Today TaxMama® hears from Rick in the TaxQuips Forum.
Let me summarize his issue. He just learned that he is getting a $9,000 1099MISC for items he receives to review. He can’t use most of those things, but he’s not allowed to sell them. Yet, he will be paying taxes on the retail value of these things. What can he do?
I honestly don’t know what to tell you. This IS a bad deal. The taxes might be higher than your actual compensation. If you had discussed this with a tax pro before starting this, you might have negotiated the contract differently.
For instance, under the circumstances, you need to talk to them about changing your arrangement. If these are non-consumables (things you don’t use up in the course of the review), INSIST that you will return the items and not get 1099’d for them.
In the meantime, you have a problem. Your business can’t really take a charitable contribution for the donations. YOU may take the contribution on your Schedule A – Itemized Deductions. And if you don’t have enough expenses to itemize, you don’t even get that benefit.
You MIGHT try to deduct the items you donate to charity on you Schedule C. Defend the Schedule C deduction because the contract requires you to donate them, I suppose.
Or look up what it would cost you to buy each item and print it out. Report the full 1099 income on your Schedule C, but on the second page where you have blank lines you use, enter “adjustment for actual market value of 1099 goods” and deduct the difference.
Keep the records in your file. Pray you are never audited.
And remember, you can find answers to all kinds of questions about 1099s and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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