1099-MISC and self-employment

[MatthewGD]

My daughter graduated in May and got a job as basically an office admin.  They issued her a 1099-MISC.  Does this make her self-employed?  If so, what is her business name, etc.? She certainly was not out advertising her skills, just following instructions from her supervisor.  If self-employed, can she then deduct all the miles to and from the office?

[Hal_Al · Accepted solution]

Yes that makes her self-employed.  

Although it may be news to you that you “have a business” (and most of the other people who get their first 1099-MISC); The IRS considers anything in box 7 of 1099-MISC to be self employment income. Enter the 1099-Misc income, at Other Common income / income from a 1099-MISC . TurboTax (TT) will complete Schedule C or C-EZ for you and allow you to deduct any expenses associated with this income. You'll also have to pay self employment tax (social security & Medicare) on any profits greater than $400. These types of payments are frequently done this way. Your "employer" is not the only one.

The office is still her work place, so the mileage is not deductible, as it is considered commuting, which is not deductible even for the self employed.

Filing as self employed is the best way to handle this.

That said, there is a  way to contest the “employer’s” classification of you as a contract employee. That is to pay your share of the Social security tax on form 8919 .In TurboTax, type> form 8919 with 1099-misc income <in the search box.  After you enter your 1099-Misc, select that you got the 1099-Misc for another reason. Then select "My employer reported this extra money on a 1099-MISC but it should have been reported on a W-2" from the drop down list.

You also have to submit form SS-8 and the IRS will determine whether you or the employer pays the employer portion of the SS tax. You will probably also upset your employer, because the IRS may contact him about whether or not he properly paid wages.

Form SS-8 is not in TT but is here ===>>> http://www.irs.gov/pub/irs-pdf/fss8.pdf
See this IRS site ===>>> http://www.irs.gov/taxtopics/tc762.html

[WEK]

I have run into the same situation but received a 1099-NEC which classified the income as self-employment income.  Would the approach be the same for the solution as you applied to this response to the 1099-MISC and self employment?

Another question I have is about the related Deduction that is allowed.  Deductions - Self Employment Tax Deferral.

The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) gives self-employed taxpayers the option to delay paying a portion of their Social Security taxes when they meet certain requirements.

The option to defer only applies to Social Security taxes for self-employment income you earned from March 27, 2020 through December 31, 2020. This income is typically reported on Schedule C (profit or loss from business) or Schedule H (for household employees) of your tax return. It appears the Medicare Tax was not included in this waiver.

If you think you may be eligible for the self-employment tax deferral, TT will walk you through the requirements as well as calculating how much tax you owe and how much you can defer.

After I entered in the 1099-NEC income in TT it gave me the option to enter it as self-employed which would push this income to Schedule C is this the best path if the deduction deferral of the Social Security Taxes is to be claimed?

J-Dog

[Hal_Al]

@WEK 

Yes, the 1099-NEC is new this year and replaces the 1099-MISC (box 7) for self employment income. So. everything is the same.

As to you 2nd question about Covid rules; you should ask a fresh question in the main forum (rather than tagging on here) to get more eyes on the question

[ThomasM125]

@WEK If you did not report the income on a schedule C, then it would not be considered self-employment income. As such, you would not be subject to a self-employment tax, so deferral of social security tax would not be a factor, since there would be no social security tax.

If the work you performed was not associated with your normal employment and you did it on a one-time basis, than you can probably treat the income as Other Income as opposed to self-employment income and you may save on taxes due to being exempt from self-employment taxes.

[WEK]

TT give you the option of saying this 1099-NEC was in error and it should have been on a W-2, and this is the case in my situation.  This could cause an inquiry of the employer to determine if the taxes should have been paid by the employer.  Prior posts have indicated the forms to complete to follow this path of reporting.

Thanks

 J-Dog

[Hal_Al]

The interview still does that. 

If you got a 1099-NEC in addition to a W-2, from the same employer, TurboTax completes form 8919 (to pay your share of FICA tax) and that's all that's required.

If you got a 1099-NEC instead of a W-2, TT will complete the 8919 and then advise you to complete form SS-8 and mail it to the IRS before filing your tax return.  TT does not prepare or file SS-8.

[WEK]

Thanks appreciate the guidance.  All I got to date is a 1099-NEC, which I believe was an error.  It is being reviewed by the employer today, because they continue treat the situation as the role is a contractor and not an employee.

J-dog