During the summer of 2019, college student Jason worked for his uncle, a painting contractor, for two weeks, and was paid $1,600 cash for his help painting a house for one of his uncle’s customers. At the end of 2019, his uncle filed a Form 1099MISC indicating he had paid non-employee compensation of $1,600 to Jason (copies of the form were sent to Jason and the IRS). When it came time to file his 2019 income tax return, the tax software indicated he had to pay self-employment tax (in addition to income tax) on the $1,600 payment received from his uncle. You did some research online and found one primary authority (only one), a Tax Court case (John A. and Mary L. Batok vs. Commissioner) that seemed to indicate a one-time job was not considered regular or continuous and thus did not rise to the level of a trade or business subject to self-employment tax. Contacting the IRS to ask how to handle this issue is not an option. Should Jason pay self-employment tax on the $1,600? Is there a way he could report the $1,600 on his return without paying self-employment tax that may avert questions from the IRS, and not get him (or you) a penalty if the IRS subsequently audits him and determines self-employment tax should apply? In answering this question, use only the information provided (do not research further; assume this the only information you can find).
During the summer of 2019, college student Jason worked for his uncle, a painting contractor, for two weeks, and was paid $1,600 cash for his help painting a house for one of his uncle’s customers. At the end of 2019, his uncle filed a Form 1099MISC indicating he had paid non-employee compensation of $1,600 to Jason (copies of the form were sent to Jason and the IRS). When it came time to file his 2019 income tax return, the tax software indicated he had to pay self-employment tax (in addition to income tax) on the $1,600 payment received from his uncle. You did some research online and found one primary authority (only one), a Tax Court case (John A. and Mary L. Batok vs. Commissioner) that seemed to indicate a one-time job was not considered regular or continuous and thus did not rise to the level of a trade or business subject to self-employment tax. Contacting the IRS to ask how to handle this issue is not an option. Should Jason pay self-employment tax on the $1,600? Is there a way he could report the $1,600 on his return without paying self-employment tax that may avert questions from the IRS, and not get him (or you) a penalty if the IRS subsequently audits him and determines self-employment tax should apply? In answering this question, use only the information provided (do not research further; assume this the only information you can find).
Chapter6: Business Expenses
Section: Chapter Questions
Problem 60P
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- During the summer of 2019, college student Jason worked for his uncle, a painting contractor, for two weeks, and was paid $1,600 cash for his help painting a house for one of his uncle’s customers. At the end of 2019, his uncle filed a Form 1099MISC indicating he had paid non-employee compensation of $1,600 to Jason (copies of the form were sent to Jason and the IRS). When it came time to file his 2019 income tax return, the tax software indicated he had to pay self-employment tax (in addition to income tax) on the $1,600 payment received from his uncle. You did some research online and found one primary authority (only one), a Tax Court case (John A. and Mary L. Batok vs. Commissioner) that seemed to indicate a one-time job was not considered regular or continuous and thus did not rise to the level of a trade or business subject to self-employment tax. Contacting the IRS to ask how to handle this issue is not an option. Should Jason pay self-employment tax on the $1,600? Is there a way he could report the $1,600 on his return without paying self-employment tax that may avert questions from the IRS, and not get him (or you) a penalty if the IRS subsequently audits him and determines self-employment tax should apply? In answering this question, use only the information provided (do not research further; assume this the only information you can find).
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ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
