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Handling 1099-NEC /Insurance
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JoeTaxpayer
Feb 13, 2023, 10:01:44 AM2/13/23
to
Background -
I am working on my daughter's tax return. She is on her own, another
state, in fact, but at 24, still on a family insurance plan with me.
She has multiple jobs, 6, and as I look at the W2's she forwarded, I see
a 1099-NEC instead for one place she worked. Looking at pub 1779, which
is now 10 years old, has a description of Independent contractor vs
employee, and there is nothing about the work that should have her as a
1099 contractor. She is not comfortable discussing this with the
company, so I'm moving forward.
I know this income will go on Schedule C (and she'll pay 2X FICA on this
amount), but the one real question I have now - How much of her health
insurance cost can go as an expense (line 14) against this income? FWIW,
the amount is about 25% of her total income for 2022.
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I am working on my daughter's tax return. She is on her own, another
state, in fact, but at 24, still on a family insurance plan with me.
She has multiple jobs, 6, and as I look at the W2's she forwarded, I see
a 1099-NEC instead for one place she worked. Looking at pub 1779, which
is now 10 years old, has a description of Independent contractor vs
employee, and there is nothing about the work that should have her as a
1099 contractor. She is not comfortable discussing this with the
company, so I'm moving forward.
I know this income will go on Schedule C (and she'll pay 2X FICA on this
amount), but the one real question I have now - How much of her health
insurance cost can go as an expense (line 14) against this income? FWIW,
the amount is about 25% of her total income for 2022.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
Adam H. Kerman
Feb 13, 2023, 11:16:49 AM2/13/23
to
JoeTaxpayer <JoeTa...@comcast.net> wrote:
>Background -
>I am working on my daughter's tax return. She is on her own, another
>state, in fact, but at 24, still on a family insurance plan with me.
>She has multiple jobs, 6, and as I look at the W2's she forwarded, I see
>a 1099-NEC instead for one place she worked. Looking at pub 1779, which
>is now 10 years old, has a description of Independent contractor vs
>employee, and there is nothing about the work that should have her as a
>1099 contractor. She is not comfortable discussing this with the
>company, so I'm moving forward.
I've filed Schedule C for myself in any number of tax years. There are
>Background -
>I am working on my daughter's tax return. She is on her own, another
>state, in fact, but at 24, still on a family insurance plan with me.
>She has multiple jobs, 6, and as I look at the W2's she forwarded, I see
>a 1099-NEC instead for one place she worked. Looking at pub 1779, which
>is now 10 years old, has a description of Independent contractor vs
>employee, and there is nothing about the work that should have her as a
>1099 contractor. She is not comfortable discussing this with the
>company, so I'm moving forward.
record-keeping requirements when I'm in business for myself. Other than
statutory employee/non-employee, in my opinion, making that bright-line
distinction has to take into account where the work is performed and if
the work is performed at the payor's site, then whether the payee brings
his own tools. If the payee works with the payor's tools at the payor's
job site, it's hard to argue that the payee isn't an employee. You're
probably right that it was mischaracterized.
At this point, if she's not taking the position that the income was
mischaracterized, then the onus is on her that she was a sole proprietor
for this period, and that comes with all the record-keeping requirements
of being in business for one's self.
On the other hand, if she takes the position that she was an employee,
then her take-home pay is net of withholding for FICA and HI (I assume
Additional Medicare Tax doesn't apply), in other words 100%-7.65%=92.35%
of gross wages, ignoring income tax withholding. If she takes the
position that she's an employee but her take-home pay was her gross
wages, in theory, she could owe 1/2 of the undeposited Social Security
taxes but they'd really come after the employer.
It's not a good position to be in. Let her learn a lesson that both
parties must agree to employee versus non-employee up front and that the
employer doesn't want the expense of payroll tax deposits DOES NOT make
her a non-employee. In order to be a non-employee, she truly has to be
in business for herself.
>I know this income will go on Schedule C (and she'll pay 2X FICA on this
>amount),
Qualified Business Income Deduction.
>but the one real question I have now - How much of her health
>insurance cost can go as an expense (line 14) against this income? FWIW,
>the amount is about 25% of her total income for 2022.
was on that job, and employed on the days she was on the 5 other jobs,
then up to the pro-rated share of that number of days of the year. But
she'd better have business records showing this as I'm assuming she
didn't literally write you a check for her share of the family medical
insurance for this period.
paultry
Feb 13, 2023, 11:26:52 AM2/13/23
to
On 02/13/2023 08:58, JoeTaxpayer wrote:
> Background -
> I am working on my daughter's tax return. She is on her own,
> another state, in fact, but at 24, still on a family
> insurance plan with me.
> She has multiple jobs, 6, and as I look at the W2's she
> forwarded, I see a 1099-NEC instead for one place she
> worked. Looking at pub 1779, which is now 10 years old, has
> a description of Independent contractor vs employee, and
> there is nothing about the work that should have her as a
> 1099 contractor. She is not comfortable discussing this with
> the company, so I'm moving forward.
>
> I know this income will go on Schedule C (and she'll pay 2X
> FICA on this amount), but the one real question I have now -
> How much of her health insurance cost can go as an expense
> (line 14) against this income? FWIW, the amount is about 25%
> of her total income for 2022.
>
Best for your daughter to talk to the employer, as
> Background -
> I am working on my daughter's tax return. She is on her own,
> another state, in fact, but at 24, still on a family
> insurance plan with me.
> She has multiple jobs, 6, and as I look at the W2's she
> forwarded, I see a 1099-NEC instead for one place she
> worked. Looking at pub 1779, which is now 10 years old, has
> a description of Independent contractor vs employee, and
> there is nothing about the work that should have her as a
> 1099 contractor. She is not comfortable discussing this with
> the company, so I'm moving forward.
>
> I know this income will go on Schedule C (and she'll pay 2X
> FICA on this amount), but the one real question I have now -
> How much of her health insurance cost can go as an expense
> (line 14) against this income? FWIW, the amount is about 25%
> of her total income for 2022.
>
uncomfortable as it may be. Perhaps the employer is acting
with the IRS's blessing. More likely, it is skirting the
law. If that doesn't resolve, she should file an SS-8 for
an IRS determination of her work status. If you/she file
the Schedule C when she is truly an employee, you/she will
be enabling the employer's incorrect and possibly fraudulent
misclassification. If the IRS does not give a timely
response to the SS-8 filing, she can proceed with Form 8919.
Stuart O. Bronstein
Feb 13, 2023, 12:06:52 PM2/13/23
to
JoeTaxpayer <JoeTa...@comcast.net> wrote:
> Background -
> I am working on my daughter's tax return. She is on her own,
> another state, in fact, but at 24, still on a family insurance
> plan with me. She has multiple jobs, 6, and as I look at the W2's
> she forwarded, I see a 1099-NEC instead for one place she worked.
> Looking at pub 1779, which is now 10 years old, has a description
> of Independent contractor vs employee, and there is nothing about
> the work that should have her as a 1099 contractor. She is not
> comfortable discussing this with the company, so I'm moving
> forward.
>
> I know this income will go on Schedule C (and she'll pay 2X FICA
> on this amount), but the one real question I have now - How much
> of her health insurance cost can go as an expense (line 14)
> against this income? FWIW, the amount is about 25% of her total
> income for 2022.
You may know this already, but in case you don't, if your daughter
> Background -
> I am working on my daughter's tax return. She is on her own,
> another state, in fact, but at 24, still on a family insurance
> plan with me. She has multiple jobs, 6, and as I look at the W2's
> she forwarded, I see a 1099-NEC instead for one place she worked.
> Looking at pub 1779, which is now 10 years old, has a description
> of Independent contractor vs employee, and there is nothing about
> the work that should have her as a 1099 contractor. She is not
> comfortable discussing this with the company, so I'm moving
> forward.
>
> I know this income will go on Schedule C (and she'll pay 2X FICA
> on this amount), but the one real question I have now - How much
> of her health insurance cost can go as an expense (line 14)
> against this income? FWIW, the amount is about 25% of her total
> income for 2022.
should have been classified as an employee, she can file IRS Form SS-8
to notify the IRS of the situation. Then she can file Form 8919
essentially to eliminate the employer's portion of the self-employment
tax on her Schedule C.
Good luck.
--
Stu
http://DownToEarthLawyer.com
--
This email has been checked for viruses by AVG antivirus software.
www.avg.com
honda....@gmail.com
Feb 13, 2023, 4:12:37 PM2/13/23
to
On Monday, February 13, 2023 at 9:01:44 AM UTC-6, JoeTaxpayer wrote:
> Background -
> I am working on my daughter's tax return.
snip
> Background -
> I am working on my daughter's tax return.
> I know this income will go on Schedule C (and she'll pay 2X FICA on this
> amount), but the one real question I have now - How much of her health
> insurance cost can go as an expense (line 14) against this income? FWIW,
> the amount is about 25% of her total income for 2022.
If eligible for this deduction, so far I think 100% of the health insurance cost
> amount), but the one real question I have now - How much of her health
> insurance cost can go as an expense (line 14) against this income? FWIW,
> the amount is about 25% of her total income for 2022.
gets reported on her Form 1040, Schedule 1, Line 17.
One requirement for eligibility is that your daughter's "business" has to
show a net profit on Schedule C.
I have other questions about who is paying for what here. E.g. if this is
a family insurance plan, then your wife and you technically pay
the premium, right? I presume your daughter is reimbursing you all
for her share. Is it kosher for the daughter to take a deduction for
health insurance for which your wife and you technically paid?
I presume you have already looked into questions like this. I am
just not sure whether there is more that needs to be checked
here before proceeding.
JoeTaxpayer
Feb 13, 2023, 10:58:27 PM2/13/23
to
On 2/13/23 11:15 AM, Adam H. Kerman wrote:
> If she's taking the position that she was self employed on the days she
> was on that job, and employed on the days she was on the 5 other jobs,
> then up to the pro-rated share of that number of days of the year. But
> she'd better have business records showing this as I'm assuming she
> didn't literally write you a check for her share of the family medical
> insurance for this period.
I just confirmed with her about the 1099. She is a dancer. This is a
> If she's taking the position that she was self employed on the days she
> was on that job, and employed on the days she was on the 5 other jobs,
> then up to the pro-rated share of that number of days of the year. But
> she'd better have business records showing this as I'm assuming she
> didn't literally write you a check for her share of the family medical
> insurance for this period.
part time position teaching class. Apparently, the studio that pays her
acts as third party arranging classes taught at a public school. To be
clear, she shows up at a particular school, and teaches a class, twice a
week. At least this makes sense why they 1099 her.
No, she does not reimburse me for the insurance. For 2022, it would seem
that the fraction of the insurance (at age 24 vs me at 60, I would even
assume 1/2 is her's) and this work only being about 25% of her income,
it's not worth attempting to write it off.
Preparing for 2024 (tax year '24, filing in '25) when she is on her own
insurance, can you give me a hint what records she'd need to keep to
take some insurance deduction? None of the W2 employers are providing
any benefit, and I take it, just pro-rating the 1099 income over total
income is not sufficient?
Thanks for the response.
Rick
Feb 13, 2023, 11:28:32 PM2/13/23
to
"JoeTaxpayer" wrote in message news:tsdj64$264ea$1...@dont-email.me...
newsgroup pointed out that a 1099-NEC doesn’t always imply self-employment
income and a Schedule C, etc. If the 1099-NEC was for some one-off activity
not related to her career or normal work, it’s possible the 1099 was
mischaracterized and should have been a 1099-MISC. For this reason, you
(or whoever does her taxes) should consider asking her what activity this
1099-NEC covered and whether it was actually legitimate Schedule C type
income or just a one-time activity you report as "Other Income".
--
>
>Background -
>I am working on my daughter's tax return. She is on her own, another state,
>in fact, but at 24, still on a family insurance plan with me.
>She has multiple jobs, 6, and as I look at the W2's she forwarded, I see a
>1099-NEC instead for one place she worked. Looking at pub 1779, which is
>now 10 years old, has a description of Independent contractor vs employee,
>and there is nothing about the work that should have her as a 1099
>contractor. She is not comfortable discussing this with the company, so I'm
>moving forward.
>
>I know this income will go on Schedule C (and she'll pay 2X FICA on this
>amount), but the one real question I have now - How much of her health
>insurance cost can go as an expense (line 14) against this income? FWIW,
>the amount is about 25% of her total income for 2022.
>
There’s another possibility with this. A previous response on this
>Background -
>I am working on my daughter's tax return. She is on her own, another state,
>in fact, but at 24, still on a family insurance plan with me.
>She has multiple jobs, 6, and as I look at the W2's she forwarded, I see a
>1099-NEC instead for one place she worked. Looking at pub 1779, which is
>now 10 years old, has a description of Independent contractor vs employee,
>and there is nothing about the work that should have her as a 1099
>contractor. She is not comfortable discussing this with the company, so I'm
>moving forward.
>
>I know this income will go on Schedule C (and she'll pay 2X FICA on this
>amount), but the one real question I have now - How much of her health
>insurance cost can go as an expense (line 14) against this income? FWIW,
>the amount is about 25% of her total income for 2022.
>
newsgroup pointed out that a 1099-NEC doesn’t always imply self-employment
income and a Schedule C, etc. If the 1099-NEC was for some one-off activity
not related to her career or normal work, it’s possible the 1099 was
mischaracterized and should have been a 1099-MISC. For this reason, you
(or whoever does her taxes) should consider asking her what activity this
1099-NEC covered and whether it was actually legitimate Schedule C type
income or just a one-time activity you report as "Other Income".
--
Adam H. Kerman
Feb 14, 2023, 1:13:48 AM2/14/23
to
JoeTaxpayer <JoeTa...@comcast.net> wrote:
>On 2/13/23 11:15 AM, Adam H. Kerman wrote:
>>If she's taking the position that she was self employed on the days she
>>was on that job, and employed on the days she was on the 5 other jobs,
>>then up to the pro-rated share of that number of days of the year. But
>>she'd better have business records showing this as I'm assuming she
>>didn't literally write you a check for her share of the family medical
>>insurance for this period.
>I just confirmed with her about the 1099. She is a dancer. This is a
>part time position teaching class. Apparently, the studio that pays her
>acts as third party arranging classes taught at a public school. To be
>clear, she shows up at a particular school, and teaches a class, twice a
>week. At least this makes sense why they 1099 her.
Ok. That does sound like she's self employed.
>On 2/13/23 11:15 AM, Adam H. Kerman wrote:
>>If she's taking the position that she was self employed on the days she
>>was on that job, and employed on the days she was on the 5 other jobs,
>>then up to the pro-rated share of that number of days of the year. But
>>she'd better have business records showing this as I'm assuming she
>>didn't literally write you a check for her share of the family medical
>>insurance for this period.
>I just confirmed with her about the 1099. She is a dancer. This is a
>part time position teaching class. Apparently, the studio that pays her
>acts as third party arranging classes taught at a public school. To be
>clear, she shows up at a particular school, and teaches a class, twice a
>week. At least this makes sense why they 1099 her.
>No, she does not reimburse me for the insurance. For 2022, it would seem
>that the fraction of the insurance (at age 24 vs me at 60, I would even
>assume 1/2 is her's) and this work only being about 25% of her income,
>it's not worth attempting to write it off.
>Preparing for 2024 (tax year '24, filing in '25) when she is on her own
>insurance, can you give me a hint what records she'd need to keep to
>take some insurance deduction? None of the W2 employers are providing
>any benefit, and I take it, just pro-rating the 1099 income over total
>income is not sufficient?
and business cards and brochures and a Web page, cell phone specific to
the business, separate bank account, while keeping very careful records
of receipts and expenses applicable to the business. If she can show
that she's taking on students throughout the year, or she accepts work
in these after school classes throughout the year, then that could be
adequate to provide herself health insurance through the business.
Maintaining a diary of her appointments to teach and keeping mileage
records to and from her appointments and keeping receipts attributable to
the business would go a long way toward demonstrating that her business
is legitimate.
As long as it's not a somewhat lengthy period of full-time jobs as an
employee without gig jobs, I don't see why she couldn't provide health
coverage to herself through her business throughout the year.
>Thanks for the response.
I'm more concerned about her finding a somewhat affordable individual policy.
Sometimes one can join a professional association that may offer a group
plan.
JoeTaxpayer
Feb 16, 2023, 12:52:30 PM2/16/23
to
On 2/13/23 4:11 PM, honda....@gmail.com wrote:
> On Monday, February 13, 2023 at 9:01:44 AM UTC-6, JoeTaxpayer wrote:
>> Background -
>> I am working on my daughter's tax return.
> snip
>> I know this income will go on Schedule C (and she'll pay 2X FICA on this
>> amount), but the one real question I have now - How much of her health
>> insurance cost can go as an expense (line 14) against this income? FWIW,
>> the amount is about 25% of her total income for 2022.
>
> If eligible for this deduction, so far I think 100% of the health insurance cost
> gets reported on her Form 1040, Schedule 1, Line 17.
>
> One requirement for eligibility is that your daughter's "business" has to
> show a net profit on Schedule C.
>
> I have other questions about who is paying for what here. E.g. if this is
> a family insurance plan, then your wife and you technically pay
> the premium, right? I presume your daughter is reimbursing you all
> for her share. Is it kosher for the daughter to take a deduction for
> health insurance for which your wife and you technically paid?
>
> I presume you have already looked into questions like this. I am
> just not sure whether there is more that needs to be checked
> here before proceeding.
>
The plan is just the two of us. (Wife is 65+. Medicare)
> On Monday, February 13, 2023 at 9:01:44 AM UTC-6, JoeTaxpayer wrote:
>> Background -
>> I am working on my daughter's tax return.
> snip
>> I know this income will go on Schedule C (and she'll pay 2X FICA on this
>> amount), but the one real question I have now - How much of her health
>> insurance cost can go as an expense (line 14) against this income? FWIW,
>> the amount is about 25% of her total income for 2022.
>
> If eligible for this deduction, so far I think 100% of the health insurance cost
> gets reported on her Form 1040, Schedule 1, Line 17.
>
> One requirement for eligibility is that your daughter's "business" has to
> show a net profit on Schedule C.
>
> I have other questions about who is paying for what here. E.g. if this is
> a family insurance plan, then your wife and you technically pay
> the premium, right? I presume your daughter is reimbursing you all
> for her share. Is it kosher for the daughter to take a deduction for
> health insurance for which your wife and you technically paid?
>
> I presume you have already looked into questions like this. I am
> just not sure whether there is more that needs to be checked
> here before proceeding.
>
No, I haven't been asking her to reimburse me for her share of the premium.
In hindsight, I may have had her track her hours carefully, only it
wasn't until a few weeks ago I saw that one job 1099ed her. She also has
5 W2s.
For the 1099 income, and the potential $200 tax savings (i.e. not much
income from this gig, and 10% tax bracket), I'm not going to bother her
with tracking this. I'll file the required Sch C and move on.
I'll revisit this if her 1099 income goes up, to a level where the
tracking is worth it.
Thanks, all.
Adam H. Kerman
Feb 16, 2023, 2:12:50 PM2/16/23
to
JoeTaxpayer <JoeTa...@comcast.net> wrote:
>>. . .
>The plan is just the two of us. (Wife is 65+. Medicare)
>No, I haven't been asking her to reimburse me for her share of the premium.
>In hindsight, I may have had her track her hours carefully, only it
>wasn't until a few weeks ago I saw that one job 1099ed her. She also has
>5 W2s.
>For the 1099 income, and the potential $200 tax savings (i.e. not much
>income from this gig, and 10% tax bracket), I'm not going to bother her
>with tracking this. I'll file the required Sch C and move on.
>I'll revisit this if her 1099 income goes up, to a level where the
>tracking is worth it.
I don't agree. She shouldn't retroactively set up a business. She should
do it now. The point is to make the health insurance plan she needs more
affordable and if carrying the health insurance through the business is
a way to make it more affordable, then do it that way. She's a dancer
and dancers are subject to injury and she'd need to look for a plan that
includes rehab.
I think if she makes sure she takes gigs throughout the year, then she's
got a legitimate year-round business which makes carrying the health
insurance as a business expense reasonable.
>>. . .
>The plan is just the two of us. (Wife is 65+. Medicare)
>No, I haven't been asking her to reimburse me for her share of the premium.
>In hindsight, I may have had her track her hours carefully, only it
>wasn't until a few weeks ago I saw that one job 1099ed her. She also has
>5 W2s.
>For the 1099 income, and the potential $200 tax savings (i.e. not much
>income from this gig, and 10% tax bracket), I'm not going to bother her
>with tracking this. I'll file the required Sch C and move on.
>I'll revisit this if her 1099 income goes up, to a level where the
>tracking is worth it.
do it now. The point is to make the health insurance plan she needs more
affordable and if carrying the health insurance through the business is
a way to make it more affordable, then do it that way. She's a dancer
and dancers are subject to injury and she'd need to look for a plan that
includes rehab.
I think if she makes sure she takes gigs throughout the year, then she's
got a legitimate year-round business which makes carrying the health
insurance as a business expense reasonable.
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