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1099 Income as Other Income, No Self-Employment (SE) Taxes

Article ID: 191
Last updated: 21 Sep, 2014
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By Jason Watson ()
Updated September 2, 2014

Can a 1099-MISC avoid self-employment taxes? Maybe. IRS Revenue Ruling 58-112 defines a trade or business activity as one that is regular, frequent and continuous. Revenue Rulings (58-112, 55-43 and 55-258) indicate that income from an occasional act or transaction, absent of proof of efforts to continue those acts or transactions on a regular basis, is not income from a trade or business.

Some taxpayers who were able to able to claim their income as ‘other income’ and avoid self-employment taxes had to demonstrate that the activity was a one-and-done event (giving a speech for example) or was sporadically done. In other words, the taxpayer cannot hold himself or herself out to the public to engage in the activity.

If you meet these criteria, your 1099 income is exempt from self-employment taxes. If you attempt to file your tax returns with a 1099 and claim that it is not subjected to self-employment taxes, you have a good chance of getting a letter from the IRS. And No, they are not writing to say they agree. If you believe you are correct and need help fighting this, please let us know.

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