Did a fair amount of surveys over the past year - enough to generate a 1099 MISC form. Obviously, this income gets reported but my question is should I be paying self employment taxes in addition to income taxes? I would consider this to be a sporadic source of income rather than true self employment but would uncle sam see it this way too? Any advice on how to handle this extra income would be appreciated.
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Just to be clear, the issuing company is only complying with its obligations. Income, whether officially reported to IRS or not, is still taxable. You will owe Medicare and income taxes on it. I've been trying to think of some offsetting deductions, but can't come up with any other than allocating a part of your tax prep fees to the sch C. Maybe a small part of your internet costs.Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087
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- Yes, it is worth doing it for $5,000, you can contribute 25% (less the Medicare adjustment). Having the rollout ability from a 401k from other jobs is well worth it because it will preserve your ability to back-door Roth.
- No, you cannot set one up for 2015. The deadline was 12/31/15
- Your CPA or CFP should have suggested you do this during tax planning
Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087
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Quick related question...
When I was about to fill out a survey through Sermo, it said that I may need to report the honorarium to the state medical board, in my case Virginia. I tried looking up what Virginia's requirements for reporting were, but wasn't able to find information, so I passed on doing surveys... Any idea on where to find this information? I have a second state license, Missouri, that I plan on letting lapse in a couple of years. Do I need to report to them too?
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Thanks for the feedback so far. This may be a rookie question but moving forward I would elect to setup a 401K to put this money into. For the sake of discussion, could I put the same 5k into a 401k and avoid paying taxes on it altogether provided I stay under my yearly 18k total 401k limit? Basically what I'm asking is, what can I do to avoid losing 40% of this income moving forward?
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Yes, you can set up a SOLO-k contribute $5k for 2016 but it will count toward your annual $18k aggregate contribution limit. And I guess you'll have to do a lot more surveys! It will reduce your taxable income by that much but you'll still owe Medicare (and, if applicable, FICA - not sure what stage you're at in your career).
The deadline for opening a 401k for 2015 was 12/31/15/Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087
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so the IRS expects that you report miscellaneous income that is not reported on a 1099?
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yes
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so the IRS expects that you report miscellaneous income that is not reported on a 1099? If its not reported to them, how would they know about it? If someone makes $35 doing an online survey (or even $599) do they actually report this income?
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Absolutely. Your responsibility to report income is not mitigated by the dereliction of the party paying you that income. You are also required to report income below the reporting threshold of $600 to the IRS.
Under the new law, because even $1 over the $415k income limit can disqualify you from taking a section 199a deduction, reporting this taxable income is more important than ever.Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087
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