Re: How to handle 1099-Misc

04-14-2006, 07:45 AM

"Bill" <an_ordinary_guy_158[at]hotmail.com> wrote:
- quote -

> tc[at]coxrt.com (Tony=A0Cox) posted:
> > "Paul Thomas, CPA" <paulthomascpapc[at]bellsouth.net> wrote:
> > > "kp09" <kapil.rajpal[at]qlogic.com> wrote

> > > > I need some help. I am stuck in a unique
> > > > situation i.e. my earlier company was
> > > > supposed to give my bonus but it was stuck
> > > > due to some conflict. After I had left that
> > > > company they agreed and paid my bonus,
> > > > but since I had already left the company this
> > > > amount did not show up in the W-2 form,
> > > > instead they sent me 1099-Misc. Now, this
> > > > amount shows up as a non-employee
> > > > money and since it had no deduction for
> > > > social or medical taxes, I do not know how
> > > > to handle it. Can someone give me tips to
> > > > handle this situation.
> > > > <elided
> > > Schedule C or S-EZ. While not 100% correct,
> > > will cover it on your part. The employer
> > > should have included this on your W-2 and
> > > withheld Social, Medicare and the income
> > > taxes, matching their half of the Social and
> > > Medicare tax.
> > > Your only other option would be to create a
> > > Substitute W-2 and pay your taxes (and your
> > > half of Social and Medicare).

> > What is a substitute W-2 & how does this
> > work?
> > It seems to me that if the bonus was earned
> > when this fellow was an employee, it's W-2
> > income and his employer ought to be paying
> > the 2nd 1/2 of the SS and Medicare tax, not
> > him. He may possibly have an unnecessary
> > estimated tax penalty too. Also, wouldn't
> > creating a substitute W-2 (however that
> > works)] indicate to the IRS that his old
> > company is misclassifying workers by paying
> > them as ICs?
> > Surely the best thing to do here would be to
> > first contact the company and get them to
> > correct their mistake? Most of the answers in
> > this thread put the onus (and the extra tax) on
> > the poor fellow who just got his bonus!!

> You've made a fair point.
> Speaking for myself only (but, I suspect for others as
> well), the answer was keyed to the OP's request for "some
> tips on how to handle this situation" ... and the timing of
> the query -- just a few days before the deadline for filing
> -- led me to focus on pragmatic solutions, rather than the
> _ideal_. As you point out, the _ideal_ solution would be to
> contact the former employer, and have them redo the paper
> work. However, that would require a return of sufficient
> funds to cover the OP's share of SS and Medicare deductions,
> and some significant time would be required.

Well, I wasn't getting at you personally. Its just that
it seemed to me everyone was missing the obvious.
Why not pay what's owed and file for an extension?

Anyway, what is a substitute W-2?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

#-1 04-13-2006, 03:28 AM

tc[at]coxrt.com (Tony=A0Cox) posted:
- quote -

> "Paul Thomas, CPA" <paulthomascpapc[at]bellsouth.net> wrote:
> > "kp09" <kapil.rajpal[at]qlogic.com> wrote

> > > I need some help. I am stuck in a unique
> > > situation i.e. my earlier company was
> > > supposed to give my bonus but it was stuck
> > > due to some conflict. After I had left that
> > > company they agreed and paid my bonus,
> > > but since I had already left the company this
> > > amount did not show up in the W-2 form,
> > > instead they sent me 1099-Misc. Now, this
> > > amount shows up as a non-employee
> > > money and since it had no deduction for
> > > social or medical taxes, I do not know how
> > > to handle it. Can someone give me tips to
> > > handle this situation.
> > > <elided
> > Schedule C or S-EZ. While not 100% correct,
> > will cover it on your part. The employer
> > should have included this on your W-2 and
> > withheld Social, Medicare and the income
> > taxes, matching their half of the Social and
> > Medicare tax.
> > Your only other option would be to create a
> > Substitute W-2 and pay your taxes (and your
> > half of Social and Medicare).

> What is a substitute W-2 & how does this
> work?
> It seems to me that if the bonus was earned
> when this fellow was an employee, it's W-2
> income and his employer ought to be paying
> the 2nd 1/2 of the SS and Medicare tax, not
> him. He may possibly have an unnecessary
> estimated tax penalty too. Also, wouldn't
> creating a substitute W-2 (however that
> works)] indicate to the IRS that his old
> company is misclassifying workers by paying
> them as ICs?
> Surely the best thing to do here would be to
> first contact the company and get them to
> correct their mistake? Most of the answers in
> this thread put the onus (and the extra tax) on
> the poor fellow who just got his bonus!!

You've made a fair point.

Speaking for myself only (but, I suspect for others as
well), the answer was keyed to the OP's request for "some
tips on how to handle this situation" ... and the timing of
the query -- just a few days before the deadline for filing
-- led me to focus on pragmatic solutions, rather than the
_ideal_. As you point out, the _ideal_ solution would be to
contact the former employer, and have them redo the paper
work. However, that would require a return of sufficient
funds to cover the OP's share of SS and Medicare deductions,
and some significant time would be required.

Clearly, there isn't time to work that all out before April
17, so my focus was on what to do "now" in responding to the
OP's request for "some tips on how to handle" things.

Bill
______________________________________

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

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