My wife did in-home healthcare for a sister in-law over a period of years. The sister in-law did not have the money at the time to pay her so the understanding was it would be paid from the estate after the sister in-laws passing. There was no problem with this as the heir recognized the work done and agreed. So my wife has received a lump sum for the work performed. How do I report this for taxes, SS and Medicare?
How you report this payment depends on the answers to at least the following questions:
- Did the estate report the payment (to your wife) on Form 1099-MISC or Form 1099-NEC?
- Was your wife certain of getting payment from the estate for her services, or was it only a hopeful expectation that her services would be recognized by the estate?
- Did your wife incur any expenses in providing home health-care to her relative?
Thanks for the reply.
1. No 1099's were issued.
2. It was a verbal agreement only. It was not certain if there would be enough funds in the estate for both the heir and for for my wife.
3 No expenses were incurred other than driving to the sister in law's house which was in the same town and negligible.
You would report the self-employment on a schedule C and pay self-employment taxes to cover the Social Security and Medicare taxes. Vehicle expenses could be deducted from the income if you wish.
Here are instruction to enter the income on a Schedule C:
We'll automatically complete Schedule C when you set up your self-employment work in TurboTax.
In TurboTax Desktop
If your self-employment income was only from cash or personal checks
- Open your return and type Schedule C in the Search box. Select the Jump to link.
- This will take you to where you can enter any cash, personal checks under General Income
- Click Continue, Business Expenses could be entered under Business Vehicle Expenses
- Continue and select No for Is this Qualified Business Income?
Form SE will be generated from this business entry where the SS and Medicare taxes will be paid.