Misc Income [how to report with no 1099]

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LeTooth
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Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 9:18 am

I have always been an employee and only filed W-2s...I helped out a neighbor at her business for a week while her associate was away. I received $1200 and no 1099... How do I enter this in my taxes and is there anything else I need to do?

LeTooth
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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 11:32 am

I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?

PFInterest
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Re: Misc Income [how to report with no 1099]

Post by PFInterest » Mon Feb 19, 2018 11:33 am

Sounds like you were paid under the table?

rkhusky
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Re: Misc Income [how to report with no 1099]

Post by rkhusky » Mon Feb 19, 2018 11:37 am

Add it to wages (line 7, 1040). If you have a business and were working under that business, line 12 & Sched C would be appropriate.
Last edited by rkhusky on Mon Feb 19, 2018 11:40 am, edited 1 time in total.

stlutz
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Re: Misc Income [how to report with no 1099]

Post by stlutz » Mon Feb 19, 2018 11:40 am

What tax bracket are you otherwise in? Overall, that sounds about right as you have to pay regular income tax, Social Security self-employment tax (12.4%) and Medicare tax (2.9%) on the money.

The money does get added to your Social Security wages which will slightly increase your payout when you retire.

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Pajamas
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Re: Misc Income [how to report with no 1099]

Post by Pajamas » Mon Feb 19, 2018 11:43 am

Did you ask for the 1099? If she paid you $600 or more, she is required to issue you a 1099 you should get a 1099. Just report the income as if you had gotten a 1099 if for some reason you can't get one. As the recipient, you don't have to give the 1099 to the IRS anyway. If no taxes were withheld and you were paid a lump some, she basically treated you as an independent contractor.

https://www.irs.gov/faqs/interest-divid ... employed-1

harmony
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Re: Misc Income [how to report with no 1099]

Post by harmony » Mon Feb 19, 2018 11:51 am

It may be that there is more than just your income tax that is still owed: https://www.irs.gov/individuals/employe ... ithholding The employer is supposed to pay half of the FICA tax. When you pay your part, it may expose the employer. It may be better to ask the employer to make this right earlier rather than later. Opting for 1099 is also problematic if your work didn't fit 1099 criteria.

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Epsilon Delta
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Re: Misc Income [how to report with no 1099]

Post by Epsilon Delta » Mon Feb 19, 2018 11:56 am

LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.

LeTooth
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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 11:57 am

PFInterest wrote:
Mon Feb 19, 2018 11:33 am
Sounds like you were paid under the table?
I believe this to be the case... Because I was "just helping her"?

LeTooth
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Joined: Mon Feb 19, 2018 9:15 am

Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 11:58 am

Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross

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Epsilon Delta
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Re: Misc Income [how to report with no 1099]

Post by Epsilon Delta » Mon Feb 19, 2018 12:09 pm

LeTooth wrote:
Mon Feb 19, 2018 11:58 am
Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross
Then $500 seems high, You should be solidly in the 15% tax bracket. So 15% income tax plus 15.3% SE = 30.3% or $360. Taxes of $500 is still possible if you are in phase out or hit an income limit. Careful comparison of returns with and without the self employment income would be warranted. EITC, savers credits and ACA subsidies are obvious places to look, but there are others. Depending exactly on what is in play a small additional IRA deduction may have large benefits.

gotester2000
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Re: Misc Income [how to report with no 1099]

Post by gotester2000 » Mon Feb 19, 2018 12:22 pm

LeTooth wrote:
Mon Feb 19, 2018 11:57 am
PFInterest wrote:
Mon Feb 19, 2018 11:33 am
Sounds like you were paid under the table?
I believe this to be the case... Because I was "just helping her"?
...and it was in cash?

JW-Retired
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Re: Misc Income [how to report with no 1099]

Post by JW-Retired » Mon Feb 19, 2018 12:30 pm

How about on your 1040 Line 21?

I've used that for small "other income" items, but nothing approaching your amount.
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DSInvestor
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Re: Misc Income [how to report with no 1099]

Post by DSInvestor » Mon Feb 19, 2018 12:34 pm

In addition to the self employment tax on the schedule C income, also check to see if they claim the ACA premium tax credit for health insurance as an increase in income could decrease this credit.
Wiki

tomd37
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Re: Misc Income [how to report with no 1099]

Post by tomd37 » Mon Feb 19, 2018 12:38 pm

It is not a job for you but rather a one-time effort to assist her. IMO it goes on line 21 of the 1040 as miscellaneous cash income. If it was something you did fairly regularly on a part-time basis for her then a 1099-MISC would be the document she should report the income to you on and you would file Schedules C and SE.
Tom D.

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arcticpineapplecorp.
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Re: Misc Income [how to report with no 1099]

Post by arcticpineapplecorp. » Mon Feb 19, 2018 12:57 pm

LeTooth wrote:
Mon Feb 19, 2018 11:58 am
Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross
You have to do a Schedule C (Pajamas and Harmony are correct based on the IRS links they provided you).

On schedule C put:

Line 1, 3, 5, 7 should all have $1200.

Then you need to put $1200 on line 12 of your tax return (1040)

Next do a Schedule SE. Here's what you get:

line 1 -- $1200
line 1b -- nothing
line 2 -- $1200
line 3 -- $1200
line 4 -- $1108.92 (this is $1200 X .9235 = $1108.20)
line 5 -- $169.55 (this is $11.08.20 X 0.153 = $169.55. It's 15.3% because you're joint income is less than $127,000)
line 6 -- $84.78 (this is $169.55 X 0.50 = $84.78)

put line 5 amount $169.55 on line 57 of your 1040
put line 6 amount $84.78 on line 27 of your 1040

You said your adjustable gross income was $42,000 (you didn't say if this was before or after deductions). So we'll have to assume it's your gross income before deductions (as in line 7 from the 1040). The amounts below would be different if that's not the case. With that in mind:

If you add line 7 ($42,000), line 12 ($1200) and line 27 ($84.78) from the 1040 that makes your taxable income $43,284.78

You see that line 57 is the self employment tax $169.55. That is a tax because it gets added to your total tax (after the standard deduction and personal exemption). Assuming you're single the 1040 should read:

$42,000 gross income (line 7)
$1200 from line 12 business income or loss
+$84.78 from line 27
-6350 standard deduction (assuming under 65 and unmarried)
-$4050 personal exemption (assuming unmarried and no dependents)

leaves $32,884.78 adjusted gross income

tax on $32,884.78 is $4465 (assuming single)
add to that $169.55 from line 57

makes your total tax $4634.55.

So you're paying an additional tax OF $169.55 PLUS tax ON $1200 AND tax ON $84.78 of additional income. Since you're in the 15% tax bracket (highest) for 2017 you're essentially paying 15% of $1200 and 15% of $84.78 which is $180 and $12.72 in additional tax PLUS the additional tax of $169.55.

Therefore you're paying additional tax of $180 + $12.72 + $169.55 in taxes = $362.28 total addtional taxes on $1200 of income. NOT $500 in additional taxes, but $362.28 in additional taxes.

You should go to a VITA site through United Way (Volunteer Income Tax Assistance) since your income is less than $62,000 you qualify to have your taxes done for free by volunteers who had to pass a certification through the IRS. Find a site near you:

https://irs.treasury.gov/freetaxprep/

Oh, and since you now know you'll have additional tax to pay, factor that in to what you charge next time. In other words, charge $1500 or so next time instead of $1200 if you want to be left with around $1200 net! :happy
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Carl53
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Re: Misc Income [how to report with no 1099]

Post by Carl53 » Mon Feb 19, 2018 2:30 pm

Spouse has helped out at the polls several times over the last few years. No 1099, no W2, no nothing other than a very modest check. I put it on line 21 and noted election worker. Basically a few bucks of thanks for volunteering when they were begging for help for a very, very long day and evening before. Kind of odd though as she volunteered me to help set up, do some machine maintenance and tear down and for what amounts to perhaps 3X what her renumeration is over a years time ($750 for me), I get a W2.

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Pajamas
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Re: Misc Income [how to report with no 1099]

Post by Pajamas » Mon Feb 19, 2018 2:39 pm

Carl53 wrote:
Mon Feb 19, 2018 2:30 pm
Spouse has helped out at the polls several times over the last few years. No 1099, no W2, no nothing other than a very modest check. I put it on line 21 and noted election worker. Basically a few bucks of thanks for volunteering when they were begging for help for a very, very long day and evening before. Kind of odd though as she volunteered me to help set up, do some machine maintenance and tear down and for what amounts to perhaps 3X what her renumeration is over a years time ($750 for me), I get a W2.
1099s are only required to be issued to recipients of amounts of $600 or more on an annual basis. Amounts under $600 must still be reported (and appropriate taxes paid) by the recipient. Since your spouse only made about $250, she shouldn't expect a 1099. Sometimes they are issued anyway.

1year23
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Re: Misc Income [how to report with no 1099]

Post by 1year23 » Mon Feb 19, 2018 2:42 pm

Did you have some expenses related to doing this job that can be deducted on Schedule C?

LeTooth
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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 3:06 pm

gotester2000 wrote:
Mon Feb 19, 2018 12:22 pm
LeTooth wrote:
Mon Feb 19, 2018 11:57 am
PFInterest wrote:
Mon Feb 19, 2018 11:33 am
Sounds like you were paid under the table?
I believe this to be the case... Because I was "just helping her"?
...and it was in cash?
No.. check

LeTooth
Posts: 11
Joined: Mon Feb 19, 2018 9:15 am

Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 3:10 pm

1year23 wrote:
Mon Feb 19, 2018 2:42 pm
Did you have some expenses related to doing this job that can be deducted on Schedule C?
yes.. some

LeTooth
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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 3:11 pm

arcticpineapplecorp. wrote:
Mon Feb 19, 2018 12:57 pm
LeTooth wrote:
Mon Feb 19, 2018 11:58 am
Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross
You have to do a Schedule C (Pajamas and Harmony are correct based on the IRS links they provided you).

On schedule C put:

Line 1, 3, 5, 7 should all have $1200.

Then you need to put $1200 on line 12 of your tax return (1040)

Next do a Schedule SE. Here's what you get:

line 1 -- $1200
line 1b -- nothing
line 2 -- $1200
line 3 -- $1200
line 4 -- $1108.92 (this is $1200 X .9235 = $1108.20)
line 5 -- $169.55 (this is $11.08.20 X 0.153 = $169.55. It's 15.3% because you're joint income is less than $127,000)
line 6 -- $84.78 (this is $169.55 X 0.50 = $84.78)

put line 5 amount $169.55 on line 57 of your 1040
put line 6 amount $84.78 on line 27 of your 1040

You said your adjustable gross income was $42,000 (you didn't say if this was before or after deductions). So we'll have to assume it's your gross income before deductions (as in line 7 from the 1040). The amounts below would be different if that's not the case. With that in mind:

If you add line 7 ($42,000), line 12 ($1200) and line 27 ($84.78) from the 1040 that makes your taxable income $43,284.78

You see that line 57 is the self employment tax $169.55. That is a tax because it gets added to your total tax (after the standard deduction and personal exemption). Assuming you're single the 1040 should read:

$42,000 gross income (line 7)
$1200 from line 12 business income or loss
+$84.78 from line 27
-6350 standard deduction (assuming under 65 and unmarried)
-$4050 personal exemption (assuming unmarried and no dependents)

leaves $32,884.78 adjusted gross income

tax on $32,884.78 is $4465 (assuming single)
add to that $169.55 from line 57

makes your total tax $4634.55.

So you're paying an additional tax OF $169.55 PLUS tax ON $1200 AND tax ON $84.78 of additional income. Since you're in the 15% tax bracket (highest) for 2017 you're essentially paying 15% of $1200 and 15% of $84.78 which is $180 and $12.72 in additional tax PLUS the additional tax of $169.55.

Therefore you're paying additional tax of $180 + $12.72 + $169.55 in taxes = $362.28 total addtional taxes on $1200 of income. NOT $500 in additional taxes, but $362.28 in additional taxes.

You should go to a VITA site through United Way (Volunteer Income Tax Assistance) since your income is less than $62,000 you qualify to have your taxes done for free by volunteers who had to pass a certification through the IRS. Find a site near you:

https://irs.treasury.gov/freetaxprep/

Oh, and since you now know you'll have additional tax to pay, factor that in to what you charge next time. In other words, charge $1500 or so next time instead of $1200 if you want to be left with around $1200 net! :happy
Fantastic.. though I am married ;)

harmony
Posts: 504
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Re: Misc Income [how to report with no 1099]

Post by harmony » Mon Feb 19, 2018 3:20 pm

Instead of OP paying all of the FICA taxes as if he was self-employed, I’d recommend he ask the employer to pay this as she should have done. There is time yet before the end of February apparently. If she has other employees she would know this requirement.
Topic Number 154 - Form W-2 and Form 1099-R (What to Do if Incorrect or Not Received)
If your Form W-2.pdf, Wage and Tax Statement, and/or Form 1099-R.pdf, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., aren't available to you by January 31, 2018, or if your information is incorrect on these forms, contact your employer/payer. If by the end of February you still haven't received the missing or corrected form, you may call the IRS at 800-829-1040 for assistance . . .

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arcticpineapplecorp.
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Re: Misc Income [how to report with no 1099]

Post by arcticpineapplecorp. » Mon Feb 19, 2018 3:26 pm

LeTooth wrote:
Mon Feb 19, 2018 3:11 pm
arcticpineapplecorp. wrote:
Mon Feb 19, 2018 12:57 pm
LeTooth wrote:
Mon Feb 19, 2018 11:58 am
Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross
You have to do a Schedule C (Pajamas and Harmony are correct based on the IRS links they provided you).

On schedule C put:

Line 1, 3, 5, 7 should all have $1200.

Then you need to put $1200 on line 12 of your tax return (1040)

Next do a Schedule SE. Here's what you get:

line 1 -- $1200
line 1b -- nothing
line 2 -- $1200
line 3 -- $1200
line 4 -- $1108.92 (this is $1200 X .9235 = $1108.20)
line 5 -- $169.55 (this is $11.08.20 X 0.153 = $169.55. It's 15.3% because you're joint income is less than $127,000)
line 6 -- $84.78 (this is $169.55 X 0.50 = $84.78)

put line 5 amount $169.55 on line 57 of your 1040
put line 6 amount $84.78 on line 27 of your 1040

You said your adjustable gross income was $42,000 (you didn't say if this was before or after deductions). So we'll have to assume it's your gross income before deductions (as in line 7 from the 1040). The amounts below would be different if that's not the case. With that in mind:

If you add line 7 ($42,000), line 12 ($1200) and line 27 ($84.78) from the 1040 that makes your taxable income $43,284.78

You see that line 57 is the self employment tax $169.55. That is a tax because it gets added to your total tax (after the standard deduction and personal exemption). Assuming you're single the 1040 should read:

$42,000 gross income (line 7)
$1200 from line 12 business income or loss
+$84.78 from line 27
-6350 standard deduction (assuming under 65 and unmarried)
-$4050 personal exemption (assuming unmarried and no dependents)

leaves $32,884.78 adjusted gross income

tax on $32,884.78 is $4465 (assuming single)
add to that $169.55 from line 57

makes your total tax $4634.55.

So you're paying an additional tax OF $169.55 PLUS tax ON $1200 AND tax ON $84.78 of additional income. Since you're in the 15% tax bracket (highest) for 2017 you're essentially paying 15% of $1200 and 15% of $84.78 which is $180 and $12.72 in additional tax PLUS the additional tax of $169.55.

Therefore you're paying additional tax of $180 + $12.72 + $169.55 in taxes = $362.28 total addtional taxes on $1200 of income. NOT $500 in additional taxes, but $362.28 in additional taxes.

You should go to a VITA site through United Way (Volunteer Income Tax Assistance) since your income is less than $62,000 you qualify to have your taxes done for free by volunteers who had to pass a certification through the IRS. Find a site near you:

https://irs.treasury.gov/freetaxprep/

Oh, and since you now know you'll have additional tax to pay, factor that in to what you charge next time. In other words, charge $1500 or so next time instead of $1200 if you want to be left with around $1200 net! :happy
Fantastic.. though I am married ;)
crap. now I've got to do that all over again! :oops:

Well, let's plug the numbers in again:

$42,000 gross income (line 7)
$1200 from line 12 business income or loss
+$84.78 from line 27
-12,700 standard deduction (married!!)
-$8100 personal exemption (married!!)

leaves $22,484.78 adjusted gross income

tax on $22,484.78 is $2439 (married!!)
add to that $169.55 from line 57

makes your total tax $2608.55.

So you're paying an additional tax OF $169.55 PLUS tax ON $1200 AND tax ON $84.78 of additional income. Since you're in the 15% tax bracket (highest) for 2017 you're essentially paying 15% of $1200 and 15% of $84.78 which is $180 and $12.72 in additional tax PLUS the additional tax of $169.55.

Therefore you're paying additional tax of $180 + $12.72 + $169.55 in taxes = $362.28 total addtional taxes on $1200 of income. NOT $500 in additional taxes, but $362.28 in additional taxes.

The tax on the self-employment is the same, but your overall tax went down because of the additional standard deduction and personal exemption (of your spouse).

Is that what you're getting on your end?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

armeliusc
Posts: 279
Joined: Wed Dec 21, 2011 9:40 am

Re: Misc Income [how to report with no 1099]

Post by armeliusc » Mon Feb 19, 2018 3:27 pm

arcticpineapplecorp. wrote:
Mon Feb 19, 2018 12:57 pm
LeTooth wrote:
Mon Feb 19, 2018 11:58 am
Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross
You have to do a Schedule C (Pajamas and Harmony are correct based on the IRS links they provided you).

On schedule C put:

Line 1, 3, 5, 7 should all have $1200.

Then you need to put $1200 on line 12 of your tax return (1040)

Next do a Schedule SE. Here's what you get:

line 1 -- $1200
line 1b -- nothing
line 2 -- $1200
line 3 -- $1200
line 4 -- $1108.92 (this is $1200 X .9235 = $1108.20)
line 5 -- $169.55 (this is $11.08.20 X 0.153 = $169.55. It's 15.3% because you're joint income is less than $127,000)
line 6 -- $84.78 (this is $169.55 X 0.50 = $84.78)

put line 5 amount $169.55 on line 57 of your 1040
put line 6 amount $84.78 on line 27 of your 1040

You said your adjustable gross income was $42,000 (you didn't say if this was before or after deductions). So we'll have to assume it's your gross income before deductions (as in line 7 from the 1040). The amounts below would be different if that's not the case. With that in mind:

If you add line 7 ($42,000), line 12 ($1200) and line 27 ($84.78) from the 1040 that makes your taxable income $43,284.78

You see that line 57 is the self employment tax $169.55. That is a tax because it gets added to your total tax (after the standard deduction and personal exemption). Assuming you're single the 1040 should read:

$42,000 gross income (line 7)
$1200 from line 12 business income or loss
+$84.78 from line 27
-6350 standard deduction (assuming under 65 and unmarried)
-$4050 personal exemption (assuming unmarried and no dependents)

leaves $32,884.78 adjusted gross income

tax on $32,884.78 is $4465 (assuming single)
add to that $169.55 from line 57

makes your total tax $4634.55.

So you're paying an additional tax OF $169.55 PLUS tax ON $1200 AND tax ON $84.78 of additional income. Since you're in the 15% tax bracket (highest) for 2017 you're essentially paying 15% of $1200 and 15% of $84.78 which is $180 and $12.72 in additional tax PLUS the additional tax of $169.55.

Therefore you're paying additional tax of $180 + $12.72 + $169.55 in taxes = $362.28 total addtional taxes on $1200 of income. NOT $500 in additional taxes, but $362.28 in additional taxes.

You should go to a VITA site through United Way (Volunteer Income Tax Assistance) since your income is less than $62,000 you qualify to have your taxes done for free by volunteers who had to pass a certification through the IRS. Find a site near you:

https://irs.treasury.gov/freetaxprep/

Oh, and since you now know you'll have additional tax to pay, factor that in to what you charge next time. In other words, charge $1500 or so next time instead of $1200 if you want to be left with around $1200 net! :happy
This above calculation is not quite correct.

$84.78 (employer portion of SE) is deducted from the taxable income. You don't pay tax on that. Plus the calculation above is also taxing both the total SE tax AND the employer version of the SE tax, which doesn't make sense.

The total additional tax should be your marginal rate (15%) of $1200 PLUS SE tax MINUS 15% of Half of SE Tax (the deductible part) == $336.83

tomd37
Posts: 2886
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Location: Middle Tennessee

Re: Misc Income [how to report with no 1099]

Post by tomd37 » Mon Feb 19, 2018 3:51 pm

LeTooth,
Once again I am going to suggest this $1,200 income be reported as miscellaneous income on 1040 line 21 instead of Schedule C.

Looking at the 2017 Instructions for Schedule C it says "Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit, and you are involved in the activity with continuity and regularity. For example, a sporadic activity or hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Form 1040, line 21."

Looking at Instructions for Form 1040, Line 21 Other Income, one of the bullets there is "Income from an activity not engaged in for profit. See Pub 535."

I still contend your $1,200 income is from activity that you are not engaged in with continuity and regularity. I have prepared a number of tax returns with a similar situation and use line 21 to report this income. As mentioned by you and others, the income must be reported but the method of reporting is under question here.
Tom D.

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Re: Misc Income [how to report with no 1099]

Post by harmony » Mon Feb 19, 2018 4:13 pm

If using Line 21 “Other Income”, then neither the employer’s nor the employee’s share of FICA gets paid.

The employer’s share of the FICA should have been paid by the employer.

Filing Schedule C at least gets the employee’s share of FICA paid, but it could create more problems. That’s why I would try to get the employer to pay this late. File for an extension and wait for a W-2. If using Schedule C, the IRS assumes you are self-employed (which you weren’t) but at least you’ve paid FICA. Then even if your tax form was wrong, at least the tax you paid will be correct.

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Re: Misc Income [how to report with no 1099]

Post by prudent » Mon Feb 19, 2018 4:16 pm

tomd37 wrote:
Mon Feb 19, 2018 3:51 pm
LeTooth,
Once again I am going to suggest this $1,200 income be reported as miscellaneous income on 1040 line 21 instead of Schedule C.

Looking at the 2017 Instructions for Schedule C it says "Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit, and you are involved in the activity with continuity and regularity. For example, a sporadic activity or hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Form 1040, line 21."

Looking at Instructions for Form 1040, Line 21 Other Income, one of the bullets there is "Income from an activity not engaged in for profit. See Pub 535."
I agree with the above. Helping someone for a few days is not a operating a business nor is it a profession.

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Re: Misc Income [how to report with no 1099]

Post by arcticpineapplecorp. » Mon Feb 19, 2018 6:32 pm

armeliusc wrote:
Mon Feb 19, 2018 3:27 pm
arcticpineapplecorp. wrote:
Mon Feb 19, 2018 12:57 pm
LeTooth wrote:
Mon Feb 19, 2018 11:58 am
Epsilon Delta wrote:
Mon Feb 19, 2018 11:56 am
LeTooth wrote:
Mon Feb 19, 2018 11:32 am
I tried the schedule C as freelancer... But holy cow, it took $500 off my refund!?!? A $500 tax hit for $1200 of misc income?!? does that seem right?
42%. That could be right. It will often be 15.3% self-employment tax plus your marginal tax rate. If your earned income (wages plus the $1200 self employment) are over $127k self employment taxes will be lower. If so make sure the long form in schedule SE is completed correctly.
Filing jointly, income was ~$42,000 gross
You have to do a Schedule C (Pajamas and Harmony are correct based on the IRS links they provided you).

On schedule C put:

Line 1, 3, 5, 7 should all have $1200.

Then you need to put $1200 on line 12 of your tax return (1040)

Next do a Schedule SE. Here's what you get:

line 1 -- $1200
line 1b -- nothing
line 2 -- $1200
line 3 -- $1200
line 4 -- $1108.92 (this is $1200 X .9235 = $1108.20)
line 5 -- $169.55 (this is $11.08.20 X 0.153 = $169.55. It's 15.3% because you're joint income is less than $127,000)
line 6 -- $84.78 (this is $169.55 X 0.50 = $84.78)

put line 5 amount $169.55 on line 57 of your 1040
put line 6 amount $84.78 on line 27 of your 1040

You said your adjustable gross income was $42,000 (you didn't say if this was before or after deductions). So we'll have to assume it's your gross income before deductions (as in line 7 from the 1040). The amounts below would be different if that's not the case. With that in mind:

If you add line 7 ($42,000), line 12 ($1200) and line 27 ($84.78) from the 1040 that makes your taxable income $43,284.78

You see that line 57 is the self employment tax $169.55. That is a tax because it gets added to your total tax (after the standard deduction and personal exemption). Assuming you're single the 1040 should read:

$42,000 gross income (line 7)
$1200 from line 12 business income or loss
+$84.78 from line 27
-6350 standard deduction (assuming under 65 and unmarried)
-$4050 personal exemption (assuming unmarried and no dependents)

leaves $32,884.78 adjusted gross income

tax on $32,884.78 is $4465 (assuming single)
add to that $169.55 from line 57

makes your total tax $4634.55.

So you're paying an additional tax OF $169.55 PLUS tax ON $1200 AND tax ON $84.78 of additional income. Since you're in the 15% tax bracket (highest) for 2017 you're essentially paying 15% of $1200 and 15% of $84.78 which is $180 and $12.72 in additional tax PLUS the additional tax of $169.55.

Therefore you're paying additional tax of $180 + $12.72 + $169.55 in taxes = $362.28 total addtional taxes on $1200 of income. NOT $500 in additional taxes, but $362.28 in additional taxes.

You should go to a VITA site through United Way (Volunteer Income Tax Assistance) since your income is less than $62,000 you qualify to have your taxes done for free by volunteers who had to pass a certification through the IRS. Find a site near you:

https://irs.treasury.gov/freetaxprep/

Oh, and since you now know you'll have additional tax to pay, factor that in to what you charge next time. In other words, charge $1500 or so next time instead of $1200 if you want to be left with around $1200 net! :happy
This above calculation is not quite correct.

$84.78 (employer portion of SE) is deducted from the taxable income. You don't pay tax on that. Plus the calculation above is also taxing both the total SE tax AND the employer version of the SE tax, which doesn't make sense.

The total additional tax should be your marginal rate (15%) of $1200 PLUS SE tax MINUS 15% of Half of SE Tax (the deductible part) == $336.83
thanks for the correction. you are correct. I thought something seemed off. On the 1040 line 36 (the $84.78) is indeed subtracted from line 22 (total income) to arrive at line 37 which is adjusted gross income. Then subtract the standard deduction (line 40), and personal exemptions (line42) to reach taxable income (line 43). Determine the taxable income based on line 43 which goes on line 44 and add the SE tax from line 57 to get the total tax on line 63.

Thanks for catching that. A little off. My bad. Still not $500 as originally claimed.
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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Mon Feb 19, 2018 7:22 pm

1. If I go the Sched C route I could get her in trouble?

2. If I file the $1200 as a hobby, do I still pay FICA on it? So, if something does come back I am covered?

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Re: Misc Income [how to report with no 1099]

Post by FiveK » Mon Feb 19, 2018 7:41 pm

LeTooth wrote:
Mon Feb 19, 2018 9:18 am
I have always been an employee and only filed W-2s...I helped out a neighbor at her business for a week while her associate was away. I received $1200 and no 1099... How do I enter this in my taxes and is there anything else I need to do?
Consider Income & Expenses | Internal Revenue Service and links therein when you decide whether to treat this as a "hobby" (Other Income, no FICA tax) or a "business" (Schedules C and SE).

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Re: Misc Income [how to report with no 1099]

Post by harmony » Mon Feb 19, 2018 7:42 pm

To keep your neighbor and yourself out of trouble, ask her to give you a proper W-2. She might have a late fee and she may have to pay some other employment taxes such as FUTA if required for your state. If you don’t get the W-2 in time, file for an extension. If she does this right the first time around (assuming she’s never had an employee before) then she will know what to do when she hires the next helper. If she had given you a 1099 when your work for her was actually as an employee, she could have gotten in trouble for not paying her part of the FICA taxes. This is an area of scrutiny by the IRS. If you had expenses that were not reimbursed, she may reimburse you. Don’t put these on a Schedule C for yourself. This belongs on her business Schedule C if she actually reimburses you for these expenses. Neither Schedule C nor Line 21 is the most appropriate place for this income.

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Re: Misc Income [how to report with no 1099]

Post by arcticpineapplecorp. » Mon Feb 19, 2018 9:27 pm

I don't think it's miscellaneous income. In fact in order to get turbotax to count it as miscellaneous and not as self-employment you have to specifically answer the following two questions:
Select No, it didn’t involve work….. and Continue.
Select No, it didn’t involve an intent to earn money, then Continue.
source: https://ttlc.intuit.com/questions/3862819
Since it DID involve work and it DID involve an intent to earn money, I don't see how it can possibly be listed under line 21 miscellaneous income.

I suppose in the future if you want to do any work for someone maybe you should be upfront and make sure they're going to issue a W-2 (instead of a 1099-misc as non-employee compensation) and take the appropriate taxes out so you don't have to pay them yourself.
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Re: Misc Income [how to report with no 1099]

Post by harmony » Mon Feb 19, 2018 9:48 pm

Here's a tax form which might be helpful, especially the instructions, if not the form itself. Maybe take this over to the neighbor and ask for her help filling it out. This will alert her to her responsibility and she can take care of it now, if she hasn't already. Is it possible that she did pay FICA, but she just didn't get the W-2 process completed? Then she might have some figures to give you.

https://www.irs.gov/pub/irs-pdf/f4852.pdf

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Re: Misc Income [how to report with no 1099]

Post by MnD » Mon Feb 19, 2018 9:51 pm

Sounds like the $1200 was a thoughtful gift from your neighbor for helping her out when in need. 8-)
Next!

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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Tue Feb 20, 2018 12:48 am

MnD wrote:
Mon Feb 19, 2018 9:51 pm
Sounds like the $1200 was a thoughtful gift from your neighbor for helping her out when in need. 8-)
Next!
That is actually my take on it... I don't want to put her out because of it... I know that may sound like I am trying to get away with it... But that is it

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Re: Misc Income [how to report with no 1099]

Post by cheesepep » Tue Feb 20, 2018 2:13 am

Nothing to add here other to say that taxes are complicated. No wonder why some people don't report such incomes because they have no idea how to do so.

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Re: Misc Income [how to report with no 1099]

Post by JBTX » Tue Feb 20, 2018 2:52 am

harmony wrote:
Mon Feb 19, 2018 4:13 pm
If using Line 21 “Other Income”, then neither the employer’s nor the employee’s share of FICA gets paid.

The employer’s share of the FICA should have been paid by the employer.

Filing Schedule C at least gets the employee’s share of FICA paid, but it could create more problems. That’s why I would try to get the employer to pay this late. File for an extension and wait for a W-2. If using Schedule C, the IRS assumes you are self-employed (which you weren’t) but at least you’ve paid FICA. Then even if your tax form was wrong, at least the tax you paid will be correct.
If she is a 1099 contractor she is not an employee. If she files schedule C she will pay self employment tax which is basically the employee and employer share of FICA combined for the self employed.

It wasn’t clear from the OP if she acted as an employee or a 1099 contractor. Given she got a flat $1200 that doesn’t sound like an employee. An employee would have had fica and income taxes withheld. It appears their accounts payable just paid her $1200. This appears more like 1099 vs employee.

One strategy would be to go back and clarify with “employer” their intent, and have them either issue 1099 or W2 based on their intent.

If it is truly 1099, I suspect the letter of the law correct way to handle would be to file schedule C.

What would I do? I’d be tempted to declare it as miscellaneous income and be done with it. It is unlikely that the payor declared the amount as a 1099 payment to the IRS since you didn’t get 1099, so you could probably get away with not even declaring it, but that would be dishonest and put you at risk on the remote chance you got caught. Then why Miscellaneous Income?

1. A schedule C incrementally increases your chance of audit. Misc income requires no schedule C
2. The risk of you being audited and this coming up is very small
3. Schedule c is a bit of a PITA
4. On the really small chance you get audited you be honest and say you weren’t clear how to handle it, but you wanted to be honest and declare it. They may charge you back taxes and some minor penalities but again we are talking a very small risk here.

This is what I did one time when DW earned a few hundred doing some bookkeeping for a third party. But that was only a few hundred, not $1200.

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Re: Misc Income [how to report with no 1099]

Post by armeliusc » Tue Feb 20, 2018 9:30 am

JBTX wrote:
Tue Feb 20, 2018 2:52 am

1. A schedule C incrementally increases your chance of audit. Misc income requires no schedule C
2. The risk of you being audited and this coming up is very small
3. Schedule c is a bit of a PITA
4. On the really small chance you get audited you be honest and say you weren’t clear how to handle it, but you wanted to be honest and declare it. They may charge you back taxes and some minor penalities but again we are talking a very small risk here.

This is what I did one time when DW earned a few hundred doing some bookkeeping for a third party. But that was only a few hundred, not $1200.
Related questions that I am never clear: is the payer always required to issue 1099 when for the payee to file Sched C? Why? What happen if they don't and the payee just file Sched C anyway, can the payer get in trouble? How would IRS know who's the payer anyway?
A related question, if one does freelancing and has multiple clients, one will file Sched C but none of the clients (likely) would not issue 1099, right? (i.e. I would not issue 1099 to any random business or person that I hire to do some .. e.g... yard word)

An anecdote, I was helping out my former graduate advisor upgrading all of his home computers. I did not seek payment, but he insisted to 'reimburse my time' for several hundreds dollar. So in that year I declared as Misc Income. Well, the next year he got a contract with publisher and needed my help again to upgrade his software ecosystem, and he paid me again (out of pocket, I think). Then when I declared again as Misc Income, I got a letter back basically saying I need to file Sched C. I was rather clueless about taxes at the time, so I called and spoke with a very nice lady that explained to me the extra I owed (basically extra SE tax), and if I agreed to the changes then I don't need to do much. So I did. No penalty.

It seems to me that a one-off is viewed as OK as Misc Income by IRS, but a recurring activity then it arguably becomes self employment.

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Re: Misc Income [how to report with no 1099]

Post by JBTX » Tue Feb 20, 2018 10:02 am

armeliusc wrote:
Tue Feb 20, 2018 9:30 am
JBTX wrote:
Tue Feb 20, 2018 2:52 am

1. A schedule C incrementally increases your chance of audit. Misc income requires no schedule C
2. The risk of you being audited and this coming up is very small
3. Schedule c is a bit of a PITA
4. On the really small chance you get audited you be honest and say you weren’t clear how to handle it, but you wanted to be honest and declare it. They may charge you back taxes and some minor penalities but again we are talking a very small risk here.

This is what I did one time when DW earned a few hundred doing some bookkeeping for a third party. But that was only a few hundred, not $1200.
Related questions that I am never clear: is the payer always required to issue 1099 when for the payee to file Sched C? Why?
The payer is required to issue 1099 if amount is over $600. Payer has no idea if payee filled out
Schedule C. The reason payer is supposed to issue 1099 is not only to give payer/taxpayer documentation but also report to IRS potential income. The IRS could then cross reference to see if payee declares income.
What happen if they don't and the payee just file Sched C anyway, can the payer get in trouble? How would IRS know who's the payer anyway?
Strictly speaking the payee should file schedule c whether they got 1099 or not. Not getting 1099 does
Not relieve taxpayer/payee or tax liability. From a practical matter if payer didn’t report 1099 and you don’t report income the IRS would have no way of knowing about it. If payer didn’t issue 1099 technically they have violated rules requiring them to issue them. Would they payer get in trouble? Only if the IRS has some reason to try to trace back to the payee. If you have declared the income in your schedule C then there is no underpayment so I kind of doubt the IRS would worry about small dollar 1099 issuance compliance but I have no idea. When you declare income on schedule C I think you also turn in 1099s when you file. If you didn’t get a 1099 I imagine you indicate who paid it to you somewhere. I don’t recall.

A related question, if one does freelancing and has multiple clients, one will file Sched C but none of the clients (likely) would not issue 1099, right? (i.e. I would not issue 1099 to any random business or person that I hire to do some .. e.g... yard word)
Each client should, in theory, any business should issue a 1099 if services are paid over $600. I don’t know if that applies to individual taxpayer/consumers. I wouldn’t think so. The taxpayer payer is still required to do schedule C.

An anecdote, I was helping out my former graduate advisor upgrading all of his home computers. I did not seek payment, but he insisted to 'reimburse my time' for several hundreds dollar. So in that year I declared as Misc Income. Well, the next year he got a contract with publisher and needed my help again to upgrade his software ecosystem, and he paid me again (out of pocket, I think). Then when I declared again as Misc Income, I got a letter back basically saying I need to file Sched C. I was rather clueless about taxes at the time, so I called and spoke with a very nice lady that explained to me the extra I owed (basically extra SE tax), and if I agreed to the changes then I don't need to do much. So I did. No penalty.

It seems to me that a one-off is viewed as OK as Misc Income by IRS, but a recurring activity then it arguably becomes self employment.
Interesting. That tells me that there is some procedure to follow up on miscellaneous income. Given that,
It may behoove OP to go ahead and file schedule C.

For the record, I am not at all an expert on these matters. I speak only from my own experience.

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Re: Misc Income [how to report with no 1099]

Post by FoolishJumper » Tue Feb 20, 2018 10:41 am

This is cut and dry from the IRS's view - this is self-employment income and belongs on a Sch C (or Sch C-EZ in your case). You could very likely 'get away' with filing on Line 21 (or not at all), but it definitely is not legal and you wouldn't find a tax expert who would be comfortable with calling it as such. The only scenario that would fit here if this was hobby income, but that does not seem to be this - this has been described as work (even if done for a short period as a favor). Hobby income is things like baseball card collecting or entering hobby competitions (baking, horse riding, etc). You get income but it isn't consider self-employment as you would do it whether or not you received the money. One point for armeliusc example above is that you don't owe self-employment taxes if your Schedule C income is below $400, so perhaps that applied in year 1 but not year 2, and the only difference on your taxes between Line 12 (self-employment) and Line 21 is whether or not you have to pay self-employment taxes on that part of the income.

Be sure you include expenses (you can just sum them and not itemize if using C-EZ). Line 1 on the C-EZ is gross receipts (whether included on a 1099 or not). Line 2 is then the sum of all expenses. Then follow the instructions from there.

As far as a lack of 1099, the IRS isn't overly pushy here - I can tell you from experience that few small businesses issue their tax filing company a 1099 even though they theoretically should. You definitely won't get your neighbor in trouble by filing a Sch C. As you see, the name of the neighbor or her business is not anywhere on your tax form. Just file the Sch C-EZ as your conscious will be clear. For all you know, you might still get a 1099-MISC from the business but it may not come until summer when the business return is done (she would then just pay a small penalty but it will be a bigger pain for you to amend your federal return). And if you already file correctly then you are good to go and no amendment needed.

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Re: Misc Income [how to report with no 1099]

Post by harmony » Tue Feb 20, 2018 10:47 am

Here's a 20-point checklist for the owner of the business. OP can probably fill it out accurately enough to know if he was an Independent Contractor (1099) or an employee (W-2). https://www.walthall.com/wp-content/upl ... cklist.pdf
If you answer “Yes” to all of the first four questions, you’re probably dealing with an independent contractor; “Yes” to any of questions 5 through 20 means your worker is probably an employee.

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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Wed Feb 21, 2018 1:47 pm

OK. here is what I did... I filed my taxes without reporting the income because of immediate needs of refund. However, I have asked my neighbor to talk to her accounting about making me a part-time employee since she has asked if I could fill-in in the future... Her first response was positive and she is going to let me know this week... If she does then I will amend my taxes with a W-2 and all will be well..

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Re: Misc Income [how to report with no 1099]

Post by armeliusc » Thu Feb 22, 2018 9:28 am

JBTX wrote:
Tue Feb 20, 2018 10:02 am
armeliusc wrote:
Tue Feb 20, 2018 9:30 am
Related questions that I am never clear: is the payer always required to issue 1099 when for the payee to file Sched C? Why?
The payer is required to issue 1099 if amount is over $600. Payer has no idea if payee filled out
Schedule C. The reason payer is supposed to issue 1099 is not only to give payer/taxpayer documentation but also report to IRS potential income. The IRS could then cross reference to see if payee declares income.
What happen if they don't and the payee just file Sched C anyway, can the payer get in trouble? How would IRS know who's the payer anyway?
Strictly speaking the payee should file schedule c whether they got 1099 or not. Not getting 1099 does
Not relieve taxpayer/payee or tax liability. From a practical matter if payer didn’t report 1099 and you don’t report income the IRS would have no way of knowing about it. If payer didn’t issue 1099 technically they have violated rules requiring them to issue them. Would they payer get in trouble? Only if the IRS has some reason to try to trace back to the payee. If you have declared the income in your schedule C then there is no underpayment so I kind of doubt the IRS would worry about small dollar 1099 issuance compliance but I have no idea. When you declare income on schedule C I think you also turn in 1099s when you file. If you didn’t get a 1099 I imagine you indicate who paid it to you somewhere. I don’t recall.

A related question, if one does freelancing and has multiple clients, one will file Sched C but none of the clients (likely) would not issue 1099, right? (i.e. I would not issue 1099 to any random business or person that I hire to do some .. e.g... yard word)
Each client should, in theory, any business should issue a 1099 if services are paid over $600. I don’t know if that applies to individual taxpayer/consumers. I wouldn’t think so. The taxpayer payer is still required to do schedule C.
So I am answering my own questions here because I got curious and looked it up (should have done that in the first place).

Apparently 1099 is only required "when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. " (From 1099 instructions).

So a business engaging the service of individual in the course of their business needs to issue a 1099. But if you don't get 1099 you're still required to file as Sched C. There is no where in the Schedule C where one indicates where the payment from.

Back to the OP, this looks like a clear case that the OP needs to file Sched C for the income, regardless the fact he's not receiving 1099.

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Re: Misc Income [how to report with no 1099]

Post by harmony » Thu Feb 22, 2018 11:00 am

A learning opportunity presents: Let's look together just a bit further down at the 1099 instructions found on pp. 1 and 2 of the pdf: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of
your trade or business. Personal payments are not reportable . . .

Exceptions. Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following. . .

Wages paid to employees (report on Form W-2, Wage and Tax Statement).
The employer was not paying OP a personal payment. The payment was in the course of her trade or business. Wages is included in the list of exceptions. Specifically stated on the 1099 instructions: Wages must be reported on a W-2; and not on a 1099, not on a Schedule C. The OP is now on the right course. If his employer follows through with a W-2, both of them will be in the free and clear.

Edited to add: See also p. 25 of Publication 15 (Circular E), Employer's Tax Guide https://www.irs.gov/pub/irs-pdf/p15.pdf
Part-Time Workers
Part-time workers and workers hired for short periods of time are treated the same as full-time employees, for federal income tax withholding and social security, Medicare, and FUTA tax purposes.

Generally, it doesn't matter whether the part-time worker or worker hired for a short period of time has another job or has the maximum amount of social security tax withheld by another employer.

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Re: Misc Income [how to report with no 1099]

Post by LeTooth » Thu Feb 22, 2018 8:20 pm

She just informed me, matter of factly, that she would not be issuing me a w-2 because of the cost of workmans comp.. So, she said she would be giving me a 1099... I didn't argue.. guess I'll be filling a sched C and taking the hit.

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Re: Misc Income [how to report with no 1099]

Post by harmony » Thu Feb 22, 2018 8:55 pm

Workman’s Compensation Insurance would not only protect her employees, but would also cover some business liability in the case of the injury of an employee if the business were found to be at fault. It can be a steep but necessary climb when a business hires employees. If they don’t want Workman’s Compensation at a minimum, you start to wonder if they have general liability coverage.

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Re: Misc Income [how to report with no 1099]

Post by pshonore » Fri Feb 23, 2018 8:49 am

LeTooth wrote:
Thu Feb 22, 2018 8:20 pm
She just informed me, matter of factly, that she would not be issuing me a w-2 because of the cost of workmans comp.. So, she said she would be giving me a 1099... I didn't argue.. guess I'll be filling a sched C and taking the hit.
Not a good reason. In a lot of states, employers are required to provide WC for both employees and contractors if the contractor does not have their own WC policy. (That's one reason why folks use temp agencies - the agency pays all that stuff.) If she has a WC policy, the cost of adding $1200 of payroll (the rating base for WC) is quite small. If she doesn't have a WC policy, then it would cost some money.

Absent a W2, this is certainly self employment income that should be filed on Sched C or Sched C-EZ, expenses (if any) taken, and FICA paid on the balance. There is no question about that.

I remember several years ago doing a return for a guy who played a clown at birthday parties and made a few hundred bucks. To save him the cost of a Sched C, I put it on Line 21 AND used Sched SE to pay the FICA. IRS kicked it back and said put it on Sched C.

pshonore
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Re: Misc Income [how to report with no 1099]

Post by pshonore » Fri Feb 23, 2018 8:56 am

harmony wrote:
Thu Feb 22, 2018 8:55 pm
Workman’s Compensation Insurance would not only protect her employees, but would also cover some business liability in the case of the injury of an employee if the business were found to be at fault. It can be a steep but necessary climb when a business hires employees. If they don’t want Workman’s Compensation at a minimum, you start to wonder if they have general liability coverage.
Generally, state law requires WC coverage if you have people working in a business. The cost depends on the occupation. WC for office employees is cheap because they have very little chance of being injured on the job compared to roofers, electricians, truckers, etc. Doubt a WC policy would provide any liabilty coverage outside of injured workers.

MarkNYC
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Re: Misc Income [how to report with no 1099]

Post by MarkNYC » Fri Feb 23, 2018 10:02 am

For those convinced that a Schedule C is required, I suggest they re-read the bolded section of the post above by tomd37, where he quotes the IRS instructions: Use Schedule C... for a business you operated or profession your practiced...the activity qualifies as a business if the taxpayer is involved in the activity with continuity and regularity...a sporadic activity does not qualify as a business.

This fill-in work done by the OP may have been a brief one-time thing, thus not qualifying as a business to be reported on Schedule C and not subject to Self-Employment tax, in which case the income is properly reported on line 21.

If the payer issues a 1099-MISC for "nonemployee compensation" the IRS will be looking for SE tax, but that does not mean the taxpayer legitimately owes it. The line 21 income should include a statement explaining why the income is not subject to SE tax, despite the 1099 coding. This may result in IRS correspondence so the taxpayer must then decide, based on the dollars involved, if reporting the income correctly on line 21 is worth the potential time and trouble of corresponding with IRS.

The IRS will not object to reporting the income on Schedule C, even if it doesn't belong there.

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