1099misc

[Earl]

Client received a 1099MISC showing other income. Need to know how to handle.

The client is an employee at furniture store. Works some as a salesman. When she sells certain mattresses she gets a bonus/commission/money? from the mattress company (Sealy). She is not employed by the mattress company and gets a W2 from the furniture store.

I know that some automobile salesmen get this type of incentive payment from auto manufacturers and it is not liable for self-employment tax. Was wondering if this would be handled the same.

I know she has to pay income tax but wondering about self-employment tax of this type income..

[Kram BergGold]

My view

I would treat this as push money like the car salesmen get and put it on line 21. If the 1099 show it in box 7 you will need to wash it off Schedule C.

[S T]

I would think

it should be the same as the auto salesman receiving the "spiff" from the auto manufacturer, report on line 21 not subject to SE with a description.

Sandy

[JohnH]

IRS Publication

Here's the link to the IRS publication that deals with "spiffs". It only addresses automotive industry manufacturer payments to salespersons employed by dealers, but it seems your fact pattern is identical.

http://www.irs.gov/pub/irs-pdf/p3204.pdf

[Matt Sova]

Spiffs

These are just like the auto industry spiffs. The reason they are not subject to SE tax is auto sales people use to write all their expenses off on Schedule C as opposed to 2% on Schedule A and end up paying less in taxes.

If the manufacturer erroneously puts the amount in box 7 then you have to put it as revenue on Sch C and the same amount as other expenses with a description like "Manufacturer Incentive Reported on Page 1 Line 21". Then put the amount on line 21. If it is box 3 Other Income then just put it on Line 21 with no SE Tax.

[Snaggletoof]

IRS cut a deal??

I haven't had a car salesman in quite some time. Last time I dealt with a spiff bonus on a separate 1099, I put it on Sch C. When I did that, the Sch. C became a magnet for all manner of deductions such as mileage, entertainment, promotions, etc. In some years, the expenses would exceed the spiff, and in other years, there would be very little income on the Sch C because of all the deductions. As far as I was concerned, this was legitimate reporting, so long as he incurred all the expenses he claimed.

From what I'm hearing, IRS now wants this reported on Line 21, and gave up on collecting SE tax. Guess they got tired of people being able to deduct things they have to spend in order to make money. Part of their concept of taxing the gross instead of the net. Forcing more people into the 2% stuff.