"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
[snip]
- quote -

"Other income" fits the sort of prizes the OP was referring
to. These aren't payments for services rendered or to be
rendered; they're awards in recognition of some sort of
eminent achievement. So far as I can tell, they should show
up in 1099-MISC box 3 and be reported as "other income"
unless there are some unstated facts here.

- quote -

Could. University policies often treat awards won by
employees as W-2 income.

Only way to avoid tax on the prizes altogether, though, is
to designate the funds to go to an appropriate institution:
you have to do this before receiving the award, and any
organization making the sort of awards that are being
discussed here will be aware of the procedure that needs to
be followed.

--
Chris Green

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Arthur L. Rubin <ronnirubin[at]sprintmail.com> wrote:
- quote -

If this is from the employer, sure.

B`ut if the Pulitzer prize commitee awards and pays this money to
an employee of the New Yorker, then it comes under the category
of Prizes & Awards (See Pub 525) and no SE.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Arthur L. Rubin <ronnirubin[at]sprintmail.com> wrote:

- quote -

Even if the prize comes from a third party that is unrelated
to the employer? I don't think so. (Is a Nobel Prize wage
income for a working physicist?)

Seth

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Arthur L. Rubin wrote:

- quote -

Actually, it would be an interesting issue from an SE/FICA
standpoint and would fall between the cracks <grin> --as I
recall, the issue has arisen for payments in the auto
industry (if I remember right) directly from manufacturers
to dealers' employees. The payments aren't self-employment
income because they are earned in the trade or business of
being an employee.

However, since the entity paying the amount doesn't have an
employment arrangement with the individual, it's not subject
to FICA taxes either.

The same analysis would seem to apply here.

--
Ed Zollars, CPA
Phoenix, Arizona

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JanZtax wrote:

- quote -

I am sure that arguments can be made either way. But, since
she appears to be in the "trade or business" of being a
poet, I suspect that the IRS would hold these awards to be
SE income.

Ironically, she might have been better off in this regard to
have treated any income along the way as "hobby" related,
rather than filing the Schedule Cs.

MTW

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"MTW" mtwingcpa[at]yahoo.com wrote:

- quote -

She does office work to support herself but she has filed
a schedule C the last 5 years or so, showing her occupation
as writer/poet.

- quote -

Nothing. Some of her poetry was published in a national
poetry magazine and it was seen by the "right" people who
nominated her for the awards. This is not a sham thing --
one of the awards is a Guggenheim.

- quote -

She has received a couple of other $10,000-20,000 awards in
the past and her prior preparer listed them each year as
other income. At the same time, each return included a
schedule C (as a writer/poet) with less than $100 income and
approx $2000 in expenses.

Thanks for thinking about this,

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Harlan Lunsford wrote:
- quote -

Actually, I'd have to disagree with that. I still think
it's "other income", but I cannot imagine that the
poetry-writing community is so small that one could be
awarded a prize without having a significant body
of work. It might be a "hobby" rather than a
"business" because it's not expected to be profitable,
but it would certainly have to be a regular activity.

However, I think this is still "other income", as
are the Nobel and Field prizes. (The Field prize is
in Mathematics, as there is no Nobel prise in
Mathematics.)

As an aside, if the client were EMPLOYED as a
poetry writer, wouldn't this argument make the
prize "wage income", rather than SE income?

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Jan Zobel EA <janztaxnospam[at]aol.com> wrote:

- quote -

See the discussion on the bottom of Page 28, Pub 525, Nobel
Prizes ....

While ordinarily, prizes would be taxable income (line 21;
not SE). under the special conditions referenced above,
client might be able to use the money towards creating more
poetry while not paying tax on it.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Jan Zobel EA wrote:

- quote -

Most definitely. Doesn't sound like your client is in a
regular trade or business.

ChEAr$,
Harlan Lunsford

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janztaxnospam[at]aol.com (Jan Zobel EA) wrote:

- quote -

How was this "prize" reported to her, 1099-MISC (Box 7 or
Box 3)? Unless it was considered "Nonemployee compensation",
I would treat it as Other Income (line 21) on the 1040. Be
sure and include an explanatory statement when filing.

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janztaxnospam[at]aol.com (Jan Zobel EA) wrote:

- quote -

How was this "prize" reported to her, 1099-MISC (Box 7 or
Box 3)? Unless it was considered "Nonemployee compensation",
I would treat it as Other Income (line 21) on the 1040. Be
sure and include an explanatory statement when filing.

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Jan Zobel EA wrote:

- quote -

As long as she did not perform services to obtain the award
and she is not required to perform services in the future in
order to obtain or keep the award, it is not SE income. Use
Line 21 Other Income.

--
Alan
http://taxtopics.net

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Jan Zobel EA wrote:

- quote -

1) What is her normal line of work and/or primary income source?

2) Exactly what DID she do to win these awards?

- quote -


MTW

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Jan Zobel EA wrote:

- quote -

Am I missing something here? Aren't awards -- even if
requested -- considered unearned income?

"Other income" seems correct to me.

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Met with a client today who won a $100,000 poetry award this
year and another $40,000 award (I had no idea that writing
poetry could be so profitable!) I was figuring out her
estimates for 2004 and at first included the award money in
with her other self-employment income. My thinking was that,
like book royalties for a self-employed writer, the income
belonged on schedule C. But after questionning her further,
I learned that she didn't do anything to get these awards.
These awards were not for a specific poem and she does not
have to report on how she spent the money or provide any
services in exchange for the awards. In other words, they
were to sort of "reward" her for her writing and presumably
encourage her to do more of it. So, even though I'm sure the
IRS would look long and hard at a return showing $140,000 as
'other income', I'm thinking maybe that's where it belongs.
Thoughts?

Jan Zobel EA

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