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Self employment tax on interest income??

Hi all,

I have lent some money to a friend, who pays me interest on the money. He sends me a 1099-misc form, and files a copy with the IRS. I declare that as interest income on line 8a of 1040 and on schedule B. I just got a notice from IRS that I haven't paid self-employment tax on this income (social security tax not withheld). I am not sure if this is correct or not. I am not a self-employed person. I have a regular job for which I receive W2 form and pay regular employee tax. Is the interest I receive considered self-employment income? Do I need to pay social security tax on it?

Thanks, RS

Reply to
RS
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Why? Did anyone look at the 1099 instructions to see if this was correct? Hint: it isn't.

It's not. Your inventive friend is reporting this an Nonemployee Compensation in Box 7 of the 1099-MISC. Because of budget cuts IRS fired all their psychics and have to go with what they're told.

No. You need to respond to IRS and tell them about the erroneous 1099-MISC. You also need to suggest to your firend that he knock it off.

Reply to
Phil Marti

Sounds like your friend should have filed a 1099-INT instead. Penalties for non-filing are detailed in Section O of the General instructions for form 1099.

Reply to
Tony Cox

Unless the payment was in the course of the payor's trade or business a

1099-INT is inappropriate. See the 1099-INT instructions.

See the Schedule A instructions for reporting home mortgage interest paid to an individual.

If this is just A loaning money to B for B's personal use, there's no reporting by the payor.

Reply to
Phil Marti

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