SE Tax?

[DTS]

Any thoughts on whether earned income ($500) is subject to SE tax? It was earned on one odd job in '04, not her regular work. This is a one-time thing.

Thanks, Dennis

[Gretel]

SE tax

Dennis, if it just was a one time deal not in her profession no SE tax applies.

[DTS]

SE Tax

Thanks, Gabriele,

This is what I thought, according to past posts, and just wanted to make sure.

Dennis

[Bees Knees]

Keep this court case in your file:

Batok, Tax Court Memo, Dec. 28, 1992.

That is where a one-time window installation job was not subject to SE tax because the guy never performed that kind of service before, nor did he ever agian at any time thereafter.

Tax court cases can be found by going to

http://www.ustaxcourt.gov/

[S T]

Good Info

Thanks Bees, for the court case. Now that this forum can print questions and all replies on one sheet of paper (well more than 1 if there are a lot of replies) I can print and start a reference notebook by subject matter.

Sandy

[Unregistered]

SE Tax

What if the amount was $650 and the individual received a 1099 with amount in Box 7 (Non Employee Compensation)?

If SE does not apply, do you put the earnings on Line 21 (Other Income) of 1040?

Thanks,

Ronnie

[jainen]

1099's

Yes, use line 21. I've always thought that many of my colleagues give far too much weight to what a 1099 says. It isn't some kind of holy writ. The purpose of a 1099 is to support the issuer's tax return. Even if it isn't a flat-out lie it can't characterize funds in the hands of the recipient. Another problem I often see is 1099's including a check issued (or backdated) December 29 but received in the new year. Report your income from your own records.

[Gretel]

How do I find the court case?

I went on the court webpage and found the docket no. but not the actual document. What do I need to do? Thanks.

[taxmandan]

TC memos on-line

The TC site says you can search from 09/25/95, since this case was in 1992 I doubt it can be located on-line. So, anyone know another source for these earlier cases, or how to request a copy from the TC?

[Gene V]

Se

Here is a summary of the tax case, I found this in my notes, not sure where I got this from.

John A. and Mary L. Batok. v Commissioner 64 TCM 1992-727 64 TCM 1605 (Dec. 48,709(M) (1992)

During 1988 taxpayer (husband) was retired. He was an auto mechanic and was involved in producing stained glass as a HOBBY. During 1988 taxpayer was hired for ONE MONTH to install office windows, something he had NEVER done before. Taxpayer was issued a form 1099 reporting the payment of $4,000 for installing the windows as nonemployee compensation.
IRS determined that he failed to report $4,000 compensation as self employment income subject to self employment tax. Taxpayer did not consider himself to be engaged in the business of glass installation, staining or engraving. However, since IRS wanted to treat the $4,000 as self employment income, he decided to deduct business expenses related to such a trade, and he filed an amended return claiming a loss of $3,000 after listing $7,000 in expenses.

Court ruled: A taxpayer must be involved in an activity with continuity, regularity and with profit objective to be considered engaged in a trade or business.
Taxpayer's one time job of installing windows for one month is too sporadic to be considered a trade or a business. The fact that this was a "one-time job” was significant in the court's determination.
The court added that a "sporadic activity, hobby, or amusement" does not qualify as a trade or business.
The court held that he was not liable for self employment tax.

[Gretel]

Thanks a million

Thanks a million

[Unregistered]

I found a copy of the TC Memo buried in a read-only PDF document. Actually this was an "adverse" opinion. The taxpayer had significant expenses related to the compensation (but little or no documentation) but wasn't able to deduct any of the expenses on his Schedule A as a hobby expense since he used the standard deduction. His tax benefit would have been greater on the Schedule C. The gist is the same, however, a one-time situation like this isn't a business and not subject to SE. However, since it isn't a business, it's most likely hobby income and the expenses are deductible on the Schedule A only to the extent of the loss if the taxpayer itemizes deductions and subject to the 2% rules. I'm sure glad the question was posted, I too saved this case but during a move lost the file.

[DTS]

Thank you

Thank you all for posting this case. I, also, had trouble with the Tax Court site after going in, so this really helps!

Dennis

[dyne]

casual SE

Perhaps the best authority to quote as to why casual SE income is not subject to SE tax
is in IRS Instructions for Schedule C in the third sentence which says:...For example,
a sporadic activity or a hobby does not qualify as a business...."

[jainen]

Schedule A

That means, I suppose, that you can't deduct expenses except on Schedule A, subject to 2% and not exceeding income.