Student Dependent and 1099 Misc Form

[S T]

I have a dependent that is a Student, and is telemarketing and/or Internet marketing for a Company, he received $ 2,565 on a 1099 Misc Form - Box 7

Question - subject to SE?
Is there a way around the SE?

Thanks,
Sandy

[FEDUKE404]

Yes it is or no it is not

Apparently the consensus among most here is that the work is not a "regular job" (cf infamous summertime painting of houses ) and therefore not subject to SE.

For my 2¢ worth, it is pure, simple self-employment income that goes on a Schedule C and then to Schedule SE.

But I long along tired of assaulting said deceased equine via these boards.

Assuming you are to sign the return, the final decision is yours alone!

FE

[ATSMAN]

Couple of years back I had a client whose dependent son got a 1099-Misc for I think like $1200 for some door to door sales in the summer. There was no intention to be self employed. We put that income on line 21 as other income, no SE tax. Got a CP2000 gave the facts that it was a one time thing, no self employment was intended etc. No SE assessed.

[FEDUKE404]

So exactly what is the work?

Couple of years back I had a client whose dependent son got a 1099-Misc for I think like $1200 for some door to door sales in the summer. There was no intention to be self employed. We put that income on line 21 as other income, no SE tax. Got a CP2000 gave the facts that it was a one time thing, no self employment was intended etc. No SE assessed.

This is the common argument presented here.

My question would be if the guy had "no intention to be self-employed" then exactly what WAS he doing that summer?? Someone just, merely out of the kindness of their heart, decided to pay him $1200 ??

And then there is the separate "one-time" thing. Work all summer using job skill A (first time)....no SE. Work next summer using job skill B (first time)....no SE. Sounds like good work if you can get it!!

Curious: What would your position be if, in this case, during two different calendar years the dependent son did the EXACT same thing, for the EXACT same income, which was reported EXACTLY the same way on two different Forms 1099-MISC??? Did he or did he not, somewhere along the way, "cross the Rubicon" into self-employment/"work" ?? And an inquiring person might also pose a valid question as to how "work" could somehow not be involved for a telemarketing firm.

I'm not being argumentative, but I am trying to get my hands around the reasoning being repeatedly cited here for these types of situations.

FE

[S T]

The issue as I see it is twofold

1) could be summertime or part time work - and really not the fault of the dependent son trying to earn some $ based on the encouragement of his parents - as we know parents and children don't have a clue on the W-2 or 1099 reporting and income taxes

Then when we provide the Tax Bill, and the explanations, -------

2) the Company/Employer is really the one that is negligent here - circumventing the Employment taxes, Work Comp, etc

Really a 19 year old is an "independent contractor" !!!!!!!

I am looking at approx $ 175 added tax to the dependent's return if I process with the SE tax. Son is still a dependent of parents.

Sandy

[FEDUKE404]

For S T

Sandy -

Tried to send you PM. Your inbox is full. . . .

FE

[S T]

FE ----Thanks just received a TMI notice, and cleared some out - want to try again.

Sandy

[S T]

Thanks for the posts - not sure I want to risk a "notice" just is sad that employers are out there not paying attention to the ""payroll tax" laws and the Taxpayer has to pay their side and the Employer side when it comes to SE, when the taxpayer is probably not really an IC.

Sandy

[Kram BergGold]

Interesting Post

The child being a dependent has nothing to do with the issue.
If you feel this is a job where there is no employer/employee relationship and the child is never going to do this work again then I might put the income on Schedule C and back it off to line 21. My only reluctance is the kid probably has no prior job so that you can say it is not in his field.
However, if this is a situation where the payer is dodging employment taxes then you either contest it and pay 1/2 of FICA and Medicare or skip and pay the SE tax.

[ATSMAN]

This is the common argument presented here.

My question would be if the guy had "no intention to be self-employed" then exactly what WAS he doing that summer?? Someone just, merely out of the kindness of their heart, decided to pay him $1200 ??

And then there is the separate "one-time" thing. Work all summer using job skill A (first time)....no SE. Work next summer using job skill B (first time)....no SE. Sounds like good work if you can get it!!

Curious: What would your position be if, in this case, during two different calendar years the dependent son did the EXACT same thing, for the EXACT same income, which was reported EXACTLY the same way on two different Forms 1099-MISC??? Did he or did he not, somewhere along the way, "cross the Rubicon" into self-employment/"work" ?? And an inquiring person might also pose a valid question as to how "work" could somehow not be involved for a telemarketing firm.

I'm not being argumentative, but I am trying to get my hands around the reasoning being repeatedly cited here for these types of situations.

FE

I could be completely off base but my argument against SE would be the following:

1) It was a 16 yr old high school kid selling door to door cleaning/household products. The kid has no intention to be in that business.

2) It was sold to the kid as a part time job for the summer. So perhaps the IRS should look at if an employer/employee relationship exists? The kid does not know what an independent contractor is?

3) If the kid repeated the same "work" again the next year then my argument will fall flat.

4) And finally I would ask for an objective, reasonable consideration of the situation from the kids point of view.

[FEDUKE404]

Youth is a reason for not paying tax?

I could be completely off base but my argument against SE would be the following:

1) It was a 16 yr old high school kid selling door to door cleaning/household products. The kid has no intention to be in that business.

2) It was sold to the kid as a part time job for the summer. So perhaps the IRS should look at if an employer/employee relationship exists? The kid does not know what an independent contractor is?

3) If the kid repeated the same "work" again the next year then my argument will fall flat.

4) And finally I would ask for an objective, reasonable consideration of the situation from the kids point of view.

Most interesting. Now for a return volley. . .

I had a client in virtually the exact same scenario. His "work" involved telemarketing, and his sole income was determined by getting a portion of fees from any customers he "signed up" for the service or product...I don't recall the exact circumstances. He also received (only) a Form 1099-MISC. The work was extremely seasonal in nature.

But this person was a 30 year old male who saw an opportunity to make some additional money with minimal effort (he already had a regular job where his person-to-person skills probably gave him an edge up). It may have even been a moonlighting "job." And I seriously doubt if he harbored any intention of "being in that business."

I prepared a simple Sch C-EZ and corresponding Sch SE for that income. So far as I know, he did not return to such work the following year.

The circumstances are remarkably similar, except for the ages of the participants.

Are you then saying the tax scenario should somehow be different due to the youth and/or naiveté of the person involved?? I would have to think about the validity of that logic. . .

I do agree there could well be some muddying of the waters here as to whether a W2 (with perhaps a separate Form 1099-MISC) should be proper, as stated in your #2 point, but that is not the subject of this discussion.

It does appear the common sticking point in discussions of this type is whether someone is 1) "in" a business or 2) the activity is only "temporary." As you noted, year #2 might even present you problems! The other side of the argument is that employment is employment, and it is not appropriate to pick and choose how the tax laws apply based upon some vague "howevers...."

Thanks very much for your input. As mentioned earlier, I would personally have prepared a Sch C / Sch SE for this "student" without reservation and feel I could adequately make a case for my decision to the student and/or to the parents. But I'm not signing the tax return, so only Sandy can decide which path she wishes to follow.

FE

[ATSMAN]

Let me thrown in another spin.

Say the IRS says no it is self employment and we say that the kid was really trying out as a hobby?

We did not deduct any expenses. The full 1099 amount was reported as income on line 21.

[S T]

Thanks everyone! Thoughts and experience are most appreciated. I really dislike these types of issues.

Fortunately, it is a student that had limited income, costs about $ 175 additional ER side on the SE tax.

I am just going to go with the C and have them pay the tax.

I don't agree with how the employer handled, but that is neither here nor there at this point and maybe it will be a learning lesson for the T/p to inquire about whether he is on W-2 wages or IC.

Education process

Sandy

[Jiggers]

I can't put my hand on it, but isn't there a form that a person who thinks that he is an employee can attach to his return and the IRS will follow-up with the company for payroll taxes?

Gee, if the kid isn't going to work for that company again, what will it hurt? Other than educate the company so that they do what they are supposed to do.

[WhiteOleander]

I can't put my hand on it, but isn't there a form that a person who thinks that he is an employee can attach to his return and the IRS will follow-up with the company for payroll taxes?

Gee, if the kid isn't going to work for that company again, what will it hurt? Other than educate the company so that they do what they are supposed to do.

It is form 8919. But, there are some hoops to jump through. Go read the instructions. You will be dealing with letters, etc from the IRS. So, would it be worth it?