how do I report a one time referral income commision receipt of $10,000 that was reported on line 1 of 1099-nec

Forum|Forum|5 years ago
April 11, 2021
5 replies
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Best answer by rbynaker

Be prepared for an IRS nastigram asking for self-employment taxes (but I agree, the correct reporting is likely "other income").

I haven't seen one this year, but here's my old copy/paste "preparer note" that I attach to the return on the off chance that someone at the IRS reads it before the SE tax bill gets sent out (update accordingly for the new NEC form):

THE $x INCLUDED IN BOX 7 OF THE 1099-MISC FROM company.name xx-xxxxxxx
WAS PAID FOR enter.reason. THE ACTIVITY WAS NOT REGULAR, CONTINUOUS OR SUBSTANTIAL AND DOES NOT RISE TO THE LEVEL OF A TRADE OR BUSINESS.

Then if/when the IRS love letter does come, I like to get a little snarky and start with something like "As stated in the note filed electronically with the original return, the $x . . . "

sjrcpa

Level 15

Other income.

The more I know the more I don’t know.

PATAX

Level 12

If applicable, it may be a good idea to enter "not subject to SE tax" next to the description on the tax return ..... Just my opinion...

rbynakerAnswer

Level 13

Be prepared for an IRS nastigram asking for self-employment taxes (but I agree, the correct reporting is likely "other income").

I haven't seen one this year, but here's my old copy/paste "preparer note" that I attach to the return on the off chance that someone at the IRS reads it before the SE tax bill gets sent out (update accordingly for the new NEC form):

THE $x INCLUDED IN BOX 7 OF THE 1099-MISC FROM company.name xx-xxxxxxx
WAS PAID FOR enter.reason. THE ACTIVITY WAS NOT REGULAR, CONTINUOUS OR SUBSTANTIAL AND DOES NOT RISE TO THE LEVEL OF A TRADE OR BUSINESS.

Then if/when the IRS love letter does come, I like to get a little snarky and start with something like "As stated in the note filed electronically with the original return, the $x . . . "

BobKamman

Level 15

Lately I've been assuming that "new members" here found their way through TurboTax, but if they're smart enough to have done that they are smart enough to ask the question in a way that will result in the answer they want.

If the question were, "I've had my real estate license for three years and work 20 hours a week trying to get listings, but the best I have done is one referral commission on my brother-in-law's house," the answer might be different. Although the question could be the same.

O

oldtimer50Author

Level 2

BobKamman is absolutely correct. I should have made it clear that this referral income was not related to any ongoing activity, but rather something that just happened to fall in the lap of the taxpayer by chance.

Of course, had this happened to be a single successful outcome of an activity that the taxpayer was considering as an a trade or business, but without prior or subsequent success, the income should probably be reported on schedule C and be subject to SE tax.

My bad. This is my initiation into this forum. I'll do better next time.

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