1099 nec

[rwm221]

I have a client who has a business. He 1099-nec his employees. He also 1099-nec himself and his wife. I took the all the 1099's off on the sch c as labor. Do I create a separate schedule c for himself and his wife? That means they will have 3 schedule c's, 1 for the business, 1 for himself, and 1 for his wife. Is there a better way to do this?

Thank you

[Lion]

Sorry, wrong thread.

[Anarchrist]

The better way is to report employees on W2s & 941s. Ignoring that, he should issue a corrected 1099 showing zero to himself and have two Sch Cs. Ignoring that, the next best way is the three Sch Cs method you mention and tell him to knock it the f*** off.

For simplicity, I'd probably go with the 3 Cs over the corrected 1099 since it ends up the same on his 1040. If this year ends up getting audited and the auditor asks about it, you roll your eyes as you let out a sigh and say, "I can't believe it, but this guy 1099'd himself . . . " The auditor will say, "Yeh, I've seen that many times" to which you reply, "Really?"

[TaxGuyBill]

Your question SHOULD be "what is the correct way to do this?"


As was noted above, employees receive a W-2, not a 1099-NEC (and the employer needs to file the associated employer forms for the employee).

An owner of a Schedule C business does not receive a W-2 or a 1099-NEC.

You also would need to determine the wife's role in the business - as an owner, an employee, or something else.

[ATSMAN]

I can picture Lion shaking her head at the OP.

rwm221 when did this taxpayer become your client? Were you at all involved, consulted before the 1099s were generated.

In my operation with business clients, I give them the rundown of how to treat employees and independent contractors. 3Q I have a meeting with all my business clients with employees or those who hire independents to avoid a year end fiasco. I started doing this years back when a sole prop was getting a payroll service to issue paychecks and W2 to the sole prop along with the rest of the true employees.

[Lion]

I'd posted in the wrong place, so you can shake your head at me. And, I wouldn't shake my head at OP but at his client who might not have contacted his tax preparer when his financial life was changing. I have one on extension now. After the year ended, he told me he was working to become a partner of a start-up company. I asked him to get me his paperwork as soon as available, thinking he might have a K-1 OR a W-2. He brought me his kids' documents but brought his own in later. No Form K-1. No Form 1099-NEC. No Form w-2. Form 1099-MISC Box 3. NOW I'm shaking my head. He doesn't want to rock the book while he's aiming to be a partner. As long as he's NOT a partner, I can deal with a 1099 on Schedule C. But I talked to him about clarifying his position this year and discussing what forms are being issued BEFORE the year ends.