I have a client employed by an American company working overseas and the income she earned as a teacher was reported on a 1099 MISC as NEC. No problem, she had expenses, so we claimed them and it offset about 40% of her income. Not a lot of income, the highest year's total was $12,000. She had earnings reported as follows:
2004: 3,300
2005: 12,500
2006: 9,600
She paid $0 federal tax and a few hundred dollars in SE tax for 2005 and 2006.
Well, one of her Canadian counterparts complained to the IRS that their income was not NEC, but really wages because they were really employees. Long story short, IRS investigates and makes the company change the reporting of earnings. My client then receives 1099s for all three years with $0 in box 7 and W2s with the above amounts listed in box 1, 3 and 5 and nothing reported for FIT, SS or medicare.
Really long story....sorry. I figured that once we amended all three years reporting the income as wages instead of NEC, that she will owe roughly $1,300 including federal income tax and her share of social security and medicare. How do I add social security and medicare tax to the 1040?
Do I fill out a form 4137 and let the form figure the underpaid Social Security and Medicare? Also, I know she owes late payment penalties for the additional federal tax owed, but what about penalties on social security and medicare that was unpaid due to her employer's foul up?
TIA---sorry about the long post, but I haven't seen a situation like this on the board.
2004: 3,300
2005: 12,500
2006: 9,600
She paid $0 federal tax and a few hundred dollars in SE tax for 2005 and 2006.
Well, one of her Canadian counterparts complained to the IRS that their income was not NEC, but really wages because they were really employees. Long story short, IRS investigates and makes the company change the reporting of earnings. My client then receives 1099s for all three years with $0 in box 7 and W2s with the above amounts listed in box 1, 3 and 5 and nothing reported for FIT, SS or medicare.
Really long story....sorry. I figured that once we amended all three years reporting the income as wages instead of NEC, that she will owe roughly $1,300 including federal income tax and her share of social security and medicare. How do I add social security and medicare tax to the 1040?
Do I fill out a form 4137 and let the form figure the underpaid Social Security and Medicare? Also, I know she owes late payment penalties for the additional federal tax owed, but what about penalties on social security and medicare that was unpaid due to her employer's foul up?
TIA---sorry about the long post, but I haven't seen a situation like this on the board.
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