this situation overwhelmed me yesterday. It wasn't really just this situation in itself, but the lot of them I've been having lately. It brought me to tears last night and that frustrated me even more. My husband actually had a good day at work and he comes home to a sopping mess of a wife.

I'm just so thankful to have this board for support. You guys are the best medicine for a girl like me!

Becky

[RitaB]

You are doing great

Becky, (That's my pastor's wife's name, so I know you're awesome.) -

You are going above and beyond for this client. Not sure if they appreciate you enough. I hope I did not add to your stress with my comments about the situation.

I have seen this situation so often, and most of the time my folks are NOT mad cause they've been classified incorrectly. They're mad cause they GOT a form and "now" have to report the income. I get a little aggravated every time I see it. Please accept my apologies if I mouthed off a little. Hope your day goes great!

--- Rita

[mblatour]

Rita,

Thank you so much for your comments. It really means a lot more than you realize. I've been working on growing a backbone for years but it's been tough. I grow my little tax biz mostly from referrals. I've got about 70 clients and hope to continue to gain many more in the future. I have a very good relationship with most of my clients. We chit chat about everything. I've received some of the most tremendous feedback these past couple of weeks from many of my referrals. People saying things like "she's the best" and "she really cares". Some of these referrals were from clients of whom I wasn't even sure if they liked me at all. It's not a popularity contest by any means, but it sure helps to know that I am looked at in a positive light by my clients.

I do go above and beyond for most of my clients. That's why it can get sort of emotional for me at times. I had an 85 year old widow in my office a couple of weeks ago in tears over losing her husband a last summer. Sweetest little thing and all I could do was give her kleenex's and a hug. I'm not just developing business clients, I am also developing many friendships as well.

That's how I want to run MY tax business and it makes me proud. Some day when I'm gone, I want people to say that they thought I was a special person who went out of her way to help others. My mother was just that kind of person and with her gone now, I really want to follow in her foot steps.

Sorry to get off subject. I totally do understand your frustration with client's turning a sort of blind eye to their tax situations. What seems so obvious to us is just so easily overlooked by them.

I hope you have a good day as well!
~Becky

[taxea]

mblatour

Truthfully I think this is employee income and should be handled as directed by the latest IRS rules that require your client to report (by form) to the IRS. Before he does that I would have him go back to the employer and request a W-2 and that the 1099 be corrected by zeroing it out and resubmitting it. taxea

[BHoffman]

And make sure to tell him to update his resume.

[fliszt]

Yes madam,

I would do a sch C and write expenses off. It is what it is.
lam

[Lion]

Hi

Not that it'll help his SE tax situation, but a way to end the conversation on a positive note: remind them that now that the son's working he can contribute (or parents can for him) to an IRA or a Roth IRA. Show him how much it'll be worth when he's 65. Leave them on a high note!