Should my retired wife's taxable fringe benefit (club membership) be entered under 1099-MISC income or 1099-NEC income?

[ChiTrader1]

Listing the amount as 1099-MISC income results in needing to calculate Self-employment tax as well as Social security

[MinhT1]

If you receive a form 1099-NEC (or form 1099-MISC) for a fringe benefit, then you are not considered as self-employed and do not need to file a Schedule C.

In TurboTax, enter your form 1099-NEC and follow the interview until you arrive at the page titled Did this involve an intent to earn money?. Answer that this did not involve an intent to earn money. The amount will be reported as Miscellaneous income and will not be subject to Self-employment tax.

In TurboTax, there is a work-around. Although you may receive this income every year, say that you only receive the 1099-NEC only in 2020, not in previous years and not in 2021, you will then have the screen where you can say that it did not involve an intent to earn money.

[ChiTrader1]

I was restricted by the character count, but I wanted to clarify that she has received this benefit for five years and always gets a 1099-MISC showing that income. Never had an issue with TT calling it Schedule C business income until this year when I followed the TT instructions. Is that a glitch in their software? Or should my wife's former company have sent her a 1099-NEC instead to reflect the change in the rules? Thanks again.

[ToddL99 · Accepted solution]

You can report this in the 1099-MISC interview without requiring a Schedule C or paying self-employment tax.  Since she is retired, the payment is not compensation for current work in her part, and was not sought with an intent to "earn" money - it is more properly treated as an element of her pension. 

Enter the information as follows in the 1099-MISC interview:  

• Enter the 1099-Misc in the Other Common Income  section (Enter "1099 misc" in the Search Box and Select "Jump to 1099 misc form")  

• For "Description", enter "Retirement Benefit"  

• Also check that it does not  involve work like your main job, that it  did  not  involve an intent to make money, and is not a recurring payment (received in the past or expected in the future) (yes, that is a workaround answer, but the tax treatment is correct) .

• The income will be reported on line 8 of Form 1040 of your return (Other income from Schedule 1, Line 9).  

[ChiTrader1]

Many thanks. 

[DaveF1006]

It depends. Was it reported on a 1099-Misc? If not, it should be reported as other income.

1. Log into Turbo Tax
2. Go to federal>income and expenses>all income>>show more 
3. Less Common Income> Start
4. Miscellaneous Income,>start
5. Other reportable income>start
6. Next screen asks Any Other Taxable Income>yes
7. The next screen will allow you to report the income with a brief explanation.

If you have a 1099-Misc:

1. Log into Turbo Tax
2. Go to federal>income and expenses>all income>>show more 
3. other Common income>show more
4. Form 1099-MISC start