1099 misc

[mike51696]

I'm doing my sister in laws taxes and she received a 1099 misc from training that she did for work. I know that she has to pay taxes on this but it is making her do a schedule c form and taxing it what seems to be way to much. She does not have a business. This is ongoing training for the childcare field. How should this be entered so it doesn't require a schedule c form?

[HelenC12]

Take a look at your form. A 1099-NEC having an amount in box 1 and 1099-MISC with an amount in boxes 1, 5, 9, or 10 is a good indicator that it's self-employment income.

Whether you’re a sole proprietor, an independent contractor, a consultant or a freelancer, you’re probably getting some or all of your income reported on a 1099-NEC, 1099-MISC or 1099-K. You have flexibility to work the way you want, but it also means the government considers you to be self-employed — or even a business.

Follow these instructions to enter a 1099-NEC and/or 1099-MISC form. After you enter the info from your form, we’ll ask you a few questions to make sure it’s for self-employment. If not, we’ll link it to the correct income section of your return.

1099-MISC unrelated to self-employment

A non-work 1099-MISC would be for things like:

• Prize money
• Lawsuit settlements
• Research studies
• Other

Here ‘s how to enter a 1099-MISC that you may have received for another reason.

After you enter the info from your form, we’ll ask you a few questions to determine what type of 1099-MISC it is and link it to the correct income section of your return.

Key Points on 1099-NEC or 1099-MISC and Other Self-Employment Income

When you’re paid this way, there’s no withholding taken out of your income, which means you’ll pay both self-employment tax as well as income tax.

A benefit of being self-employed is that it enables you to have lots of write-offs as well, so make sure to enter all your expenses. This helps you reduce the taxes you might owe or

increase your refund. We’ll help you get every possible tax break you deserve.

Related Information:

• Am I considered self-employed?
• Where do I enter a 1099-MISC?
• Where do I enter Schedule C?
• Why is there an amount in Box 1 (Nonemployee Comp) on my 1099-NEC?

[mike51696]

Thanks for the help. This is reported in box 3 and it was for completing extra training in her field. Would that still be self employment?

[HelenC12]

Who gave her the 1099-MISC, her employer or an outside firm? Per IRS instructions for Form 1099-MISC, enter in box 3 prizes and awards that are not for services performed.

A non-work 1099-MISC would be for things like:

• Prize money
• Lawsuit settlements
• Research studies
• Other

Here's an example of incentive pay:  Basically, Box 3 reports any income you receive from an endeavor that you didn’t engage in for profit, and that’s admittedly a gray area.

• Automotive salespersons certainly work to earn a living, but they work for and are under the control of the dealership, not the manufacturer directly, and therein lies the loophole.

[Opus 17]

If her job sent her somewhere to get training, and that training included a stipend or salary to support her living expenses while she received the training, that is unfortunately, self-employment income and she needs to file a schedule C and pay the higher taxes. At least, it’s better than not being paid at all during the training and having to live off of savings or some thing else.

[Opus 17]

You might be able to argue that this should have been wages, and that she should only pay the employee half of Social Security and Medicare tax at 7.65% instead of self-employment tax at 15.3%. If she wants to make this argument, there is a box for special circumstances after entering the 1099 that you can check for “this should have been wages on a W-2.“  TurboTax will prepare a form 4852 substitute W-2 and will only assess the employee half of the employment taxes. You will also have to prepare a form SS-8 to explain the circumstances and ask the IRS to review the situation and determine her employment status. If the IRS determines that she should have been classified as an employee, they may penalize the employer. If the IRS determines that she was properly classified as self-employed, they will send her a bill for the other half of the self-employment tax.

I haven’t seen too much about this issue. This kind of training is often sponsored by a union, and the worker is not really an employee of the union even though the union is providing them a stipend during their training.  However, the fact that the training is probably offered at a specific location and specific time and manner dictated by the union may lead to her being classified as an employee.