Form 1099-MISC Issue

[Tax Sleuth]

A taxpayer was working in a summer job at a tutoring center. She received a Form 1099-MISC with Box 7 - Nonemployee Compensation filled in with an amount of just a few thousand dollars. She had been teaching in a public school, but is no longer teaching at all. The tutoring was only a one-time summer job. Can I safely record this amount on her tax return as Other Income instead of booking it as a Schedule C item? I don't want the taxpayer to be audited by the IRS.

[rtsietsema]

Tutoring is a hobby?

So, I understand trying help clients save taxes, but what are you going call the income to justify putting it on line 21?

It is not prize money, not an award for a contest, nor many other types of income listed in the IRS publications. At best you call it a hobby. But the person is trained as an educator, and probably took the job to make money. If they didn't plan on being paid and making money, be an unpaid volunteer.

As it stands...Just because they had a short term position, and may not do it the same way again, doesn't mean it wasn't SE income. My opinion....If it was my reputation on the line. I would advise my client it is SE income and help them see if they had any expenses to help reduce the tax liability. Call it what it is, and it isn't a hobby.

[Lion]

"...working in a summer job..." Schedule C and SE.

[taxea]

A taxpayer was working in a summer job at a tutoring center. She received a Form 1099-MISC with Box 7 - Nonemployee Compensation filled in with an amount of just a few thousand dollars. She had been teaching in a public school, but is no longer teaching at all. The tutoring was only a one-time summer job. Can I safely record this amount on her tax return as Other Income instead of booking it as a Schedule C item? I don't want the taxpayer to be audited by the IRS.

Check the employee vs IC rules, if it qualifies TP as an employee the the issuer should have provided a W2. This could be seen as seasonal or part-time temporary employment as opposed to IC.

[Kram BergGold]

Two Options

1. File the paper work to challenge the categorization of the payer.
2. Report on Schedule C.
Since the person was a teacher the option of putting the income on line 21 as a one time job not in the person's field is null.

[Burke]

Actually she could put it on Line 21 (subject to SE tax) if no expenses are being taken. My software has the option to do this. This option automatically brings up a Sche SE to compute the SE tax. This is often done as IRS tends to send Sche C's to localities for business tax review.

[Gretel]

I believe since this is/was her trade or business it would be difficult to justify that this income is not subject to SE. If she was a carpenter and had this one summer job a year later, it would be different.

[unzuetay]

[QUOTE=Tax Sleuth;184906]A taxpayer was working in a summer job at a tutoring center. She received a Form 1099-MISC with Box 7 - Nonemployee Compensation filled in with an amount of just a few thousand dollars. She had been teaching in a public school, but is no longer teaching at all. The tutoring was only a one-time summer job. Can I safely record this amount on her tax return as Other Income instead of booking it as a Schedule C item? I don't want the taxpayer to be audited by the IRS.[/

Seems like it needs to be on a C because she needs to pay social security and medicaid taxes.

[FEDUKE404]

Survey says !!

Topics of this type have been here in many shapes and forms.

MOST people feel a Schedule C and a Schedule SE are appropriate.

SOME people don't see it as a "job" and defer to line 21 of Form 1040.

As noted, she also could "challenge" the employer (form # escapes me) by paying [her] half of the FICA/etc, but that can get messy especially if she has wishes of working for that "employer" again.

The IRS will more than likely at least inquire about a Form SE if one is not filed.

Maybe the "employee" should have painted houses and then . . . it was clearly NOT a "job" so some say.

Good luck!

FE

[taxea]

Even if TP were painting houses I would still say Sch C if it didn't qualify as part-time or seasonal employment. Especially if there is an intent to do it again.

[ttbtaxes]

I'll swim against the tide and I would not pay SE tax on the income. Admittedly, the fact she is a teacher may work against her but I would submit the activity in the summer is not subject to SE tax.

This is a quote from Reg §1.1402(c)-1, “In order for an individual to have net earnings from self-employment, he must carry on a trade or business, either as an individual or as a member of a partnership………”

Being paid for your labor is not enough to cause someone to be carrying on a trade or business. The activity must be continuous and regular with an intent to make a profit (Commissioner v. Groetzinger , 480 U.S. 23, 35 (1987). Also, take a look at Wolfgram T.C. Memo. 2010-69, Batok T.C. Memo. 1992-727, Langford TC Memo 1988-300.

If the teacher wrote a book over the summer, had it published, and received royalties from it, that would not be significant enough to cause the royalties to be subject to SE tax. Rev. Rul. 55-385.

[mastertaxguy]

Ttb post....

I join in the swim against the tide here.

[spanel]

ttbtaxes
I'll swim against the tide and I would not pay SE tax on the income. Admittedly, the fact she is a teacher may work against her but I would submit the activity in the summer is not subject to SE tax.

This is a quote from Reg §1.1402(c)-1, “In order for an individual to have net earnings from self-employment, he must carry on a trade or business, either as an individual or as a member of a partnership………”

Being paid for your labor is not enough to cause someone to be carrying on a trade or business. The activity must be continuous and regular with an intent to make a profit (Commissioner v. Groetzinger , 480 U.S. 23, 35 (1987). Also, take a look at Wolfgram T.C. Memo. 2010-69, Batok T.C. Memo. 1992-727, Langford TC Memo 1988-300.

If the teacher wrote a book over the summer, had it published, and received royalties from it, that would not be significant enough to cause the royalties to be subject to SE tax. Rev. Rul. 55-385.



The Activity must be continuous.... (she worked several months and thats not continuous?) It wasnt a one or two day thing, it was for several months.

Regular intent to make a profit... Your telling me she did this to not make money? Clearly there was a profit motive or she wouldnt have done it.

Sch C/SE Tax

Chris

[ttbtaxes]

Chris,

You're confusing being paid for your time with a trade or business. Was the entire time spent by an individual writing a book, in Rev. Rul. 55-385, regular and continuous? I provided you with authoritative cases where activities were determined by the Tax Court not to rise to the level of a trade or business. If you decide, after reading those cases, that the OP's summer tutoring job rose to the level of a trade or business, then have at it.

[FEDUKE404]

Logical conclusion awaits

Chris,

You're confusing being paid for your time with a trade or business. Was the entire time spent by an individual writing a book, in Rev. Rul. 55-385, regular and continuous? I provided you with authoritative cases where activities were determined by the Tax Court not to rise to the level of a trade or business. If you decide, after reading those cases, that the OP's summer tutoring job rose to the level of a trade or business, then have at it.

Of course, playing full Devil's Advocate, why can't a reasonable case be made that a college student who flips burgers at McDonalds for the summer is also not "engaged in a trade or business" and thus should be exempt from FICA/Medicare withholding ? ?

Makes as much sense as some of the "exceptions" from SE tax cited on the TTB boards.

But these discussions of "is it work?" or "is it something else" are always stimulating!

FE