In what instance would 1099-misc. income in box 7, non-employee compensation, not be subject to social security/medicare? Client gave me copy of last year's tax return which was processed by Jackson Hewitt showing 1099 income, box 7, of $21,259. Tax preparer input the $21,259 on line 21 stating contracts, but did not subject income to social security/medicare. This year client also has 1099 income of $16,800.
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peggysioux -
Whoever issues the 1099 only knows what it represents to themselves. They can't dictate what the money is in the recipient's hands.
Earnings are only subject to SE tax if they are from a trade or business. The most common ways an activity fails to reach that standard is by not being run in a regular, continuous, and businesslike manner, or not involving a profit motive. That said, in your client's case if this money is a large part of his support over multiple years, it looks like a business. -
Jainen,
Thanks - always appreciate your very knowledgeable input!peggysiouxComment
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I agree with Jainen and would also say that in all likelyhood your client should have paid SE tax on the 1099-MISC. The odds of it not being subject to SE tax is probably very small.Comment
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