Gifts versus Nonemployee Compensation

[Snaggletooth]

Issuing 1099s for various companies i do work for.

There were total payments of $750.00 to one guy, client claims $500 was a "gift." I am familiar with the situation, and the $500 really was a gift. However, it was a gift of appreciation for things the guy had done free for the client. Without the $500 there won't be enough to justify a 1099-NEC.

Should there be a 1099-NEC for $750.00 for this recipient?

[Uncle Sam]

Gifts are only deductible to a maximum of $ 25 per year.
(This hasn't been increased in decades but it's still the rule)
IRC Sec 274(b) TTB Page 8-6

[New York Enrolled Agent]

Should there be a 1099-NEC for $750.00 for this recipient?

High probability the answer is YES.

You should read the seminal case on gifts - cited frequently. Duberstein 363 U.S. 278 (1960)

[Snaggletooth]

NYEA I'm happy you still post. I'm more inclined to accept "Yes" than to read the 1960 Case you referred to.

Reading the case would take me over a half-day, and not only having to read but also understand and maybe even chase down cross references to other cases.

Bringing a post to the forum is the lazy man's way of getting answers, I realize, but at some point there is not adequate time to thoroughly research. Even the IRS website is so voluminous that it's hard to track down anything.

Thank you for responding.

[Lion]

Buy yourself a good research tool. You could start with TTB's online product. It's searchable and will offer explanations and examples and link you to documents of substantial authority. Or invest in a course for each topic you want to master. Choose a vendor or instructor that you trust and spend a couple hours listening to someone who already digested that topic and can give you explanations and examples. I like CCHCPELink.com for a wide variety of courses.

[Snaggletooth]

I'm happy that you endorse the TTB online tool. I have been purchasing TTB products since their beginning in 2005, and continue to do so. In those days the hard copy book was sufficient because Congress did not change tax laws in the middle of the stream. When they began doing this, the TMI people developed a web CD which could be continually updated during the tax season. TTB authors are practicing EAs/CPAs, so when they write, they are acutely aware of what a practitioner encounters in a real world environment. Not sure why other publications insist that their writers not be active practitioners, maybe because there may be liability attached to someone doing a complex tax return or they want their authors to be totally focused on writing - I dunno.

Some respondents to a forum such as this (such as yourself) seem to have endless other publications to which they may refer. For example, I'm happy that NYEA is familiar with so many court cases that he can share - I could never manage that much information myself. For the subscription cost, I find the TTB products to give the most bang for the buck, and find that they will address 90% or more of the situation that arises. By the admission of the writers, they cannot address every conceivable situation and keep the publication down to 600 to 700 pages.

Thank you for your response.

[Burke]

Issuing 1099s for various companies i do work for.

There were total payments of $750.00 to one guy, client claims $500 was a "gift." I am familiar with the situation, and the $500 really was a gift. However, it was a gift of appreciation for things the guy had done free for the client. Without the $500 there won't be enough to justify a 1099-NEC.Should there be a 1099-NEC for $750.00 for this recipient?

Yes. Slam-dunk. Whenever an employer pays anything to someone who works for him, employee or contractor, it is taxable, unless it is an expense under an accountable plan.. Even if it is paid to a third party for the benefit of the employee..