Your Tax Question - 053

Dear John, I received a 1099 MISC from a company that I am an independent-distributor with. What should I do with this document for tax purposes. Thank you much, Darla
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Hi Darla,

A 1099 informs you and the IRS that you were paid. You can simply claim this on your 1040 but any losses that are realized are limited to your revenues. In other words, your efforts are considered a hobby. If you are pursuing your distributorship with a profit making intent then you are officially a business and should be set up as such.

After that, the income that you will recognize will be subject to Self-Employment taxes (anything >$400.00) and will need to be dealt with. I don't know what sort of money you are realizing but remember that if your 1040 shows that you owe over $1000 in taxes you will be automatically put on quarterly tax payments. The reason this is important to note is because your business (distributorship) must pay an estimated quarterly payment on expected income or the IRS will fine you for not paying in a timely manner.

If you need help with this I work to to serve.

Thanks,
John

Your Tax Question - 046

Dear John, I just received a new job and the company is classifying me as a 1099 employee. They have informed me that I will need to save up 15% of my income in order to pay for the these taxes at the end of the year. What gives? Thx, Charlie

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Thanks for the question Charlie,

Some companies classify their employees as 1099 contractors in order to not have to pay certain employment taxes. The IRS is wise to this and they are more than happy to tell you if you are indeed an employee of the company or a contractor. Simply fill out and submit IRS Form SS-8 for the determination.

If the IRS does indeed inform you that you are a W-2 employee and not a 1099 contractor they will have to change the way they treat your paychecks and you will have to fill out Form 8919 with your 1040 for this year. According to IRS Pub 15 employers are always liable for the employee portion of the taxes and add a (ahem) special bonus to the tax for employers who do it wrong.

I hope this helps.

John

PS. Look at the countdown timer just under the header, time is getting short and I am able to help. This year I am only charging $69.00 for new clients that I service as their tax accountant. Can you say "CHA-CHING!" ?

Your Tax Question - 033

Dear John, I know I earned $500 worth of income from a side job this past year but I have not received a 1099 from the company that I did the work for - what should I do? Thank you, Gina.
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Hi Gina,

The company that you did the work for is not required to issue you a 1099 unless you earn more than $599.00 which means that you likely will not get one. Assuming that you do not have a business and do not file the Schedule C or C-EZ, You can claim this income on Line 21 of the Form 1040.

I hope this helps,
John

PS. I am more than happy to help you with this if you need a tax preparer. Email me.

Your Tax Question - 031

Dear John, This year I received my W-2 and I also received a 1099 from the same job but the 1099 has a different business name on it. My tax software is now requiring me to fill out a Schedule C as part of my taxes. Filing out a Schedule C is requiring me to answer a bunch of questions that I don't have answers for. Can I get around filing out the Schedule C? Thanks, Pat
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Hi Pat,

I don't want to get into a guessing game here so I would suggest that you call your company and find out if there was not a mistake and inquire why this happened. Remember, that the IRS will make a determination about your worker status, simply fill out Form SS-8.

Sorry, there really is no way around the Schedule C-EZ in this case. If there were no you taxes withheld from the 1099 (which I doubt that there were) you will have to pay double on the Social Security and Medicare portions of your wages. This is all covered on the 1040 SE form when you do your taxes. It should not be too difficult just a little extra effort.

I hope this helps.
John

PS. I know of a great tax guy if you need one. ;-) Email me

Your Tax Question - 030

Dear John, I was given stock options as a bonus several years ago, and I was required to "exercise" them in 2009. I have a receipt showing the estimated price at exercise, broker proceeds, grant price/share, taxable amount, tax rate, estimated tax, and net income. At the bottom it says that local payroll will pay the taxes and distribute the remainder as income. It looks like everything was taken care of, and the net proceeds were less than $1000 (woo hoo -- some bonus!). How do I declare this? Is it on the misc income section of the tax return? Thanks, Frank
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Hi Frank,

The simple answer is: "You have a long term gain which gets entered on 1040, Line 13"

The more informative answer:

Employers and banks have until January 31 to have W-2 and 1099 forms mailed. Brokerage houses, on the other hand, have until February 15 to have 1099-B forms mailed to clients -Your exercised stock options fall into this 1099-B category. The information from the 1099-B will be used to fill out 1040 Schedule D which when finished will be used to fill in Line 13 of your Form 1040.

Welcome to the world of stock options!

Good luck,
John

PS. I still have room on my client list if you need me to handle this for you. email me