My husband received $2000 from an employment agency when he accepted a job offer. He got a 1099-misc. How can I enter it without it coming up as self employment income?

[brychtac]

He is not self-employed, the payment was made as a concession so that he would accept the job being offered. He was told that the new job's benefits would start immediately but then learned that they would not. This was a factor in his decision whether or not to take the job because we didn't want to have to pay for COBRA, so the agency that was placing him offered the payment to seal the deal.  He feels that it should be added to his regular income, not considered self employment.

[LenaH]

Generally, the IRS classifies employment incentives as supplemental wages, along with bonuses, severance pay, taxable fringe benefits, vacation pay, back pay, and overtime. Supplemental pay is anything other than your husband's regular pay. Typically, supplemental pay is added to a W-2, such as regular wages are. This ensures that the proper taxes are withheld. 

If supplemental pay is reported on a 1099-MISC in Box 3, then you will still need to pay the uncollected Social Security and Medicare tax, as well as the income tax. This could be why it is populating under your Schedule C and adding self-employment tax (which will end up being your portion of the Social Security and Medicare on this income). 

Per the IRS, supplemental wages are subject to Social Security and Medicare taxes. 

Please see IRS Publication 15 for additional information. 

[Teesweet]

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[LenaH]

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