One time Consulting subject to SE tax?

[nofear3boys]

Wife received a 1099-Misc for a one time consulting job. Do I report this as Other Income and not subject to SE tax as this is a one time job? Or do I have to put on Schedule C and subject to SE tax as it is Earned Income? If it is Other Income, will this still be considered "Earned Income" as her husband receives Dependent Care Benefits in Box 10 of his W-2 form and wife has no other income?

[ATSMAN]

Looks like she is an independent contractor for this gig! I am assuming there was a contract to provide consulting services and the contract stipulated that she was not an employee?

[nofear3boys]

yes that is correct

[Dude]

1099 misc with box 7 checked and over $600, do a schedule C. Some will put it on as other income but this does take into account SE tax

[ttbtaxes]

In order for a person to have self-employment income, that person must carry on a trade or business [Reg 1.1402(c)-1]. Rev. Rul. 58-112 described a trade or business and it must be regular, frequent and continuous.

For example, the Tax Court has ruled that the activity of a person who created and patented inventions in his spare time did not rise to the level of a business because he did so sporadically (Levinson v. Commissioner, TC Memo 1999-212). Conversely, a member of Congress who was paid for 10 speeches was deemed as having a trade or business due to the frequency (Rev. Rul. 77-356).

Take a look a the July 2009 edition of the Journal of Accountancy which has an excellent article about this issue and more examples..

[TaxGuyBill]

The tricky thing that I see is that a "consulting" job may indicate she is experienced in that area, probably from prior work. So even though it may be a "one time" job, it very likely may be viewed as an extension or continuation of her prior work in this field (which may put it into the "trade or business" category, putting it on Schedule C).

[ATSMAN]

1099 misc with box 7 checked and over $600, do a schedule C. Some will put it on as other income but this does take into account SE tax

I think putting a significant amount (> 1000) on line 21 without some solid evidence or facts that the taxpayer is not considered self employed is asking for an audit! I saw a tax return where the cleaning lady was putting year after year close to $2000 on line 21. She was working at McDonalds and also cleaning houses on week ends. Her prior tax preparer advised her that she is really not a business because she does not advertise or own a cleaning company etc. She was doing this for friends and referrals, used the homeowner's cleaning supplies.

[Dude]

I think putting a significant amount (> 1000) on line 21 without some solid evidence or facts that the taxpayer is not considered self employed is asking for an audit! I saw a tax return where the cleaning lady was putting year after year close to $2000 on line 21. She was working at McDonalds and also cleaning houses on week ends. Her prior tax preparer advised her that she is really not a business because she does not advertise or own a cleaning company etc. She was doing this for friends and referrals, used the homeowner's cleaning supplies.

Totally agree. I see turbo returns where people do this for UBER and door dash among other things.

[nofear3boys]

Thank you all for your time and talent.

[terryats]

If she does not put on schedule C, then they could not claim Child and Dependent Care Credit

[taxmom34]

had a client about 4-5 years ago who won a prize from sam's club, she just submitted her name and won. I put the $1000 on line 21 of 1040. she received notice from IRS stating she owed for social security. I sent IRS copy of picture with her receiving giant check and article. did not hear from IRS again

[ttbtaxes]

During the years 1980-1983 Wilbur Langford received over $18,000 in royalties from writing a book. He was not obligated to nor did he revise it. In 1983 the IRS audited him and assessed SE tax on $4,166 received in royalties. The Tax Court ruled that because he wrote only one book as a sideline and never revised it, he would not be considered to be 'regularly engaged'. T.C. Memo 1988-300

Take $4,166 back in 1983 and image what that would be in today's dollars with inflation. I don't think an amount has anything to do with this issue.

[Rapid Robert]

I don't think an amount has anything to do with this issue.

True. It's a matter of facts and circumstances. We don't seem to have enough to make a determination, per the OP.

A Journal of Accountancy article from 2011 https://www.journalofaccountancy.com.../20114408.html says this:

"Frustratingly perhaps for practitioners, there is no bright line for determining when an activity is sporadic for SE tax purposes. But the more regular, frequent and continual the activities are, the more likely that the taxpayer will be considered to be carrying on a trade or business and subject to SE tax."


What does "one time" mean? One day? I bet that while the consulting gig was in progress over a period of weeks or months (we don't know), it was regular and frequent and continual. There is no legal indication of what "continual" means. The plain meaning of the word is "continuing indefinitely in time without interruption " (Merriam Webster). There is no particular amount of time required to meet the definition. For example, "while a hummingbird is searching for nectar, it continually beats its wings and remains aloft". This is true even if the search only ends up lasting a minute.

But as others have pointed out, below a certain threshold amount the IRS probably won't pursue it. And there are advantages to reporting on Schedule C, not only the dependent care benefit deduction, but Soc. Sec. and Medicare credits for the worker.

[ttbtaxes]

Mr. Langford in my post above wrote a book that was published. I have no idea how many hours were involved but between writing, proofing, and the submission process, it had to be hundreds of hours. He was not "regularly engaged" according to the Tax Court.