This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
4.3 Interest/Dividends/Other Types of Income: 1099–MISC, Independent Contractors, and Self-employed
I received a Form 1099-MISC for an employee bonus. How do I report
Employee bonuses should be reported on Form W-2, not on Form 1099-MISC.
Contact your employer and ask them to issue the correct form. If they will
not issue you a Form W-2 for the bonus, complete Form 4852 (PDF), Substitute for Form W-2, Wage and Tax Statement. The
bonus amount is reported on Line 7 on your Form 1040 or 1040A or line 1 of Form 1040EZ (PDF).
I received a Form 1099-MISC from a company that paid all employees
this way. Will my income go on line 21 of Form 1040 as Other Income or
on Schedule C?4.6 Interest/Dividends/Other Types of Income: Employee Reimbursements, Form W–2, Wage Inquiries
Since your income was reported to you on a Form 1099-MISC, box 7, the company
has treated you as an independent contractor and your income is treated as
self-employment income. You will need to report that income, and any related
expenses, on Form 1040, Schedule C (PDF), Profit
or Loss from Business, or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You will also
need to use Form 1040, Schedule SE (PDF), Self-Employment
Tax, to compute and report your Social Security and Medicare tax, if
you had net earnings from self-employment of $400 or more. You may also need
to make quarterly estimated tax payments. You would use Form 1040ES (PDF), Estimated Tax for Individuals, for this.
If you feel that you were an employee and not self-employed, you can file Form SS-8 (PDF), Determination of Worker Status for Purposes
of Federal Employment Taxes. This will enable the IRS to make a determination
as to whether you are an employee or an independent contractor. To do this
the IRS will need information from you and your employer.
For information about determining whether you are an employee or an independent
contractor, please see Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide.
- Form 1040, Schedule C (PDF), Profit
or Loss from Business
- Form 1040, Schedule C-EZ (PDF), Net
Profit from Business
Instructions for Form 1040, Schedule C
- Form 1040, Schedule SE (PDF), Self-Employment
- Form 1040ES (PDF), Estimated
Tax for Individuals
- Form SS-8 (PDF), Determination
of Worker Status for Purposes of Federal Employment Taxes and Income Taxes
- Publication 334, Tax Guide for Small Business
- Publication 15-A (PDF), Employer's
Tax Guide to Fringe Benefits
- Tax Information for
- Tax Topic 355, Estimated Tax
Is tuition reimbursement for school a form of taxable income or
If you receive educational assistance benefits from your employer under
an educational assistance program, you can exclude up to $5,250 of those benefits
each year. This means your employer should not include the benefits with your
wages, tips, and other compensation shown in box 1 of your Form W-2. You do
not have to include the benefits on your income tax return. The exclusion
also applies to educational assistance for graduate level courses.
To qualify as an educational assistance program, the plan must be written
and must meet certain other requirements. Your employer can tell you whether
there is a qualified program where you work.
Tax-free educational assistance benefits include payments for tuition,
fees and similar expenses, books, supplies, and equipment. The payments do
not have to be for work-related courses. Educational assistance benefits do
not include payments for the following items:
(1) Meals, lodging, transportation, or tools or supplies (other than textbooks)
that you can keep after completing the course of instruction.
(2) Education involving sports, games, or hobbies unless the education
has a reasonable relationship to the business of your employer, or is required
as part of a degree program.
For further information, please see, Publication 508, Tax Benefits
for Work Related Education .
Tax Topic 513 Tax Topic 513, Education Expenses
My employer is including amounts paid graduate school related expenses
on my Form W-2. Where do I claim education expenses on my Form 1040?
The law changed in 2002 to allow up to $5,250 in graduate school related
expenses paid by educational assistance program to be excluded from gross
income. If your employer has included amounts paid for graduate school related
expenses amounting to $5,250 or less with your wages, tips, and other compensation
shown in box 1 of your W-2, ask your employer for a corrected W-2. If you
have received amounts for graduate school related expenses that are includable
in gross income, you may deduct expenses attributable to those amounts on Form 1040, Schedule A (PDF), Itemized Deductions.
On my Form W-2, why would line 1, wages, tips, other compensation,
be different from line 3, social security wages, and line 5, medicare wages
When the amount in box 1 is less than the amount in boxes 3 and 5, you
have received some employee compensation that is not subject to Federal income
tax but is subject to Social Security and Medicare taxes. The most common
example of this is deferred compensation, e.g. contributions to a 401(k) plan.
Another example is an employee benefit plan that provides for the contribution
of pretax dollars (e.g. cafeteria plan, flexible spending arrangement, dependent
care plan, etc.).
When the amount in box 1 is more than the amount in boxes 3 and 5, you
have received some employee compensation that is not defined as wages for
the purpose of social security and Medicare taxes. An example of this would
be when a child works for his or her parent in the parent's trade or business
and is under age 18.
Is my employer supposed to include mileage reimbursement as a part
of my gross income on my Form W-2, and do I include it on my return as wages,
tips & salaries?
That depends on whether you were reimbursed under an accountable plan or
under a nonaccountable plan. Generally, an employer will have an accountable
plan if it pays business expenses that would otherwise be deductible by the
employee, requires the employee to substantiate the expense, and does not
permit the employee to keep any reimbursements that exceed expenses. If the
employer does not use an accountable plan, mileage reimbursement would be
included in your wages on Form W-2. For more information on reimbursements
and accountable plans, refer to Chapter 6 of Publication 463, Travel,
Entertainment, Gift, and Car Expenses.
If your mileage reimbursement is included in box 1 on Form W-2, you need
to enter that amount on the "wages, salaries, and tips" line of your tax return.
If you itemize your deductions on Form 1040, Schedule A (PDF), Itemized
Deductions, you may deduct the business transportation expense as an
employee business expense, subject to the 2% limitation of adjusted gross
income. You may usually deduct either your actual business automobile expenses
or use the standard mileage rate. For more information on when you may use
the standard mileage rate, refer to Chapter 4 of Publication 463, Travel,
Entertainment, Gift, and Car Expenses.
Is there any amount of wages too low to report on my tax return?4.10 Interest/Dividends/Other Types of Income: Ministers' Compensation & Housing Allowance
There is no wage amount too low that you would not include in gross income
on your tax return. If your total income were below your filing requirement,
however, you would not have to file a tax return. However, you may wish to
file to claim a refund of withheld taxes. For information on filing requirements,
please refer to the instructions for your income tax form.
For a minister, is the housing allowance included in box 1 with
wages?12.4 Small Business/Self-Employed/Other Business: Form W–4 & Wage Withholding
No. The church would enter the amount of any parsonage allowance and any
utilities allowance in box 14 of Form W-2. If the housing allowance exceeds
the minister's qualified expenses, the minister would add the excess to the
wage amount and enter the sum on line 7 of Form 1040.
I hired a babysitter to care for my children in my home. Do I need
to withhold taxes on her wages?
Household employees include housekeepers, maids, baby-sitters, gardeners,
and others who work in or around your private residence as your employees.
If you pay a household employee cash wages of $1,400 or more in 2003, you
generally must withhold social security and Medicare taxes from all cash wages
you pay to that employee. For specific information, refer to Tax Topic 756, Employment
Taxes for Household Employees , or Publication 926, Household
Employer's Tax Guide .
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