Car salesman

[bluewatertax]

Can I get some opinions on 1099s that car salesman receive for "spiffs". In this case, he receives a 1099 with the income in nonemployee compensation box from a local bank for referrals. I hate for him to have to pay self employment tax on this as its not really his "business" per se.

[Gene V]

Can I get some opinions on 1099s that car salesman receive for "spiffs". In this case, he receives a 1099 with the income in nonemployee compensation box from a local bank for referrals. I hate for him to have to pay self employment tax on this as its not really his "business" per se.

I would show it as income not subject to SE tax
Here is a related article about auto salesperson--IRS Pub. 3204

https://www.irs.gov/pub/irs-pdf/p3204.pdf

[bluewatertax]

another client just reminded me that the IRS sent him a letter changing his return and enforcing the SE tax. hmmm

[JohnH]

He needed to push back by at least sending IRS a copy of their Pub 3204.
It's pretty clear on these matters.

[TaxGuyBill]

from a local bank for referrals.

I think it is subject to SE tax.

It is NOT a Manufacturer Incentive Payment which is exempt from SE tax. The payment is not from the manufacturer. The client is 'working' by referring a person to a bank.

[Twin Turbo Z]

Not subject to se tax. List it as prizes and awards from 1099-misc and put payers info on line 21. Have tons of salesman as clients and have handled it this way for decades. Ford actually started sending letters explaining how to handle these awards. Yes I know its from a bank, same principal.

[Rapid Robert]

Yes I know its from a bank, same principal.

Can you provide any support for that leap of logic? How is a referral commission like a spiff? " spiffs are paid, either by a manufacturer or employer, directly to a salesperson for selling a specific product. "

[Twin Turbo Z]

Can you provide any support for that leap of logic? How is a referral commission like a spiff? " spiffs are paid, either by a manufacturer or employer, directly to a salesperson for selling a specific product. "

Treat it how you feel fit.

[Rapid Robert]

Treat it how you feel fit.

As a tax professional, my "feelings" have nothing to do with it. Again, do you have any support for your position that there is no difference between a referral fee and a spiff?

[Twin Turbo Z]

As a tax professional, my "feelings" have nothing to do with it. Again, do you have any support for your position that there is no difference between a referral fee and a spiff?

We contacted the IRS "Law Dept" concerning this very issue with bank "kick backs" many years ago. When the IRS actually had a "Law Dept". Now they point you to pdf's of instructions or code to figure it out yourself. But thats another discussion. Anyway the issue was many banks issued these in different ways. Some was "other income" and some "non-employee comp", some did not report it at all. Long story short, we were told to treat "bank Kick backs" as auto maker prizes and awards. Thats all I got. Treat it how you feel.

[mastertaxguy]

A spiff by any other shape is a.....

Curious that I could not find a reference to SPIFF's in the TTB 1040 edition or their web service. Close may be TTB 5-3 & 5-19.

I did find good references using Parker Tax Research. IRS Letter Ruling 9423004 is the "current authority" from my perspective. The IRS publication cited above doesn't rule out "spiffs" from third parties. There always is code section 1402(c).

I don't see SE tax applying as the recipient is not in the trade, or business, of soliciting referrals from the bank. This is more like hobby income to me. In my area, we have lots and lots of car dealers, new and used, and lots of high end appliance stores with lots and lots of SPIFF's.

[Twin Turbo Z]

Curious that I could not find a reference to SPIFF's in the TTB 1040 edition or their web service. Close may be TTB 5-3 & 5-19.

I did find good references using Parker Tax Research. IRS Letter Ruling 9423004 is the "current authority" from my perspective. The IRS publication cited above doesn't rule out "spiffs" from third parties. There always is code section 1402(c).

I don't see SE tax applying as the recipient is not in the trade, or business, of soliciting referrals from the bank. This is more like hobby income to me. In my area, we have lots and lots of car dealers, new and used, and lots of high end appliance stores with lots and lots of SPIFF's.

Amen !!!!!