payment for insurance policy renewals on 1099-MISC

Brew1 17 years ago

Residual payments from the renewal of policies written by agents now retired.

I've had one client who receives these and we've always used Schedule C. Just looked over a return with $16,000+ from a 1099-MISC, Box 7, listed on Line 21. Not coming up with anything from my reference materials; are these type of payments not subject to self-employment taxes?

My default position is that, without evidence to the contrary, I'm going to put "nonemployee compensation" of greater than $400 on a Schedule C. Would love it if someone can refer me to an exception for this income.

Thanks,

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Alan 17 years ago

This question pops up so often the IRS actually added it to Pub 334:

Insurance agent, retired. Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ.

However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ.

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Arthur Kamlet 17 years ago

Similar to book royalties. Author's royalties go on Sch C while a beneficiary of the author reports royalties on Sch E.

UltraTax allows you to report SE Income on Line 21 and to designate it as being SE income, and will generate a Sch SE in that case.

So if commissions are taxable to the salesperson, I see no harm in reporting that income on Line 21 and then generating a Sch SE.

SSA uses Sch SE to update its SE records, and doesn't care if a ch C was filed or not.

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