1099-misc

[FRAZZLED]

Mr & Mrs Jones are retired couple with pension and SS as only income. Elderly mother comes to live with them for 9 months so that they can take care of her. Elderly mother paid them for their services. Mother then issued 1099 for nonemployee compensation for over $20,000. I was wondering if this would fall under household employee rules. Mother should issue w2 and withhold Fica.

Still Frazzled

[jerome]

Elderly mother should be thrown out into the street for issuing a 1099. Only a trade or business issues a 1099 for services paid to a non-employee. You never issues a 1099 for services paid to another person unless you are a business.

[Jiggers]

1099

I doubt if the elderly mother issued the 1099. I would bet that her accountant did.

I would bet that the mother has a ranch/farm and is trying to deduct the labor paid to them. Been there, done that. Had a client who assisted an elderly person in her home and got the 1099. When I questioned the 1099 I was told that she was deducting it on the farm!

This should be household labor. Mother should have issued W-2.

[jerome]

The elderly mother came to live with the care givers. Its not a household employee because its not her household.

[FRAZZLED]

1099-misc

Elderly mother doesn't have a farm. Since she resided with daughter and son-in-law for 9 months wouldn't that make it her home? She went from there to nursing home.

[Jiggers]

1099

Still, who issued the 1099?

[JoshinNC]

Why does she need to issue a 1099?

What income is she offsetting with the 1099? I would venture to say that her accountant told her that she could offset IRA distributions with this 1099 for her phantom business and he/she drew it up.

This is really the mother paying for her own support, therefore disallowing the dependency exemption for the married couple. Find out who issued the 1099, and if it's not the mother herself, take them to task.

[gkaiseril]

In whose name and SSN was the 1099 Misc filed under? On 1099 could not be filed for both the husband and spouse.

The couple can protest this treatment of independent contractor by reporting the 1009 Misc as wages and complete and attach form 4137 paying the employee's chare of FICA and Medicare and let the IRS and SSA pursue whether the couple are independent contractors or employees.

The can file a Schedule C and take all appropriate expenses. Housing depreciation as a day care facility, food for mother-in- law by actual cost or per diem, transportation cost and any other cost to support her they paid for and were not reimbursed for. The can also make contributions to an IRA.

[FRAZZLED]

1099-misc

Accountant issued 1099 in wifes name. Appearantly elderly mother's son takes care of her money. I have considered a sch c but was trying to get them out of self-employment taxes.
Frazzled

[gkaiseril]

Self employment taxes are on net business income. This could be less than employee's share of FICA and Medicare taxes. An argument could be made for the meal, housing, transportation costs etc. incurred by the wife. This could substantially lower the amount of income subject to SE tax and income tax. Maybe the brother could be shown the error of his ways. These cost are personal expenses and can not be deducted on any investment or business expense.

[Luis Mopeo]

Elderly mother paid them for their services.

I guess I don't understand why there's a question about whether to treat this income from performance of services as self-employment income. It's not a household employee because the the house belonged to the service providers, not the service recipient. If you take your child to someone's house for day care, are they your household employees? No. If you bring in a nanny into your home, is he or she a household employee? Yes.

A 1099 shouldn't have been filed, but what difference does it make? Whether a 1099 is filed doesn't have anything whatever to do with rules for properly reporting income by the recipient.

The only question is whether the income should be reported on Schedule C, or Form 1065 as a partnership.

[JoshinNC]

What income?

I guess I don't understand why there's a question about whether to treat this income from performance of services as self-employment income. It's not a household employee because the the house belonged to the service providers, not the service recipient. If you take your child to someone's house for day care, are they your household employees? No. If you bring in a nanny into your home, is he or she a household employee? Yes.

A 1099 shouldn't have been filed, but what difference does it make? Whether a 1099 is filed doesn't have anything whatever to do with rules for properly reporting income by the recipient.

The only question is whether the income should be reported on Schedule C, or Form 1065 as a partnership.

This isn't income, this is a son and his wife taking care of his mother. The fact that the mother provided money to the son just shows that she is trying to cover some of the additional costs of having her in his home. I wouldn't have my client include this in income until I had a nice long talk with the mother's accountant.

[FRAZZLED]

1099

Mother's accountant already filed the taxes. She took the deduction as medical expenses.

Frazzled

[JoshinNC]

Than there should have been a W-2

Per TTB pg 4-8, "the cost of nursing services can include wages and employment taxes paid to hire a nurse", which leads me to believe that you don't issue a 1099.

It also goes on to say that personal and household services provided by the nurse are non-deductible. So, unless the son and his wife were giving medical treatment, not just cleaning the house or bathing her, than she doesn't have deductible expenses.

But hey, why does that matter anyway? Just put it down and take the deduction anyway. Who's ever going to figure it out?

Oy!

[Luis Mopeo]

This isn't income, this is a son and his wife taking care of his mother.

The original post said the "Elderly mother paid them for their services." If it was payment for services, it was income. You can't just change it to "gift" just because there would be less tax.

In a family situation like this there are certain to be missing pieces. The mom lived with the kids for nine months then went into a nursing home? Maybe the kids didn't want her around any more and kicked her out. Maybe the kids started trying to squeeze money out of her. Maybe she issued a 1099 because of some kind of perceived or real bad behavior by the kids.

I wouldn't jump to conclusions about who's in the right here. But it's not jumping to conclusions to say that payment for services is taxable gross receipts.