how to get out of paying self employment tax on 1099-NEC received by a student

[DDOG]

college student receives a 1099-NEC for $3,000.00 for helping a baseball organization collecting entry fees and other misc duties.  This is her only income for the year.  In the past I have always posted to a schedule C and paid self employment on this amount.  Then I read if this is not a business adventure that a schedule C should not be prepared.  Any advise on how to prepare.

[IRonMaN]

The "other income" line would be the route to go ------------ assuming they have other income that would require them to file a return.

[Jim-from-Ohio]

if it's a 1099 NEC though the IRS will be looking for that on Schedule  C.  What I have done in these instances is pick it up in income on schedule C. then deduct it under other expenses, labeling it, NOT A BUSINESS, REPORTED AS OTHER INCOME. then of course report it as other income

[George4Tacks]

I have only recently been introduced to ProSeries. The office I am at routinely enters the 1099NEC worksheet and then checks the box to throw it to other income. The feeling is that the 1099NEC is shared in the e-file and that will help IRS trace.

That is all I know, and I will stand by it (but not very close).

[BobKamman]

Sounds to me like she's in the business of helping a baseball organization collect entry fees and other miscellaneous duties.  But what do I know?  I'm not even sure IRS has ever issued a CP-2000 just to collect $425 SE tax.  

@George4Tacks I don't know that the 1099-NEC gets transmitted just because it's part of the IRS-assigned clerical duties.  My guess  is that it does not.  

[George4Tacks]

@BobKamman The EA I am working with had a prior audit experience. Apparently part of the issue was the the 1099MISC with rent income was not entered in the software and the auditor could tell that. Maybe I will get nosey and see if I can look at the actual transmittal file.

[rbynaker]

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@George4Tacks wrote:

@BobKamman The EA I am working with had a prior audit experience. Apparently part of the issue was the the 1099MISC with rent income was not entered in the software and the auditor could tell that. Maybe I will get nosey and see if I can look at the actual transmittal file.

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I've heard this recently but I filed it under "things I heard that probably aren't true."  I've always thought of these as a software tool to help people prepare tax returns who don't otherwise know how to prepare tax returns.  So ProSeries inherited it from TurboTax but I never thought it actually went anywhere.  I had a CPE last year where the instructor said that she always enters them "so the IRS knows she saw the 1099 and dealt with it," insisting that the 1099 info gets transmitted.  <shrug>

My (limited) understanding is that numbers in boxes on tax forms and schedules get transmitted with the return.  Also (because we can't attach them), W2s and 1099-Rs get transmitted (to help the IRS match them).  That's why we have to fill out all of the address details on those as an ERO responsibility.  Does all tax software have a 1099-MISC/-NEC "form" that you can activate?  I think there might be something in Drake but I've never used it.  I just enter the income where it's supposed to go.  C, E, fka Line 21, etc.

Getting back to the OP, we're light on facts but my first inclination is they were probably an employee (how much control did the employer have over their duties, etc.) but nobody wanted to deal with the hassle of W2s for "only" $3K.  Beyond that, maybe they just showed up for one event and got paid $3K, but it's more likely that they showed up regularly, continuously, and with the intention of making a profit.

[Dusty2 · Accepted solution]

" In the past I have always posted to a schedule C and paid self employment on this amount.  "

To me this says she does this year after year and knows that it is self employment income and has to be filed on a Schedule C.

Dusty