1099-Misc: Other Income vs. Nonemployee Compensation

My Walk Tax Time

One of my small business clients received a form 1099-misc from one of her customers for whom she’d performed a business service. The customer unknowingly reported the income using box 3: “Other Income” when she should have reported it in box 7: “Nonemployee Compensation”.

So what’s the difference? One is for payment for services performed, and the other is not.

  • Box 3 is for: prizes and awards that are not for services performed. Include the fair market value (FMV) of merchandise won on game shows. Also include amounts paid to a winner of a sweepstakes not involving a wager.
  • Box 7 is for: fees, commissions, prizes and awards for services performed as a nonemployee…

Does it matter?  Well, yes… In order to accurately complete the tax return, and to make sure there are no mishaps at some point in the future, my client must report this income on…

View original post 93 more words


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s