Nonemployee Compensation

[FEDUKE404]

Play it again

This type of discussion has occurred here many times before. (You might want to search the older posts.)

Most board members leaned toward the self-employment/Sch C/Sch SE approach with some saying "he only did it once, therefore...." as an out for using line 21 instead.

From the additional facts mentioned, this one seems pretty much like a self-employment income issue. Not quite sure what "no expenses" has to do with the discussion at all....

If it was a true commission (in addition to wages) there may be some additional wiggle room, as opposed to a person (such as a telemarketer) whose entire income is by nature a commission.

FE

[ChEAr$]

This type of discussion has occurred here many times before. (You might want to search the older posts.)

Most board members leaned toward the self-employment/Sch C/Sch SE approach with some saying "he only did it once, therefore...." as an out for using line 21 instead.

From the additional facts mentioned, this one seems pretty much like a self-employment income issue. Not quite sure what "no expenses" has to do with the discussion at all....

If it was a true commission (in addition to wages) there may be some additional wiggle room, as opposed to a person (such as a telemarketer) whose entire income is by nature a commission.

FE

I'm glad that A J and I can finally agree! (grin) And that is, that more information as to
the nature of the activity and frequency thereof is needed.

Also I'm sure we've all noticed that our clients, God bless 'em!, don't always used the
same nomenclature that we are so used to, e.g. "commission" used in the OP.

[Davc]

This is very similar to Spiffs.

No it's not. Spiffs are not paid by the recipient's employer.

[FEDUKE404]

Question on spiffs

No it's not. Spiffs are not paid by the recipient's employer.

Not being any kind of expert on the topic, but:

In addition to the standard commission a sales person receives from his or her company, "spiffs" are paid, either by a manufacturer or employer, directly to a salesperson for selling a specific product. Companies offer their salespersons an opportunity to claim spiffs as a benefit of employment.

SOURCE: http://employment.findlaw.com/articles/9122.html

FE

[DonPriebe]

It's not a SPIFF

SPIFF money is a commission that originates from the manufacturer of a product or some other third party, and is delivered to a salesman either directly or via his employer. In the OP case, the money originates with the employer.

IMHO this is simply a commission that was paid to an employee, and should have been included on the W2, not on a separate 1099-Misc. The correct procedure would be to use a 8919 to pay your share of the FICA/Medicare tax, hopefully after discussing it with the friendly and agreeable accounting department. If the accounting department is neither friendly nor agreeable, the pragmatic procedure is to report it and pay the full SE.

The SPIFF pub is Pub 3204 http://www.irs.gov/pub/irs-pdf/p3204.pdf

[Burke]

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?

Well, I'll hop in here with a dissenting opinion. I very often show 1099 income on Line 21 where there are no expenses, and file Sche SE for the self-employment tax. Never had a problem with it. I have teachers who are paid 1099 income to monitor ETS testing sites (for SATs or ACTs) who are paid this way. No expenses. Probably couple of other examples, too. (Jury duty, fiduciary fees, poll workers, no SE required.)

[Bees Knees]

Why put it on line 21 if you are going to charge SE tax? Are you too cheap to print one extra sheet of paper for the Schedule C-EZ?

Why not just do the tax return correctly. If it is subject to SE tax, it should go on a Schedule C (or C-EZ). There is no logical excuse for putting it on line 21.

[Gene V]

Why put it on line 21 if you are going to charge SE tax? Are you too cheap to print one extra sheet of paper for the Schedule C-EZ?

Why not just do the tax return correctly. If it is subject to SE tax, it should go on a Schedule C (or C-EZ). There is no logical excuse for putting it on line 21.

I do the same as Burke, only logical reason I do it, is because if you do a schedule C, then you have to file a city transportation form (Tri-met form TM) and a city and county form.
Once you file these forms, the state will be on your back every year you don’t file them—wanting to know why—its takes for ever too explain that the taxpayer is no longer in business. This been my experience—probably not everyones.

[RLymanC]

1099-MISC 1040 Line 21

I have been repeatly told by the IRS that 1040 Line 21 for a 1099-MISC box 7 income should NEVER be used.

I keep it simple, taxpayer has income subject to SS & Medicare. Presto, Sch C-EZ if able and its done. IRS could care less, they get there taxes, Social Securty and Medicare are paid into the TP account. This assumes there is no dispute by the taxpayer about being an employee,and agrees with the commisions.

[Burke]

Why put it on line 21 if you are going to charge SE tax? Are you too cheap to print one extra sheet of paper for the Schedule C-EZ?
Why not just do the tax return correctly. If it is subject to SE tax, it should go on a Schedule C (or C-EZ). There is no logical excuse for putting it on line 21.

Yes, there is. While I could do a C-EZ on the return, in my state the tax dept sends all Sche C's to the localities for matching with business licenses and local business taxes, which causes all kinds of headaches and extra work for the taxpayer (and me). In the case I described, this is not a business or a business venture. Where it is an ongoing self-employment type of business, I do the Sche C's, of course. To the IRS it does not matter. They get their SE tax.

In the case of the OP, the employer already had this guy on the payroll and should have included the commission payment in his W-2. That was not a separate business either, but he did need to pay the SE tax.

[Bees Knees]

How many states (or cities) make you jump through all these hoops? I've never heard of it before.

[Burke]

I am not sure how many this might affect, but states are getting more creative in their hunt for tax income, for themselves and for the localities, and somebody figured out this was a good way to cross-match business schedules with who has a local business license and pays those business and sales taxes. And frankly, it works quite well for them. Those who actually are in business or are self-employed and try to operate under the radar get tagged. Of course, the cases we have been discussing get caught up in the net and therein lies the problem. The state does the same thing for 2106. If you take a deduction for business mileage, then your car is not eligible for the personal property car tax rebate and you pay the higher rate.