Avoiding SE Tax

[ILLMAS]

Has anyone else ever seen SE Income being reported on line 7? A new TP came in with a prior year self-prepared tax return and next to line 7 something like HSNC appeared next to it. He pick up his paper after I told him his prior return was prepared incorrectly. I am guessing it was prepared with turbo tax.

[Lee B]

Household employee wages under $1,800 not required to be reported on a W -2 are reported there with a code "HSH".

[ILLMAS]

The wages were close to 17K,

[Pacun]

MAS

When someone gets a 1099-misc and the preparer has a clear cut that this person was an employee, the preparer can add the 1099-Misc to line 7.

In this case, the employer should get a letter from the IRS and the employee would be fired. So before adding a 1099-misc to line 7, we should ask how much they love that job and don't assume that the employee prefers line 7 or Sch C/SE.

[ILLMAS]

Not in this case my friend, I just didn't provide all the facts and I am not blaming the TP, he paid someone to prepare it.

[ILLMAS]

I once prepared a tax return with form 3949-A, TP was upset she was going to pay SE tax etc... Later on she had me prepare a Sch C because she didn't want to lose her job.

[Pacun]

I once prepared a tax return with form 3949-A, TP was upset she was going to pay SE tax etc... Later on she had me prepare a Sch C because she didn't want to lose her job.

Yep, that happens a lot.

[David1980]

The wages were close to 17K,

The $1,800 limit applies for a household employee that makes under $1,800 and thus isn't required to receive a W-2. So, hypothetically it may be possible they were an employee at ten different households and received $17k. Not likely...

The household help on line 7 thing is popular among a certain kind of preparer. Counts as earned income for EIC. Doesn't have SE tax. If your goal is to create the largest fraudulent refund it's a useful tool. If you're honest, not so useful.

[kcjenkins]

I once prepared a tax return with form 3949-A, TP was upset she was going to pay SE tax etc... Later on she had me prepare a Sch C because she didn't want to lose her job.

Yes, and IMHO it should be their right to make that decision. Of course, the IRS does not agree.