Discussion:Sch C vs. Line 21??
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Discussion Forum Index --> Tax Questions --> Sch C vs. Line 21??
| 18 February 2008 | |
| client received 1099-misc for spouse travel to conference. client is employed as insurance salesman. 1099-misc issued by insurance company (not his employer but from one of the companies whose product he sells). reported in box 7-nonemployee compensation. i thought prizes & awards were supposed to be reported on line 21, but typically box 7 would be reported on sch c & subject to se tax. which is correct, line 7 or sch c & is it subject to se tax? | |
| February 18, 2008 | |
| I just got one of those, too. Should have been box 3 in my opinion. Do line 21 and note that it's a prize/award not subject.
On that note, I have a client who's received an executor's fee, usually a line 21 item. His mom also got one, and her taxguy is claiming office in home deductions against it! I told him that this isn't business, therefore not a Sch. C/SE item, and also no deductions. . .Anyone ever heard of doing that? Seems rather creative. | |
| February 18, 2008 | |
| *bump*
Doing a wee bit of research, I don't see a provision for claiming expenses on line 21 against income. | |
Scottycoyote (talk|edits) said: | 18 February 2008 |
| in the 1099-misc instructions it states for any amounts in box 7........to claim it on schedule c unless the income is not from a trade or a business, in which case you claim it on line 21 (im recalling this from memory so it might not be 100%).
For example, you have an accountant who helps someone paint a house 1 time. The accountant gets paid and gets a 1099misc with the amount in box 7. Since housepainting isnt the accountants trade or business, and it was a one time thing, you would actually claim the income on line 21. Now if he continued painting houses it would become a schedule c activity. Just because something is on a form a certain way, it doesnt always dictate how to properly handle it. To me the executor fee would be a line 21 item, the spouse travel would be a line 21 item too (unless he incorrectly wrote off the spouses travel as a business expense, then id include it on the C lol). | |
Ken@seamann.com (talk|edits) said: | 18 February 2008 |
| Salesperson had to sell insurance company's product to earn his wife's travel being paid for. This is not a true prize or award. Same as car salesman's spiff's (bonuses from manufacturers) If they didn't sell the product, they wouldn't have received it. Winning a sales competition (prize, etc.) is additional compensation subject to wage taxes. IMHO & audit experience. | |
| 19 February 2008 | |
| Believe you are incorrect re car salesmans'spiffs. "...incentive payments paid by an auto manufacturer, whether directly to individual salespersons or through a dealer, ...are not treated as wages. Therefore these ...are not subject to FIT, FICA, or FUTA. Also these payments are not considered to be self-employment income and therefore are not subject to self-employment tax." Report under Other Income. Also, "...the expenses you incur to get the incentive payment may be deductible on Schedule A,...line 22 subj to 2% exclusion. Also, ..." this income may not be reported on Sche C,...and...no expenses may be taken on Sche C to offset incentive payment income." | |
| 19 February 2008 | |
| I don't agree that the accountant who helps someone paint a house 1 time is not his trade or business. For the time he did that work it was a trade or business. You can have many "trades" or "businesses". If you win a proize in a sweepstakes, that is not subject to SE tax. But it you win a prize on Price is Right, Wheel of Fortune, etc. my experience has been that IRS wants the SE tax. | |
Scottycoyote (talk|edits) said: | 19 February 2008 |
| according to the irs a trade or business is an activity CARRIED ON for the production of income from selling goods or performing services. To me this is how a one time activity like painting a house escapes the se tax, but if it became an ongoing activity, a carrying on if you will, then its a trade or business. Sure the irs wants the se tax, doesnt mean we have to give it to them. | |
| February 19, 2008 | |
| Uh, no, they don't Jake. They want tax, but not SE tax. And Burke is correct about Mfgrs spiffs. They are specifically excluded. | |
| 20 February 2008 | |
| Agree with above the spiffs are not taxed for SE. There is acutally an IRS pub on this. (at least I think it is a pub). But I am starting to get concerned about some of my client's whose spiffs are beginning to add up to a sizeable percentage of their salary (over 50%). Anyone else think this might eventually get challenged and cause problems for the employer? | |
| 20 February 2008 | |
| don't agree that the accountant who helps someone paint a house 1 time is not his trade or business.
Can't quote it but have read a tax court case that definitely pointed to the above type of situation as not being self employment income subject to SE tax. | |
Death&Taxes (talk|edits) said: | 20 February 2008 |
| Batok v. Commissioner, T.C. Memo. 1992-727
http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl7b3/1/doc Mr. Batok was retired, whether that means anything or not. | |
Death&Taxes (talk|edits) said: | 20 February 2008 |
| And JR, I agree with you about the Executor Fee. Only if the person was in the business of administering estates would such a position be valid. Your client's mom's man isn't creative, he is stupid. | |
| February 20, 2008 | |
| AHA! Just as I was sending your comment off the client DT, it hit me: IF there are valid Executor expenses, they would be paid by the estate prior to distribution! That's why I've never heard of this.
Duh. They're either legit and paid by the estate, or out of bounds. Funny how a client can run you down a cold trail for the wrong reasons. | |
Scottycoyote (talk|edits) said: | 20 February 2008 |
| wow excellent find death, thanks for the link | |
Death&Taxes (talk|edits) said: | 20 February 2008 |
| I wasn't the one beamed up, Scotty, we had this marathon last year Discussion: 1099-Misc and form 4137 | |
