Self Employment Tax question

Mar 18, 2007 5 Replies
B

Yet another Self-Employment Scenario....



Four years ago I wrote a piece of gaming software intended for the private use of my friends and I. After growing bored with it I mothballed it. Last year a company approached me and offered to purchase the software. I sold it for $4000. They issued me a 1099-Misc with box 7 (Non-employee compensation) filled in. I am not maintaining the software or assisting the company with operating it. Does the IRS consider this $4000 subject to Self-Employment Tax? If not should I request that the company re-issue the 1099 with box 3 (Other Income) filled in? Thanks



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M

Yes, you worked in order to earn the money and yes you are subject to self employment tax as well as income tax. The form 1099misc is correct. See Schedule C as well as Schedule SE.

Missy Doyle

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H

I think, Missy, that this is arguable. My position would be that this one time sale of software does not fall within a (regular) trade or business, and accordingly, I would not include a schedule se; instead placing the 4000 on line 21. ChEAr$, Harlan Lunsford, EA n LA

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A

I agree it is not self-employment as long as this was a one-time event. Could it possibly be the sale of a capital asset as it appears to be personal use property created 4 years ago?

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N

Not all issuers of 1099s understand what they are doing. A local community college sends $1440 to retired professors as a reimbursement for medical insurance. They used to use box

7 until an Arizona IRS office tried to charge the retired professor with self-employment tax. (LA office apparently understood.) Now they properly put it in box 3. I'd argue that the company did not employ the person in any way. It was a sale of something he is not in the business of producing or developing. Nan, EA in LA
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H

Oh, I like the way you think, A.G. I could do that, i.e. put it on a schedule d.

ChEAr$, Harlan

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