other income

[oceanlovin'ea]

There are a lot of people that are out of work now and they pick up little odd jobs here and there. This is not their regular line of work. They really aren't self employed so it is not schedule C income.
But if you put it on line 21 as other income, my program asked if this is earned income. If you answer yes, it will make them pay SE tax. Well, it is "earned"....they did do some work for it. But I didn't think it was subject to SE tax.

Right now I have 3 people in this situation.

Linda, EA

[rgtaxservice]

...

There are a lot of people that are out of work now and they pick up little odd jobs here and there. This is not their regular line of work. They really aren't self employed so it is not schedule C income.

What's the difference between someone who gets a W2 working for a landscaper and someone who gets a 1099 for working for a landscaper. Nothing. They were still employees. One landscaper just took the easy and cheap way out and issued 1099s.

And if you're going to say that they were not employees, then they were self employed.

The only alternative is to file a 8919.

[jimenright]

A possible good outcome is

that the income will qualify them for the EIC particularily if they have kids.

[FEDUKE404]

Dodging the tax man

. This is not their regular line of work. They really aren't self employed so it is not schedule C income.
Linda, EA

I've always taken the approach that someone "working" is subject either to FICA/Med or to Sch SE tax.

Many on these boards apparently require a "regular" job, or business cards, or something substantial for them to consider such odd jobs work as Sch SE/Sch C stuff. They will even cite the instance where the painter (?) worked all summer for a friend, but since his regular "job" was something else he was obviously not "in the business."

If you search these boards, I'm sure you can find the threads related to the "is it or is it not" discussions.

I guess a person could make it a point never to make more than $599 in any "activity" and then figuratively thumb their nose at both income taxes and self-employment taxes. Of course, that might mess up the EITC rewards at tax time.

FE

[ttbtaxes]

In order to be subject to SE tax the activity must be regular, continuous and substantial to be considered a trade or business. Unless it meets all three it is not subject to SE tax.

[FEDUKE404]

Excluding Sch SE tax

In order to be subject to SE tax the activity must be regular, continuous and substantial to be considered a trade or business. Unless it meets all three it is not subject to SE tax.

So let's say a college professor spends some time (I'm purposely avoiding the use of "works") a few weeks in June picking blueberries, a few weeks in July maintaining golf course fairways, and (even better!) a few weeks in August tutoring a kid on taking the SAT.

This work is not "regular." (Just a few weeks....)

This work is not "continuous." (The guy likes long weekends so he can go fishing....)

This work is not "substantial." (Can't buy a Mercedes on such "remuneration"!....once again, avoiding the use of the word "pay"...)

The farm owner, and the golf course owner, and the parent all truly appreciated his "help" but did provide him with the appropriate Forms 1099-MISC.

So your position is that this energetic college professor would not be subject to any self-employment tax at all?

Along a similar line, I would love to hear what preparers (those who have clients that meet the criteria) routinely do with the tax returns of college students who essentially during their entire summer "spend time" with various local individuals (farmers/landscapers/painters/etc) making some spending/tuition money and (perhaps) collect a handful of Forms 1099-MISC. Do they also get an automatic exclusion from any Sch SE tax??

FE

[solomon]

There are a lot of people that are out of work now and they pick up little odd jobs here and there. This is not their regular line of work. They really aren't self employed so it is not schedule C income.
But if you put it on line 21 as other income, my program asked if this is earned income. If you answer yes, it will make them pay SE tax. Well, it is "earned"....they did do some work for it. But I didn't think it was subject to SE tax.

Right now I have 3 people in this situation.

Linda, EA

How much money per person? Were the payments in cash?

[okie1tax]

Other Income

Mr. Batok received a Form 1099-MISC with the $4,125 reported as non-employee compensation. The Tax Court held that he wasn't liable for self-employment tax on this compensation because his work installing windows did not rise to the level of a trade or business. He had never installed windows before, or since, the one-time job. The Court cited Sloan v. Commissioner, T.C. Memo. 1988-294 as support for its decision.

[ttbtaxes]

"So your position is that this energetic college professor would not be subject to any self-employment tax at all?"

Take a look at:

Reg. 1.1402(c)-1
Rev. Rul. 55-385
Rev. Rul. 55-431
Rev. Rul. 58-112
Rev. Rul. 68-498
Rev. Rul. 68-595
Rev. Rul. 72-86
Rev. Rul. 77-356
Rev. Rul. 80-87
Batok TC Memo 1992-727
Hittleman TC Memo 1990-325
Levinson TC Memo 1999-212
Langford TC Memo. 1988-300
Groetzinger v. United States, 480 U.S. 23, 35 (1987)

[solomon]

Mr. Batok received a Form 1099-MISC with the $4,125 reported as non-employee compensation. The Tax Court held that he wasn't liable for self-employment tax on this compensation because his work installing windows did not rise to the level of a trade or business. He had never installed windows before, or since, the one-time job. The Court cited Sloan v. Commissioner, T.C. Memo. 1988-294 as support for its decision.

As I recall, Batok was a summary judgment so use as precedent would not apply. However, this does not mean that the reasoning could not be used. Also, Sch C instructions - ostensibly cited in a previous post about regularity and continuity - supports this reasoning.

Personally, I have used Line 21 in these cases and identified the activity as not for profit with no problems. The trade off is that this treatment precludes deducting any expenses.

[ttbtaxes]

My purpose of outlining pertinent cases or rulings was so FedDuke404 could review them and decide for himself (herself). What I might consider as not rising to the level of a trade or business might be considered by someone else as meeting that requirement.

In either instance, at least someone has something for their file by which to support their conclusion whatever it may be.

[Lion]

Cites

Yes, thank you very much for the sites.

In this economy, we do see people working at anything they can for as long as they can to make ends meet while looking for a more permanent job or while on reduced hours at their main job. For the most part, I think they are self-employed with the intent to profit until something better comes along. This is in contrast to the unemployed who has time on his hands and helps a neighbor with no intent of profiting over and above a possible reimbursement for supplies, but then receives a $20 tip or a restaurant gift certificate. That was definitely not-for-profit. But, all the scenarios in the middle? That's when we examine the famous facts & circumstances and use all those cites to get an idea what the IRS is thinking and how we can advise our individual client on his particular circumstances.

[BP.]

and the parent . . . did provide him with the appropriate Forms 1099-MISC.

Why would a parent 1099 a child's tutor?

[oceanlovin'ea]

Appreciate all the opinions

One person I was referring to was working as a delivery driver. His dad has a catering business and sometimes his dad needs a waiter. He will help his dad out and make $20 or $30 for the evening. Probably cash payments
One person was in sales and laid off. He did some repair work on some friends cars. He's a handy guy but never a mechanic by trade. Now he is working in Solid Waste (garbage man) Probably cash payments
One has been a lot of different jobs in his life. Latest was sales. He has taken pictures for a real estate agent on different occasions. Probably a check.

None of these are with any regularity, especially the car work. The others might be once or twice a month or once or twice a week, depending on the need of the individual.

I definitely agree that this is taxable income. I was just thinking about the SE tax. There intent was to pay the rent this month. Well, at least the last 2.

Linda EA