Nonemployee Compensation

[NewPerson864]

A taxpayer received a Form 1099-MISC with no expenses at all.

Does he have to report it on a Schedule C?

Can he just report it on Form 1040 Line 21 as other income and also file a Schedule SE to pay for the social security tax?

[MLINDER42]

1099c

Should be reported on Sched"C" SE will be done by software.

[solomon]

A taxpayer received a Form 1099-MISC with no expenses at all.

Does he have to report it on a Schedule C?

Can he just report it on Form 1040 Line 21 as other income and also file a Schedule SE to pay for the social security tax?

It depends. How much is in Box 7? It is unlikely it is a trade or business with absolutely no expenses. To be a trade or business, it must be not only conducted with a profit motive, but continuously and regularly. Are you sure it is not an employee/employer relationship?

From Sch C Instructions

Use Schedule C (Form 1040) to report income or loss from a business you operated or a
Profit or Loss profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions
for Form 1040, line 21, or Form 1040NR, line 21.

[NewPerson864]

Should be reported on Sched"C" SE will be done by software.

Thank you. I understand technically it should go to a Schedule C. But my question is if he have an option to report it on Form 1040 Line 21 since there is no expenses at all.

[AuditorTurnedGood]

I agree with solomon

it would seem odd to have a 1099-MISC for which there are no related expenses, if you have determined the 1099 income is subject to SE. What's the nature of the income on the 1099? Is is from work, a prize, or some other payment?

ATG

[NewPerson864]

it would seem odd to have a 1099-MISC for which there are no related expenses, if you have determined the 1099 income is subject to SE. What's the nature of the income on the 1099? Is is from work, a prize, or some other payment?

ATG

None of those. From what i was told, he also worked for the payer. But during the last year, he made a sale to a customer, and the payer gave him a commission which is reported on a Form 1099-MISC as non-employee compensation.

He said there are no expenses at all. He just went there, sit in the payer's office to take phone call. He did drive to there but I think the mileage is not deductible because the travel should be considered communing to work. So there is no expenses at all.

I feel uncomfortable to do a Schedule C under the situation also. That's why I asked if it can just be reported as other income on Form 1040 Line 21.

[solomon]

None of those. From what i was told, he also worked for the payer. But during the last year, he made a sale to a customer, and the payer gave him a commission which is reported on a Form 1099-MISC as non-employee compensation.

He said there are no expenses at all. He just went there, sit in the payer's office to take phone call. He did drive to there but I think the mileage is not deductible because the travel should be considered communing to work. So there is no expenses at all.

I feel uncomfortable to do a Schedule C under the situation also. That's why I asked if it can just be reported as other income on Form 1040 Line 21.

If just a few hundred dollars, Line 21 with an explanation of Non-Trade Income.

[NewPerson864]

If just a few hundred dollars, Line 21 with an explanation of Non-Trade Income.

And I think he still needs to file the Form SE for the social security tax? Just want to make sure.

[solomon]

And I think he still needs to file the Form SE for the social security tax? Just want to make sure.

No - not if reported on Line 21.

[ChEAr$]

But this commission is indeed self employment income, so must be reported on schedule
c or cez if applicable.

However.... if client is daring and willing to pay just half the normal FICA tax, he may use
that new fangled form.. 89... 19? something like that, and fill out the SS8 form to go along with it, with all the ramifications thereof. (grin

Remember, it was his employer who instead of including the commission in regular W2
wages decided to try to save payroll taxes.

[AJsTax]

not sch c

But this commission is indeed self employment income, so must be reported on schedule
c or cez if applicable.

He can not file Sch C if not in the trade or business. Should he had been paid as wages?, maybe, but was not. This is very similar to Spiffs. There is an IRS fact on the subject, but I do not have that number handy.

report in line 21, no SE required.

[ChEAr$]

He can not file Sch C if not in the trade or business. Should he had been paid as wages?, maybe, but was not. This is very similar to Spiffs. There is an IRS fact on the subject, but I do not have that number handy.

report in line 21, no SE required.

See above, the quote from Soloman (wise man!), which speaks of an activity carried on
regularly and for profit. The client sat in his employer's office for some length of time
in order to earn the "commission". It wasn't just a one time thing.

here, I guess I'd better requote it: "An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved with continuity and regularity."

[David1980]

There have been many tax software packages that have supported entering an amount on line 21, and applying SE tax to it. Totally not correct, probably never correct, but one of those shortcuts that people did and it got picked up by software. So your software might still allow you to fudge a tax return with line 21 income and SE tax. Or it might not. Proper reporting is on a C or C-EZ if it's SE income and line 21 if it isn't. Being in box 7 suggests it is SE income, or misclassified wages, or in the wrong box? If misclassified wages it's a Form 8919 along with an SS-8 (see the Form 8919 for all the acceptable reasons to file, though most of the time none apply and the only option you can use is to file an SS-8.)

[JohnH]

Not disagreeing with any of the above, but I think it's also worth mentioning that using the misclassified wages route with SS-8 & Form 8819 could cause problems with the employer. So if the client plans to continue working there or expects future income, he has to factor in the potential savings against the possibility of losing his job. Most employers take a dim view of getting an inquiry from the IRS because an employee or contractor "turned them in."

I'd be sure the client fully understands the implications of that approach. Sure wouldn't want someone telling me they lost their job because I tried to save them 7% of the amount on a 1099-Misc.

[AJsTax]

If he did it on a

See above, the quote from Soloman (wise man!), which speaks of an activity carried on
regularly and for profit. The client sat in his employer's office for some length of time
in order to earn the "commission". It wasn't just a one time thing.

here, I guess I'd better requote it: "An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved with continuity and regularity."

regular basis, then I would agree with you. I did not read the OP that way the first time or the several other times I read it. I got the impression that this was a very limited activity. So the real question would be is how often over how long a time did the activity take place. With that information one could maybe offer a more educated opinion.