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Surprise 1099 options please

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  • Surprise 1099 options please

    1099 for $1000 showed up.
    w-2 with contract that prohibits outside earnings. This was issued by the fellowship separately for schools paying the for “game coverage”.
    No anticipated ability to generate additional income.
    Is this an opportunity to open a solo 401k ?
    The path would be open a SEP IRA and contribute before tax filing for 2019. Then rollover in 2020 to Solo 401k.
    The 2019 was fellowship w-2.
    Hate to open a SEPIRA and a Solo 401 to simply park $1000. That solo 401k might never be used again, but it sure might be handy .
    Shortcuts or thoughts.

  • #2
    Taxable scholarship and fellowship income is considered wages even if it is incorrectly reported on a Form 1099-MISC. It is reported on Form 1040 Line 1 Wages, salaries, tips, etc... See Form 1040 instructions, Page 21, Line 1.

    The challenge is to do so in a manner that will pass Form 1099-MISC matching. Tax software typically has workarounds to facilitate this depending on whether it is reported in Box 3 or Box 7. Box 3 involves reporting it as other income on Form 1040 Schedule 1 with a corresponding negative entry cancelling it out. Box 7 involves reporting it as income on Schedule C, with an equal amount reported as an expense and thus a business profit of $0.

    In both cases it is then reported as taxable wages on Form 1040, Line 1.

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    • #3
      Box 6 - reported on schedule C
      This is actually services a team physician licensed in the state. Game physician for the NFL, college, and colleges.
      You are in attendance, called upon to examine and make medical decisions when needed. The work was covered under malpractice insurance.
      Pay is per game worked. Payment for medical services, which it was. It is from a different entity than the institution.

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      • #4
        Yes, this is an opportunity to contribute to a SEP. But you certainly won’t be able to park $1k. The calculation w/b net sch C profit, which is $1k less any related expenses (such as mileage to games) less 1/2 FICA tax. I’d say $150 at the max b/c team physicians tend to have OOP business expenses. So...if you want to do this merely to save taxes, you’re not gonna get very far. If you want to have a solo-k for future rollovers, might be worth considering.

        One of the extremely rare instances in whichspiritrider and I disagree, but I can’t always bat 1000. And, for all practical purposes, I’m far from close, anyway.
        Last edited by jfoxcpacfp; 02-15-2020, 10:46 AM.
        Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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        • #5
          I stand corrected. I was thrown off by the reference to fellowship income which this is not.

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          • #6
            Originally posted by jfoxcpacfp View Post
            Yes, this is an opportunity to contribute to a SEP. But you certainly won’t be able to part $1k. The calculation w/b net sch C profit, which is $1k less any related expenses (such as mileage to games) less 1/2 FICA tax. I’d say $150 at the max b/c team physicians tend to have OOP business expenses. So...if you want to do this merely to save taxes, you’re not gonna get very far. If you want to have a solo-k for future rollovers, might be worth considering.

            One of the extremely rare instances in whichspiritrider, but I can’t always bat 1000. And, for all practical purposes, I’m far from close, anyway.
            W-2’s are over the FICA limit. I am unaware of a requirement to claim expense deductions. Could be $1k income.

            This retirement crap is frustrating. Setting up 6 brokerage accounts and now 2 more for one year of retirement activities is ridiculous. A solo-k requires 1099. The would be the value.
            Don’t have a clue if it would ever be used.

            An IRA, a Rollover IRA, a SEP (all with zero balance) simply to dance through hoops. No one ever claimed the tax code was intended to be efficient. Frustrating. Geez. Glad I didn’t do taxes.

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            • #7
              Originally posted by Tim View Post
              W-2’s are over the FICA limit. I am unaware of a requirement to claim expense deductions. Could be $1k income.

              This retirement crap is frustrating. Setting up 6 brokerage accounts and now 2 more for one year of retirement activities is ridiculous. A solo-k requires 1099. The would be the value.
              Don’t have a clue if it would ever be used.

              An IRA, a Rollover IRA, a SEP (all with zero balance) simply to dance through hoops. No one ever claimed the tax code was intended to be efficient. Frustrating. Geez. Glad I didn’t do taxes.
              just open a solo 401k when needed. There is no requirement that I’m aware of to make a contribution nor to have current self employment earned income nor to have previously opened a sep ira. Problem solved. All present agree the nominal contribution and tax savings are meaningless. So forget it.
              my radiology group is hiring, pm if you can do msk and are interested

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              • #8
                Originally posted by Tim View Post
                I am unaware of a requirement to claim expense deductions. Could be $1k income.
                Setting aside the solo 401k and SEPIRA issues, why wouldn’t you want to claim any available deductions against the income? Or, did you just mean related to calculating possible retirement plan contributions?

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                • #9
                  Originally posted by Larry Ragman View Post

                  Setting aside the solo 401k and SEPIRA issues, why wouldn’t you want to claim any available deductions against the income? Or, did you just mean related to calculating possible retirement plan contributions?
                  I would spend more time convincing my darling daughter to even give me a list of games covered.
                  The only thing I got is a 1099 for $1k. Not worth the effort is the likely answer. I plan on asking but having a solo 401k available for future rollovers is the primary benefit, not the current taxes. Do not anticpate future 1099 income. Might come in handy if a future employer has poor 403b options. Roll it over into your solo401k would mean something then (if and when, who knows).

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