About to E-file, but want to make sure I’m not making a mistake here.
DW is an attorney, and has an agreement with a former employer where they will compensate her if she is ever subpoenaed for any matters from the company. She was a W2 employee when she worked there, and is a W2 employee at her current firm. Last year, she was subpoenaed about a company matter and gave witness testimony in a deposition (NOT working as an attorney). For her time, she received nearly $3k in compensation, and as expected, a 1099 NEC.
Aside from paying normal taxes, is this subject to SE tax? I say no. I say this because she is NOT receiving this misc income in the course of operating a profit seeking business. Being subpoenaed to testify in a lawsuit seems like the very definition of a sporadic activity. Am I right?
I would argue that you are wrong. Your wife performed duties related to her profession as part of an (ex-)employment agreement. If she’s an attorney, I would expect her salary should already place her near or over the maximum social security tax limit, so you’re really only looking at medicare tax. The additional ~$90 in tax is worth it to avoid the aggravation of dealing with IRS communication later - and you will get at least one computer generated letter for the 1099-NEC without schedule SE.
Thanks Ira, this is why I love getting help here. I hadn’t considered that the only impact would be a minimal amount for medicare tax - you’re right, she’s over the SS wage limit.
I presume I can keep this very simple in TT? Fill out the business related questions and let it generate a schedule C - use her name/SS, and simple cash accrual method? She has no expenses or overhead to deduct.
Surprisingly… no. Since covid started, virtually all depositions are conducted via Zoom. So all of this was done from the comfort of our dining room table.
Surprisingly… no. Since covid started, virtually all depositions are conducted via Zoom. So all of this was done from the comfort of our dining room table.
So the ISP bill and whatever equipment was bought for the deposition (headset? mouse? ring light? camera?) are the business expenses.
Surprisingly… no. Since covid started, virtually all depositions are conducted via Zoom. So all of this was done from the comfort of our dining room table. So the ISP bill and whatever equipment was bought for the deposition (headset? mouse? ring light? camera?) are the business expenses.
More likely covered by her job. A few hours use would be a very small part of the costs.
There is a large benefit you have unknowingly stepped into. Your spouse, with self-employment income, is eligible to write-off health care premiums as a deduction on Schedule 1, Section II, Line 17 - up to the amount of her self-employment income. This is NOT a business expense, so cannot be claimed on Schedule SE.
Reduces our taxable income by $4640 from medicare premiums each year.
