Tax court says police officer owes SE tax on outside security work

[FEDUKE404]

This may be old news.....

In a nutshell, officer worked for local sheriff's department and had income from additional "security" work et al. His employer did have some knowledge/approval over off-duty work performed by the officers, mainly to ensure no conflicts of interest and other similar operational issues. Payments for such work were reported on Forms 1099-MISC.

Officer reported the income, but paid no SE tax on said income. His position was he indirectly received additional "wages" through his employer, and therefore owed no SE tax on that income.

This court has ruled otherwise and stated he must pay the SE tax..

"...when taken as a whole the facts establish that petitioner was self-employed with respect to the off-duty services that he provided to third-party entities. Accordingly, we hold that the earnings in dispute are earnings from self-employment, subject to the tax imposed by section 1401...."

http://www.ustaxcourt.gov/InOpHistoric/laduejonathan.sum.WPD.pdf

FE

[taxea]

Did you read the large font disclaimer above the cite:

PURSUANT TO INTERNAL REVENUE CODE
SECTION 7463(b),THIS OPINION MAY NOT
BE TREATED AS PRECEDENT FOR ANY
OTHER CASE.

[FEDUKE404]

Answer

Did you read the large font disclaimer above the cite:

PURSUANT TO INTERNAL REVENUE CODE
SECTION 7463(b),THIS OPINION MAY NOT
BE TREATED AS PRECEDENT FOR ANY
OTHER CASE.

OF COURSE !!

(Does that really change anything???????????)

[Bees Knees]

Did you read the large font disclaimer above the cite:

That disclaimer appears before every Tax Court Summary Opinion.

Summary opinions may not be treated as precedent, but they do reflect the opinion of the court. Thus, if this were a regular tax court decision that could be cited, there is a 99% chance the results would be the same.

[FEDUKE404]

My point EXACTLY !!

That disclaimer appears before every Tax Court Summary Opinion.

Summary opinions may not be treated as precedent, but they do reflect the opinion of the court. Thus, if this were a regular tax court decision that could be cited, there is a 99% chance the results would be the same.

And there has been some discussion on these boards by those who feel the SE tax would not apply under such circumstances.......

FE

[AJsTax]

And there has been some discussion on these boards by those who feel the SE tax would not apply under such circumstances.......

FE

This decision had nothing to do with the discusion of 1099-misc. income being SE income as self employed. In this case he was trying to say the income should have been employee wages and the FICA covered by the employer. that did not fly. In this one case.
The other side of this, if he is doing this on a regular and consistant basis and of course he is qualified and trained to do the work, then of course it is SE income. I have several clients that fall into that exact situation.
Facts and circumstances of each case!!

[Bees Knees]

The other side of this, if he is doing this on a regular and consistent basis and of course he is qualified and trained to do the work, then of course it is SE income.

If you are trying to suggest NOT doing outside work on a regular and consistent basis means possibly no SE tax, then I disagree.

A police officer is doing this kind of work on a regular and consistent basis by the very fact that he is a police officer receiving a W-2 from his regular employer. Thus, even if the police officer were to only do one outside job and receive a 1099-MISC for that work, it would still be subject to SE tax. The only alternative is to claim the outside job income on Form 8919 and only pay half the FICA tax on the basis that the payer of the outside work should have treated the officer as an employee.

It is similar to me working for H&R Block and receiving a W-2. Once or twice during tax season, I decide to do a tax return at home for a friend for money. Could I get away with not paying SE tax on that income on the basis that I do not do side jobs on a regular and consistent basis? I think not.

[AJsTax]

yes,BUT

that is the main point. The police officer does that work on a regular basis. He trains to do that work and continues to do that work. so yes any of that work he does is subject to SE income.
But if he would do a gig, say for example teach a weekend seminar on the Civil War just because he is a war buff and somewhat knowlegable, that would not be SE income. He is not in the business of teaching those classes, it is hobby income. Even if it is reported in box 7 on 1099-misc. it is not SE income, it is other income reported on line 21.
A person is REQUIRED to be in a trade or business in order to have the privaledge of using the Schedule C.

[Bees Knees]

The other discussion on these boards that FEDUKE404 was referring to was the case where a police officer in Hawaii does side jobs as a security guard and receives a 1099-MISC. None of those other discussions were talking about giving Civil War lectures.

[RitaB]

Well, what if

Well, what if a person works at Micky D's for one week, gets canned or quits. They had SS/MC withheld. Do they get the SS/MC refunded cause it turned out he really wasn't into the whole continuity/regularity/setting the alarm clock thing?

Not to be argumentative, but I lean toward if you work, you pay SS/MC. Get the old codger giving the lecture, too. Heck, he will probably write off them danged uniforms and camping supplies and come out fine. ;-)

Oh, wait, he is over 70, so he is exempt. Sorry.

[taxea]

If you are trying to suggest NOT doing outside work on a regular and consistent basis means possibly no SE tax, then I disagree.

A police officer is doing this kind of work on a regular and consistent basis by the very fact that he is a police officer receiving a W-2 from his regular employer. Thus, even if the police officer were to only do one outside job and receive a 1099-MISC for that work, it would still be subject to SE tax. The only alternative is to claim the outside job income on Form 8919 and only pay half the FICA tax on the basis that the payer of the outside work should have treated the officer as an employee.

It is similar to me working for H&R Block and receiving a W-2. Once or twice during tax season, I decide to do a tax return at home for a friend for money. Could I get away with not paying SE tax on that income on the basis that I do not do side jobs on a regular and consistent basis? I think not.

Okay but what if his W-2 is not subject to SE tax (FICA/FUTA/Medicare)? If he is working under the authority of the PD and in uniform with patrol vehicle he may not be subject to SE.

[AJsTax]

I dont think we are talking

The other discussion on these boards that FEDUKE404 was referring to was the case where a police officer in Hawaii does side jobs as a security guard and receives a 1099-MISC. None of those other discussions were talking about giving Civil War lectures.

about the same thing. The discussions he was referring to (at least I thought, since I was in the middle) was the fact that many times income reported in Box 7 of 1099-misc does not go on Sch C. No matter what we were taught in the past, many time the person filling out the form is ignorant of the rules or the work done does not qualify as a business.