1099-Misc

[peggysioux5]

Taxpayer received a 1099-Misc from Union for working on a committee of Union. Would other tax preparers determine that self-employment tax needs to be calculated? He did say he will continue to be on committee ongoing so not a one-time thing but he is not looking to make a profit and it is not a business.

Peggy Sioux
 

[RitaB]

15 hours ago, peggysioux5 said:

Taxpayer received a 1099-Misc from Union for working on a committee of Union. Would other tax preparers determine that self-employment tax needs to be calculated? He did say he will continue to be on committee ongoing so not a one-time thing but he is not looking to make a profit and it is not a business.

Peggy Sioux
 

Based on your post, I would, yes.  I tend to go with "work" being subject to self-employment tax, even if it's a one-time event.  I believe "other income" is, well, income from something other than work, like a prize or debt cancellation.  Lots of tax pros better than me would never subject income to SE tax for a one-time activity, like that week of hanging vinyl siding for the general contractor, but this is not that.  Shoot, the real experts think practically nothing is subject to SE tax, Schedule SE should be seen less frequently than a Unicom, and I should just hang it up. 

I would of course ask him to provide legitimate expenses.  I assume he has some if he's not looking to make a profit.  Or do you mean he would do this work even if not compensated?  I guess my answer is the same, either way.

[Lion EA]

I researched SE for a director on a board of directors of a bank who received Form 1099-MISC and found that his director's fees were SE income. (Later cases classify director's fees as employee income, but you're not arguing that.) It sounds a lot like your committee member of a union.

A couple of things from my notes:

On the self-employment tax issue, the IRS ruled in 1972, that director fees are self-employment income subject to self-employment tax.  Rev. Rul. 72-86, 1972-1 CB 273.

Richard E. Blodgett, Jr., and Ora L. Blodgett v. Commissioner. U.S. Tax Court, Dkt. No. 9449-11, TC Memo. 2012-298, October 24, 2012.

[DANRVAN]

10 hours ago, RitaB said:

Or do you mean he would do this work even if not compensated? 

That is a good point. One of the factors in rr 72-86 is that the director expects compensation for his work.

I would also lean towards SE tax based on the information provided but would have a few more questions to ask.

[Christian]

My experience parallels Lions especially since it is going to be ongoing. I have had clients who wanted to overlook the SE tax who were hit a couple of years down the road. I have a client who made $19,000 which his employer reported on a Form 1099- Misc. This is a common dodge among employers so as to avoid withholding and reporting requirements. He about passed out when he got the combined federal, state, and SE tax he had to pay. I have repeatedly warned him of this but to no avail.