topic Re: deferred compensation in Retirement tax questions

deferred compensation

2107Azure — Fri, 09 Apr 2021 18:44:28 GMT

How do you enter deferred compensation reported on a 1099 Misc form but the payroll taxes have been paid ?

Nancy

Re: deferred compensation

Opus 17 — Fri, 09 Apr 2021 18:53:03 GMT

That sounds like what is supposed to happen. This occurs when you have a "non-qualified" deferred compensation plan. (A qualified plan would be reported on a 1099-R.). The employer is supposed to withhold and pay the payroll taxes (social security, medicare) at the time the income was earned (when you did the work). Then the income is subject to income tax when it is actually paid to you. Since the employment taxes have already been paid, this is "other income" and not subject to self-employment tax and does not require a schedule C. It is not considered income "earned" from working (that happened when you earned it, not when you are paid).

Enter the 1099-MISC in the correct section. Answer No to all the special circumstances. Answer NO to all the testing questions (not earned from working, not like your regular job, did not receive similar money in the past of future). These answers are necessary to prevent Turbotax from treating the money as earned income and creating a schedule C.

Re: deferred compensation

2107Azure — Fri, 09 Apr 2021 19:26:37 GMT

the money was earned as an independent contractor and the annual required tax was paid in the year earned . In the past I reported it on line 20 other income but I don{t know how to do it this year.

Re: deferred compensation

Opus 17 — Fri, 09 Apr 2021 19:51:56 GMT

@2107Azure wrote:

the money was earned as an independent contractor and the annual required tax was paid in the year earned . In the past I reported it on line 20 other income but I don{t know how to do it this year.

Two points:

1. The explanation of how to report "other income" is given above.

2. I'm not convinced that it is legal or appropriate for an independent contractor to ever report deferred compensation. I have only ever seen it discussed in the context of employees. I also don't know how you could have "paid the tax" on independent contractor compensation without reporting it as income. (You would somehow have to pay self-employment tax but exclude it from income tax.). I suggest you get professional assistance from a CPA or enrolled agent if you have questions about this arrangement.

Re: deferred compensation

2107Azure — Fri, 09 Apr 2021 20:16:18 GMT

It is absolutely legal. My husband was a state farm agent and the company deferred his compensation. I would like to speak to someone on the phone My number is [phone number removed]

Nancy