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Author: EmmaFrances Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121185  
Subject: 1099 -Misc & self employment Date: 2/3/2003 12:14 PM
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I received my first 1099-Misc Friday and have a question about self-employment tax. My employer reported $3000 in "non-employee compensation" in box 7. The figure includes $1500 for a research grant that I received from the institution (a competitive award), and $1375 for work I did as an independent contractor for them (oh, and yes they are correcting my form to the correct amount). As I understand it, I owe self-employment tax on the $1375, but not on the $1500. My concern is that, because the 2 different types of income are reported in the same box, that the IRS will expect me to pay self-employment tax on the whole amount, not just the $1375 - after all, they don't know where the money is coming from. Is my interpretation correct, or is there something that I'm missing? And if it is right, will my failure to calculate the self-employment tax on the entire amount listed in box 7 raise a big red flag? The 1099-Misc indicates that generally self-employment tax is owed on amounts in box 7, but doesn't indicate in what instances tax isn't owed.

Thanks for any guidance,
EF
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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63449 of 121185
Subject: Re: 1099 -Misc & self employment Date: 2/3/2003 1:00 PM
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I owe self-employment tax on the $1375, but not on the $1500

Why?

I'm not an accountant but it seems that both would be subject to SE tax.

buzman

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Author: EmmaFrances Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63451 of 121185
Subject: Re: 1099 -Misc & self employment Date: 2/3/2003 2:05 PM
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The $1500 was a research grant award, that happened to be offered through my employer. I did my own research that did not in any way relate to my job, or produce any result that was to be owned or used by my employer (not work for hire or as an independent contractor). I know the $1500 is taxable as additional income, but why should it be subject to self-employment? Or does self-employment tax apply to grants?

EF

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Author: tritha Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63458 of 121185
Subject: Re: 1099 -Misc & self employment Date: 2/3/2003 5:06 PM
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The $1500 was a research grant award, that happened to be offered through my employer. I did my own research that did not in any way relate to my job, or produce any result that was to be owned or used by my employer (not work for hire or as an independent contractor). I know the $1500 is taxable as additional income, but why should it be subject to self-employment? Or does self-employment tax apply to grants?

EF



Generally income received as a grant would not be subject to self employment tax and based on the facts you describe I do not think you will have to pay self employment tax on it. Since they are going to issue you a corrected 1099 try to have them reclassify the grant as other income. It would go on form 1099- misc in box 3 (other income) instead of non employee compensation.

bill

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63459 of 121185
Subject: Re: 1099 -Misc & self employment Date: 2/3/2003 7:27 PM
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Generally income received as a grant would not be subject to self employment tax

Thanks, y'all. I did not know that!

buzman

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