1099-MISC Tax Question

[StitchandPooh'sMom]

I know there are a few tax professionals on this board, and I am hoping someone might know the answer to this. I usually do our taxes with Turbo Tax and have read the IRS publication for the 1099-MISC form and I think I am doing this right, but I am wondering if I should get someone to do our taxes this year so I don't make a mistake.

The situation:

DH has a full-time job. He also has his broker's license, although he does not work as a broker. A friend of his wanted to buy a house, so DH referred him to a realtor and received a referral fee once the house closed. We received a 1099-MISC for the income, listed in box 7 as nonemployee income.

I wasn't sure if I should choose independent contractor or commissions and fees on Turbo Tax, so I chose commissions and fees. Turbo Tax is indicating that DH is self-employed and needs to pay self-employment tax on the income. That seems to be the most conservative approach, so I am going with that at this point. But he doesn't really have a "business", although he did receive income for the referral. Does that sound like the way to go? And if he is considered self-employed, can he deduct the cost of maintaining his license each year (license fee and continuing education)? It is not a lot of income, so I am inclined to not even try to deduct anything since he doesn't really operate referrals as a regular business, but he would take advantage of the opportunity if it presents itself again. I would rather err on the conservative side than take a deduction we can't have and have a big mess to sort out.

Thanks for any advice! I was going to post the question on the Turbo Tax forum, but I know there are at least a few CPAs on the Budget Board.

 

[usnuzuloose]

We have a business and get the 1099. We are sub contractors. He would still have to pay the tax. As getting a 1099 we are set up through our tax person that we pay our taxes every 3 months.

 

[StitchandPooh'sMom]

Thanks! I thought that was right.

 

[Diegosmom]

Yes you can deduct the fees for license and stuff...there is an addition for for that...we have a CPA do our taxes so I am not sure exact form and not sure if you can do that with the basic turbo tax, I think you have to use the small business version (which has a cost to it)...if the ddeduction isnt that big I would maybe be inclined to skip that part...but depending on the cost of the fees and how much he made it might be worth it...

Also you have to remember that you are not only paying taxes on this amount but you are also paying social security. (I made this mistake the year before I married DH when I did his taxes...this is why we use a CPA now lol)...and with a normal job your employeer pays half ss and you pay half...but when you are self employeed you are the employeer and employee so you have to pay it all...so it does really help if you have deductions. Also can deduct things like computer internet cell phone etc...but since this isnt a full time job it would only be a percentage of those and seeing he only got 1 check you probably couldnt do a very high percentage. But worth looking into...

We pay our CPAaround $250 and to me that is so worth it knowing that it is done right.

 

[timmac]

I'm not a CPA or anything, but have had 1099 style self employment income for years.

Yes, it counts as self employment. And yes, anything directly related to the earning of that income would be a business expense. In your example, licensing and education specific to that income would most definitely qualify.

 

[StitchandPooh'sMom]

Thanks! We would not deduct anything except the license fee and continuing ed if we are allowed to do that - he would not try to deduct phone, internet, vehicle, etc. The license fee and continuing ed seem reasonable since he would not be able to do a referral without a valid broker's license.

We have Turbo Tax deluxe, and so far it seems to be keeping up OK. If we need to skip the deductions to avoid buying TT Home and Business, we will. It probably wouldn't be worth the upgrade cost.