Should I receive a 1099 for tuition paid to me by an individual who attended a class that I taught?

[souljourner1]

An individual who attended a class that I taught and paid me tuition for the class wants to deduct the tuition they paid me as a business expense on their business return. They want to issue me a 1099 for the tuition they paid. I believe I should be giving them an itemized receipt And they can use it as a business expense anyway they wish to, but that they should not be issuing me a 1099 nor should they have my Social Security number. I am an independent contractor and file a schedule C.

[Anonymous_]

I will page Champ @Hal_Al 

[VolvoGirl]

I don't see a problem with them giving you a 1099NEC.  They dont have to issue it for less than $600.  You are going to report the income whether or not you get a 1099NEC.   You have have to enter the actual 1099NEC.  You can report all your income as Cash or General.  Yes you should give them a receipt.  

[souljourner1]

I have a couple of problems with being issued a 1099 by this individual. I might add that I am meticulous about claiming my income, so I am not looking to avoid claiming money I received, but I also don’t want to add complications that are not appropriate.

- If they pay me by credit card, I will already be getting a 1099 from my credit card processor, that will include the money they paid me. If they also send me a 1099 I will be receiving two 1099’s  for the same income.

- I was not contracted by this individual as an independent contractor to provide a service. She was part of a non-business course that I taught and she paid me tuition.

- I did not knowingly have a relationship with her business. She attended my course as a student. The fact that she feels her tuition can be a business expense I don’t believe turns her tuition into non-employee compensation.

- but probably the one issue I am most sensitive about is giving someone I don’t know well my Social Security number so they can issue me a 1099.

I maintain that if she feels the tuition she paid for my class is a business expense she should deduct it from her return documented by a receipt for tuition issued from me, not by a 1099 issued by her business. 

Her tax preparer is being very aggressive towards me and I would like to have an appropriate response, if indeed tuition paid to me does not warrant a 1099. 

I did not provide a business service, btw. This was a personal development course.

[Hal_Al]

Yes, you should receive a 1099-NEC for that work.  Since the student is a business, he is required to to issue you a 1099-NEC, if the amount was over $600.  That said, given the circumstances, I don't think you're going to get into trouble if you don't give him your SS#.  His problem is that the IRS is aggressive about taking business deductions for which a 1099-NEC was not issued. 

Since you file a Schedule C, you should get an EIN for your business, so that you don't have to give out your SS#. 

You do not have to actually have employees to get an EIN. How to get an Employer Identification Number (EIN):

https://irs.taxid-us.com/?keyword=get%20a%20federal%20tax%20id&source=Google&adAccount=460-350-8849&...

As an aside, can he really deduct the tuition as a business expense?

Probably.  W-2 employees can no longer deduction education as a job expense, but the self employed still can. The general rule is: Educational expenses to improve your current job skills are deductible. But learning a new job is not.  A personal development course is probably in a gray area.

[rjs]

@souljourner1 

You should get an EIN now and give it to the student before the end of the year. She and you will have problems with the IRS if you get your EIN in 2024 and she uses it on a 2023 1099-NEC. She and you will also have problems with the IRS if she issues a 1099 without your tax ID number.

You can get an EIN in a few minutes at the following link on the IRS web site. There is no fee for it. The link that Hal_Al posted is not an IRS web site. It's a company that charges a fee for what you can do for free on the IRS web site.

Apply for an Employer Identification Number (EIN) online

In the future you can give your EIN to anyone who is going to issue a 1099 to you. When you have an EIN for your Schedule C business you never have to give out your Social Security number.

Let me also emphasize something that Hal_Al said. The student is required to issue a 1099-NEC to you if she paid you $600 or more.

[souljourner]

@rjs  and @Hal_Al Thank you for those responses, and for the link to apply for an EIN, which I'm going to do in a few minutes.  My biggest concern was not getting a 1099-NEC, since I'm going to report the income anyway, it was giving out my social security number to someone I know only casually.

I wasn't aware that as a sole proprietor submitting a Schedule C I could use an EIN.  Where on my personal return do I enter that number when completing my 1040, and when do I use and EIN versus my personal SS number?

[souljourner]

I just went to the IRS website to apply for an EIN, but I'm stumped as to the reason to choose for why I'm applying.  This is for a sole proprietorship that has been operating under my SS number for 18 years, so it's not a new business and none of the other reasons apply.

Here are the options given on the application.  Which one applies in my situation?

Why is the Sole Proprietor requesting an EIN?

Choose one reason that best describes why you are applying for an EIN.

 Started a new business

Select this option if you are beginning a new business.

 Hired employee(s)

Select this option if you already have a business and need to hire employees.

 Banking purposes

Select this option if the reason for applying for the EIN is strictly to satisfy banking requirements or local law.

 Changed type of organization

Select this option if you are changing the type of organization you currently operate, such as changing from a sole proprietor to a partnership, changing from a partnership to a corporation, etc.

 Purchased active business

Select this option if you are purchasing a business that is already in operation.

[rjs]

Select "Started a new business." When it asks the date that the business started, say 1/1/2023.

You will have to do this Wednesday morning. The online application is shut down overnight. It's available from 7 a.m. to 10 p.m. Eastern Standard Time, Monday to Friday.

[Hal_Al]

Q.   Where on my personal return do I enter that number when completing my 1040? 

A. Only on Schedule C (box D).  Note that your SS# also goes on Sch C .

I don't know the answer to your bigger question.   But, I think I would choose "Banking purposes".  You need it for administrative purposes. 

[souljourner · Accepted solution]

Thank you so much for your prompt help with a time sensitive question.  I received the perfect answers.  Yes - it is appropriate for me to receive a 1099-NEC from a student taking a course with me that they wish to use as a business deduction on their business return, and even more importantly, that I should apply for an EIN to avoid giving out my personal social security number.

I just did so with the link provided on this thread and received the number immediately.

I have one last question -

I have two businesses and file two schedule C's.  Confirming that I will use the EIN I was just issued for both businesses when filing my 1040, even though the EIN was issued in the name of only one of them?

If I understand the IRS website correctly, it seems to say that only one EIN is issued per taxpayer, even if the taxpayer has multiple Schedule C businesses.  Am I understanding that correctly?

[rjs]

Yes, you are correct.