A recent thread on 1099-MISC, plus "beer for payment" prompts me to ask this: Instructions for Form 1099-MISC state to use it "only when payments are made in the course of your trade or business. Personal payments are not reportable." Suppose person A makes a one-time transfer of $70,000 to person B. From person A's viewpoint, this was payment for services received from B over a period of 18 months, based on a verbal agreement for B to provide bookkeeping, household management, selection of other personal service providers, and so on, for the benefit of A. B was also reimbursed for out-of-pocket expenses such as travel to A's home to provide these services. From person B's viewpoint, this sum was simply a gift, and had nothing to do with any services provided. B does not consider himself in the business of providing such services. So, person A would like to issue a 1099-MISC to B, but is precluded from doing so by the instructions (A does not have a W-9 from B, but does have B's TIN and other personal information). Person A does not want to file a gift tax return, and would not benefit from any deduction for the payment. Person B wants the opposite - to not pay any self-employment or income tax on the amount, rather to simply have it treated as a gift. What does the IRS want to happen in this situation? As it stands, they will receive neither a 1099-MISC (because of their own instructions), nor a report of "other income" (Form 1040 line 21) from B, nor a gift tax return (because of the disagreement as to the nature of the transfer). Oh, and if you hadn't guessed already, person A is an elderly, widowed parent with very little income and modest assets, while person B is her adult child. At the beginning of the 18-month period, A had added B as a joint tenant to A's bank account to facilitate the provision of bill-paying services by B. The $70,000 transfer was initiated by B out of the joint account into his own account, on the last day of the 18-month period. Does this additional information change the situation significantly?
-Mark Bole