Is bonus income reported on a 1099 MISC, box 7 subject to SE tax?

[ETax847]

Taxpayer has a regular W2 job.  He bonus was not seen on her W2 but on a 1099 MISC? Should this be considered self employment income or other income?

[RitaB]

It should have been treated as wages, but since it wasn't I'd put it on Sch C.  Others will disagree.  That's how we are.

[JackieCPA]

I just got one like that today, she got a sign on bonus from the hospital for $150,000. Box 7. Oofdah!

[Medlin Software, Dennis]

Proof again not all are compliant with reporting income based on employment as wages.

The Catcjh-22 is the same as always.  Report it properly as wages and the employer may be upset.  Report it as not wages and the employee ends up paring the employer part of the taxes, and may not have received full benefit of the wage amount, such as when retirement is a percentage of pay, and there is an employer match, proper accounting for UI wages, proper WC wages, etc.

If employers would accept the fact that all tangible items given to an employee is W2... since the tangible item would not have been given if the person was not their employee.

[Abby Normal]

32 minutes ago, RitaB said:

It should have been treated as wages, but since it wasn't I'd put it on Sch C.  Others will disagree.  That's how we are.

You can save half the SE tax by putting it on 8919, reason code H. I don't know if the IRS gets back to the employer when you do this or not. If you're worried about losing your job... put it on sch C.

[JackieCPA]

In my situation, being it was $150,000, I e-mailed my client with both situations and a blurp from the IRS publication that talks about sign -on bonus's and left it up to her to decide. Here at our office I asked around and pretty much everyone has said that if they were in that situation they would just pay the taxes so their name isn't dragged across the mud in case their name was ever brought-en up later. 

In my opinion, if your company has enough money to pay you a $150,000 bonus just for taking the job, they can afford to pay their half of payroll taxes.

[ETax847]

Interesting.  I'm thinking SCH C is the way to go as to not upset the apple cart.  Thanks gang!

[Medlin Software, Dennis]

1 minute ago, ETax847 said:

Interesting.  I'm thinking SCH C is the way to go as to not upset the apple cart.  Thanks gang!

I saw a great article on this.  The article said, for someone who wants to keep their earnings from the same company (not get fired), accept the 1099 and report accordingly.  But, when they leave, amend as far back as allowed, claiming employee status, and fight for a refund of the employer amounts.  Same if fired, go for UI, or injured, fight for WC.

[grandmabee]

good chance they max out on SS too.

[Roberts]

I'm imagining how few people have anything left from that signing bonus. Always hate it when someone got a nice windfall which they spent and now I'm handing them a $5k tax bill and they have no clue how to pay it. You can say they are idiots but most people live paycheck to paycheck for a reason.

 

Me, I've already paid my 2020 estimated tax payment and anything I make from here on out doing taxes is straight cash to me homey.

[JackieCPA]

My client actually talked to the CFO of the company she works for and because they paid her the sign-on bonus on a date before the date of the contract, she wasn't considered an employee at the time she received the bonus.

Wow, what a loophole!

So if they are saying they were self employed when receiving that bonus, they should get the QBI deduction right!

 

[Lee B]

22 minutes ago, JackieB said:

My client actually talked to the CFO of the company she works for and because they paid her the sign-on bonus on a date before the date of the contract, she wasn't considered an employee at the time she received the bonus.

Wow, what a loophole!

So if they are saying they were self employed when receiving that bonus, they should get the QBI deduction right!

 

"Box 1—Wages, tips, other compensation.

Show the total taxable wages, tips, and other compensation that you paid to your employee during the year. However, do not include elective deferrals (such as employee contributions to a section 401(k) or 403(b) plan) except section 501(c)(18) contributions. Include the following.

Total wages, bonuses (including signing bonuses), prizes, and awards paid to employees during the year."

I am sorry but the CFO's glib sophistry doesn't pass the smell test. 

[Christian]

An Uncle who was an IRS field agent would simply add the SE form to the return and let them pay the tax. Of course, the amounts were not large. I read something recently which indicated amounts on form 1099-MISC up to $1,899 were  exempted from SE tax and have found when lesser amounts were included the Other income line of the 1040 this proved no problem with the Service. I routinely use his method for amounts over $1,900 unless the client has identifiable expenses which can be deducted.