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URL:  http://boards.fool.com/last-october-i-received-a-finders-fee-from-my-10151225.aspx

Subject:  Re: Finders fees Date:  4/10/1998  10:11 PM
Author:  TMFTaxes Number:  3401 of 121096

[[Last October I received a finders fee from my headhunter for connecting him with a former staff
member of mine who was looking for work. Now it's time to report the income, but my software
(MacInTax) only seems to provide one route for doing this -- as income from a business (as if I
was a consultant, for instance). But the income certainly doesn't feel like that kind of thing
'philosophically.'

I've been over to www.1040.com and some of its links, and it wasn't clear to me just what should
be done. The software itself asked questions that would suggest it matters how my headhunter
reported the income to me.

I don't know if it will make a hill of beans difference in the final results, but I'd like to find out how to
report it properly, then I can figure out how to do it in MacInTax. Thanks.]]

Since you are not in the "business" of headhunting, your finders fee will be simple "other income" reported on Line 21 of the 1040, not subject to self employment taxes.

If the headhunter reported these finders fees to you on form 1099MISC, as non-employee compensation, the IRS will generally be looking for it on Sch C. But if this is the case, you can still attach an explanation to your return explaining that this is not "trade or business" income, and not subject to SE taxes.

TMF Taxes
Roy
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