Nonemployee compensation on Form 1099-MISC

[misskeiko]

Hello,

For nonemployee compensation on Form 1099-MISC, I usually put in other income subject to self-employment tax. Is it the same to put it in either Schedule C or other income subject to self-employment tax? Also, if the client have some business expenses for nonemployee compensation, are those expenses other miscellaneous deductions?

Thank you!

[qbteachmt]

You and your client need to understand if this person is running a business or not.

Having a 1099-Misc doesn't define anything other than someone paid your client for Reportable reason and it hit a reportable minimum.

The facts and circumstances control the rest of the story. You haven't given any applicable info.

[misskeiko]

Hi,

The client does not have a business.

[Just-Lisa-Now-]

What did they do to be issued a 1099MISC?

[misskeiko]

I think it's attorney services. I feel it is like independent contractor.

[Just-Lisa-Now-]

So that would go on a Sch C, like any other self employed person. 

They may not have "a" business, but if they are an independent contractor being compensated for services they performed they are "in" business and subject to SE taxes.

[misskeiko]

Spoiler

Yes. My question is can i deduct the expenses for these non-employee compensation(like independent contractor) as well?

[Just-Lisa-Now-]

On Sch C you would claim the income as well as any expenses incurred while doing the job they were hired to do.

[qbteachmt]

"like independent contractor"

Why did someone pay them? What are these expenses? Do the facts indicate they are running a Business? Are they operating as an independent contractor, Factually? Not "Like" or "as if" but you should be able to answer, "Yes, that is what they are doing."

Can you make that statement?

[misskeiko]

Hi,

 He is working as juvenile advocate. He is not running a business. The client put the expenses(office supplies, printing expenses, software, laptop, conference expenses and etc) under other miscellaneous deductions in tax organizer. The only income he received is the non-employee compensation on Form 1099 MISC. Should I put these expenses under other miscellaneous expenses? I think these expenses are related to the income on Form 1099 MISC. But not sure how to deduct. 

Thank you for teaching me. I just graduated and started to work. I feel I have too many questions and a lot need to learn.

[qbteachmt · Accepted solution]

"He is working as juvenile advocate. He is not running a business."

Yes he is; he is working for himself, as a Sole Proprietorship business, then.

"The client put the expenses(office supplies, printing expenses, software, laptop, conference expenses and etc) under other miscellaneous deductions in tax organizer."

You need to guide the person for what is Business Expense, what is Not (such as Asset purchase, is not Expense) and what is or is not expense when traveling (not meals, for instance).

Just because the Client fills in data, doesn't not guide you. The tax regulations guide you; you are hoping the client reveals things you need to know about, but they are not the Tax Expert. That is supposed to be you.

"The only income he received is the non-employee compensation on Form 1099 MISC."

Let's learn to Rephrase this: Your client makes money as an Independent Consultant, as an Advocate. The Advocacy program has 1099-Misc box 7 requirements to people to whom they paid $600 or more. That can be a one-time thing or someone who does this routinely.

"Should I put these expenses under other miscellaneous expenses?"

A person who did this as a one time thing has no business, so there are no business expenses.

A person who does this for a living has a business, so you need to know what is and is not a business expense. That computer might not be Expense; read on Fixed Assets tracking and depreciation provisions.

"I think these expenses are related to the income on Form 1099 MISC. But not sure how to deduct."

Have the person done this in the past year(s)? Look at their prior tax return; perhaps there is a Sched C = they are in business.

And it's time to find someone to mentor you, for you to work under.

[misskeiko]

Thank you so much! It is very clear to me now.