National Guard "Spiffs"

[Jesse]

Have a couple people that have 1099MISC w/ amounts in Box 7 nonemplyee compensation. They said it is commissions or like referral fees for signing up other recruits into the National Guards. Is there any reason this would not be subject to SE tax?

[JohnH]

Business Activity?

Are they in the business of signing up recruits to the National Guard?

[Jesse]

They did it to make money - profit motive?

I have two new clients(they are cousins), one made $1,500 in 2007, the other made $1,000 in 2006 and $3,000 in 2007. Last years preparer did schedule C, but you know how it goes - just when you think you have it figured out you find an exception to the rule. I thought someone might know of the exception?

[ChEAr$]

a trade or business

They did it to make money - profit motive?

I have two new clients(they are cousins), one made $1,500 in 2007, the other made $1,000 in 2006 and $3,000 in 2007. Last years preparer did schedule C, but you know how it goes - just when you think you have it figured out you find an exception to the rule. I thought someone might know of the exception?

is an activity carried on regularly for profit. An occasional referral would not be se
income.
This sounds like it could be, especially if their were associated expenses.

[Gene V]

google search

Just another google search;

I worked for the IRS as a Tax Law Specialist. Although now retired and bit rusty, I can tell you that any 1099 is income that you did not earn as an employee whose wages are subject to income-tax, FICA, and Medicare withholding. Since your income was not subject to withholding (and I doubt you paid any of these taxes on a Form ES voucher (estimated tax), you must account for the income and pay the taxes now.

What did you do to earn the income? Look in the table for a classification into which whatever you did seems to fit best.

If you cannot find anything, use 9999. Copy the amount on the Form 1099-MISC to the appropriate line on Schedule C-EZ (a short version of Schedule C), and be sure to deduct any expense(s) (including mileage) that you incurred in order to earn the income.

Turbo Tax will automatically generate a Schedule SE, which is the Social Security (SECA) tax that will be added to your income tax on the income earned.
4 days ago

[veritas]

Here's something to look at

Batok, Tax Court Memo, Dec. 28, 1992

See page 5-23 in TTB.

[Jesse]

Thank you all for your help. "Regular" and "continuous" can be interpreted different ways to different people. I think if they were trying to earn these referral fees by recruiting more than one person they did and still do have a profit motive. Even if only successful in recruiting one single person the intent is present and unless I can find an exception I'm putting this on schedule C subject to SE. Gene, I already have my code 99999 in place, thanks and they did not track any mileage and don't feel a necessity to try and back track. No log, no deduction.

I thought maybe there was an exception such as the car salesman and earning spiffs.

It's like the flipping of houses, I know many disagree w/ me, but when you buy a "fixer upper" you are doing more than just investing to warrant capital gain treatment, you are putting more money time and labor - whether labor acting as a general to coordinate the job or labor to do the physical work. It's more than buying a piece of property for shear speculation that it will increase in value.