The tax alternative to 'other income' — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

The tax alternative to 'other income'

Get PDF file

by on
in Employee Benefits Program,Employment Law,Human Resources

Q I just received an IRS deficiency notice about “other income” in 2005. Looking back, the firm should have listed this amount on the 1099 as “nonemployee compensation,” which is how I reported it on my return. Do I have a problem? K.R., Manahawkin, NJ

A Probably not. We’re assuming you earned fees from this particular firm as an independent contractor. If you properly included the fees as self-employment income on Line 1 of Schedule C, you should not owe any additional taxes or penalties. Explain the situation to the IRS in a response letter and provide documentation to support your position. But make sure you respond to the IRS inquiry within the allotted time period.

Tip: If the IRS requests it, you may have to obtain a revised Form 1099 from the firm that reported the income in the wrong box.

Leave a Comment

Previous post:

Next post: