1099-Misc question

[Disneefun]

I'm doing my taxes. I got a 1099-Misc with the income reported in box 7. It was for some design work that I did. It was a one time thing, for a friend. This is not my line of work (I'm a homemaker, so I don't work). Do I need to report this as Self employment income, subject to all the taxes, or can it go on Line 21? TaxCut makes a provision for me to specify "one time event" and it does remove some taxes, but not the full self employment tax. I'm confused.

 

[Juliee8]

If it is on a 1099 misc you will have to report it as self employment income. You can also deduct any expenses that you may have had in regards to the income.

 

[cheriemek]

Yes - Juliee8 is correct. Try to figure out as many expenses to apply to this earning as possible. The big hit is paying the full FICO on the amount - normally you pay half (in deductions) and your employer pays half. When you earn as an independent contractor, you pay the whole thing.

 

[Disneefun]

If it has to be self employment income, then why does the HR BLock program even ask if it was a one time event and then calculate the tax owed differently? What's the point in trying to differentiate one time events if everything you earn, whether it's an ongoing gig or one time event has to be SE income? Why not just be clear and say, "anything you ever earn, no matter if it's for ten minutes or ten years of work, has to be reported as SE?" I just don't get it.

If it's SE income, I'm going to have to pay the full amt. b/c I have no expenses. I didn't travel for it, I used email so no phone calls, since I don't run a business I can't take the home office deduction b/c I don't have a space I use "exclusively for business purposes, I didn't buy anything to do the work, and I can't even really deduct the computer, ink or paper b/c the amounts were so small as to not even be worth figuring out.

This was literally something that took me like four hours to do and I'll never repeat it. I just odn't get why HRBlock even gives the option.

 

[cheriemek]

It calculates the income differently? I don't know why the program would do that. If you are paid on a 1099, that amount is reported to the government who doesn't care how many times you did something to earn it.

 

[windycitymom]

It sounds like you are surprised you received a 1099. If you got this from a friend, how come she didn't just pay you cash? especially if this is a one time deal and it isn't your regular line of work. Doesn't someone need your social security number before they can issue you a 1099? Did you earn more than $600? If not, I believe a person doesn't have to issue a 1099.

 

[disneychrista]

While a 1099 does not have to be issued if the earnings were less than $600 that income is still taxable and should be included.

 

[msmayor]

1099's are also used to report prize winnings, and that is not subject to employment taxes. That would be an example of a one-time payment like that.

Those who suggest she should have been paid in cash instead and not issued a 1099 are forgetting that an action like that puts the business owner at a disadvantage and in a position to not report his/her own income correctly. I work for a very small company and we are routinely issued 1099's for work, and must issue them as well to any individual paid more than $600 so that our expenses are properly justified for tax purposes.

 

[Cheshire Figment]

I would suggest going to http://www.irs.gov/instructions/i1099msc/ar02.html#d0e861 and checking this out.