Ask The Taxgirl: Form 1099 & Schedule C

Taxpayer asks:

Hi,

I have a question, I’m hoping you can help me resolve my issue.

My husband recieved a 1099 Misc form as his only source of income, but we have be told that he has to file as self-employed been he has to file a Schedule C form, but our conflict is that it is not his dump truck and he does not generate any expenses being he is only an employee.

I hope you can help me resolve my doubts.

Taxgirl says:

Hmm. Obviously, without knowing more specifics, I can’t tell whether your husband is being properly classified or not. But I will say this: it sure sounds like he’s more of an employee than an independent contractor. And here’s why…

The IRS broadly defines an independent contractor as one who has “the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.”

So red flag #1 for me is that you state that your husband does not own the tools that he uses for his job (the dump truck belongs, I’m assuming to the person that pays your husband).

Red flag #2 for me is that you state that your husband has no expenses associated with the job. Most independent contractors have expenses as they provide their own equipment. The IRS considers expenses a factor in classification of workers as independent contractors, querying the extent to which the worker has unreimbursed business expenses; the extent of the worker’s investment in the facilities used in performing services; and the extent to which the worker can realize a profit or incur a loss.

Other factors would include whether your husband makes himself available to other potential businesses (I’m guessing no since he doesn’t own the truck) and what kind of benefits and expenses, if any, are paid by the hiring business.

I would suggest that you contact a tax professional to discuss your circumstances and make sure that you’re being classified properly.

Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
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Kelly Phillips Erb

Kelly Phillips Erb is a tax attorney, tax writer, and podcaster.

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