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dmf
New Member

Do I need to pay SE tax on a 1099-NEC received for a one time commision?

Completed 1099-NEC worksheet and selected "other income."  SE tax was not calculated in Turbo Tax.  Now I received an IRS notification stating I owe SE tax on this "other income."
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3 Replies

Do I need to pay SE tax on a 1099-NEC received for a one time commision?

@dmf did you post the dollar figure in the same box as presented on the 1099-NEC form? Box 1...

 

as long as the reported self-employment income is greater than $400, then the SE tax is owed.

 

The SE tax is really the social security and Medicare tax you would otherwise have withheld from your paycheck if you were a W-2 employee (that is the simple explanation). 

 

Since you earned the income, similar to a W-2 employee, it's subject to the SE tax.  

dmf
New Member

Do I need to pay SE tax on a 1099-NEC received for a one time commision?

Yes, I posted the non employee compensation as stated on the form on the worksheet, and the Turbo Tax program did not product SE Tax..  Since the income was from a random, one time, sporadic activity, I thought the Turbo Tax program was correct in not computing SE tax.  Here is the research I found on the subject: 

 

SE tax applies only to individuals who engage in a trade or business. So, if you’re not regularly self-employed and you earn income from some random work, occurrence or one-off circumstance, you don’t owe SE tax — even if the income would be subject to SE tax if you were regularly self-employed in that activity.

You don’t owe SE tax unless the net income in question is from a trade or business. In the landmark Groetzinger case, the US Supreme Court ruled that an activity must be conducted with “continuity and regularity” and with a “profit motive” to incur SE tax. Therefore, income earned from an isolated or sporadic activity isn’t generally subject to SE tax because the random activity doesn’t rise to the level of a trade or business.

I guess the most confusing part is that Turbo Tax did not produce a self-employment tax based on my input.

Do I need to pay SE tax on a 1099-NEC received for a one time commision?

The IRS will automatically assume that anything reported on a 1099-NEC is self-employment income and subject to self-employment tax. You may be able to rebut that presumption by responding with a well reasoned letter citing appropriate authority and explaining why this income should not be considered self-employment. If you want specific suggestions from us, we need to know more about what you did in order to be paid this money. 

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