Self-employment Teacher Consultiing fees paid as stipend indstead of 1099

[Dee12]

I am a teacher and I have a consultant business. Consulting Services provided to my district are not listed on form 1099; but instead, lumped into a stipend payment under categories (i.e. I do seminars and its lumped under 'teach workshops' on my pay-stub). Since this income has already been taxed through my employer, linking reporting it on Sch c business income would cause double taxation issues, as it has already been taxed at a fairly high emolument rate. Additionally, since it is the only type of business income generated in 2018, not including on Sch C would result in -0- income for the year. How do report this?

[rjs]

You do not report it on Schedule C. You just enter your W-2. It is not business income. The district is handling it correctly. All payments from an employer to an employee are treated as wages and are included in your W-2. It's part of your employment as a teacher. It doesn't matter what they call it or what you call it. Except in rare special circumstances, an employer does not issue a 1099-MISC to an employee.

[rjs · Accepted solution]

"not including on Sch C would result in -0- income for the year."

If you have no business income and no business expenses for the year, then you can just omit Schedule C from your tax return.

You might have expenses for your side business, not related to your W-2 employment. For example, you might have spent money on advertising to try to get outside work. If so, you can file Schedule C and show a loss.

But any expenses related to the additional work you did for the district are employee expenses and, under the new tax law, are not deductible.

[Dee12]

Thank you for your response. You stated, "...under the new tax law..." Does this mean that under the prior tax law they would have been??? I have to file 2017 and 2016; both years have the same type of expenses for summer workshops, CPD training, etc.

Thanks

[rjs · Accepted solution]

This post applies to 2016 and 2017. It does not apply to 2018 or later.

Yes, for 2016 and 2017 you can deduct expenses related to your employment by the school district. You can only deduct expenses that your employer would not reimburse. However, job-related expenses are a miscellaneous itemized deduction subject to the 2% of AGI limitation. That means that 2% of your Adjusted Gross Income (AGI) is subtracted from your total miscellaneous itemized deductions. Only the remaining amount is deductible. In addition, the deduction will not have any tax benefit unless your total itemized deductions are more than your standard deduction.

The following is from IRS Publication 529, Miscellaneous Deductions, 2017 edition.

"You can deduct only unreimbursed employee expenses that are:

• Paid or incurred during your tax year,
• For carrying on your trade or business of being an employee, and
• Ordinary and necessary.

"An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense doesn't have to be required to be considered necessary."

Here's how to enter job-related expenses in TurboTax for 2016 or 2017.

• Click the Federal Taxes tab. (In TurboTax Home & Business click the Personal Tab.)
• Click Deductions & Credits.
• Click "I'll choose what I work on."
• On the screen "Your 2017 [or 2016] Deductions & Credits," scroll down to the Employment Expenses section.
• Click the Start or Update button for Job-Related Expenses.