Proceeds on fishing income

[Karen Lee]

This is a first for me. 17 yr old (18 by 12/31/07), crew member on fishing boat in Alaska, share from fishing proceeds >$5000.

This was his only income. Issued a 1099-MISC, Box 7...

Used a Sch C-EZ for income and expenses and of course automatically came up with Sch SE however MTG says share of fishing catches is not subject to SE Tax. Code Sec. 1402©(2)

Now I can override it all and make it not subject to SE Tax however there must be a form and procedure to make it clear that the exemption is legit at first glance of the tax return BUT I CAN'T FIND IT!!!

Please Help.

Karen Lee

PS MTG para 2670...I could be mis-reading...let me know

1040 Express Answers 3-5

[jklcpa]

From Pub 334, Ch 10 under the heading Who Must Pay SE Taxes:

Fishing crew member. If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply.

You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions.

The pay is not more than $100 per trip.

The pay is received only if there is a minimum catch.

The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry.

You get a share of the catch or a share of the proceeds from the sale of the catch.

Your share depends on the amount of the catch.

The boat's operating crew normally numbers fewer than 10 individuals. (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10.)

You are not subject to SE tax if you are under age 18 and you are working for your father or mother.

[Julie]

The loss of formatting mangled your reply, changing the meaning somewhat. Not that it's clear anyway....read it carefully, because condition 1 is a double negative.

I have fishing clients and you actually had me confused for a bit. Let's see if it works better this way:

Fishing crew member. If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply.

1. You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions:
   • The pay is not more than $100 per trip.
     
   • The pay is received only if there is a minimum catch.
     
   • The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry.
     

   [*]You get a share of the catch or a share of the proceeds from the sale of the catch.

   [*]Your share depends on the amount of the catch.

   [*]The boat's operating crew normally numbers fewer than 10 individuals. (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10.)

You are not subject to SE tax if you are under age 18 and you are working for your father or mother.

Perhaps not...it doesn't like my nested lists....Eric, is there some way to get a decent outline format, with the second ordered list indented and type="a" instead of "1"

These conditions apply to nearly all West Coast commercial fishermen (although in Alaska there are boats who would violate condition 4.) The normal mode of pay is strictly share-of-catch, and meets all those conditions. I have never heard of anyone on a fishing boat meeting condition 1c., although that might happen on a very large boat.

From Pub 334, Ch 10 under the heading Who Must Pay SE Taxes:

Fishing crew member. If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply.

You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions.

The pay is not more than $100 per trip.

The pay is received only if there is a minimum catch.

The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry.

You get a share of the catch or a share of the proceeds from the sale of the catch.

Your share depends on the amount of the catch.

The boat's operating crew normally numbers fewer than 10 individuals. (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10.)

You are not subject to SE tax if you are under age 18 and you are working for your father or mother.

[Karen Lee]

Thank you