Legal Question in Tax Law in California

Tax on loan from employer taxed as self employment tax

I received a notice from the IRS that I had under reported earned income in 2004. The amount($3750) was reported as 'nonemployee compensation' by my employer. It was a loan for a deposit on an apartment, not compensation for work of any kind. I did receive a 1099 for the loan amount. This amount is being assessed Self-Employment tax. I have a note for the loan. I have been paying off the loan at $50-$100/moth since January of 2005. How should I refile an amended return for 04 with the income listed correctly? I don't mind paying tax due on income if it's truly owed but I don't feel that I should be paying payroll taxes on an amount that wasn't compensation for work of any kind. Thanks.


Asked on 5/30/06, 2:26 pm

1 Answer from Attorneys
Donald Field Donald L. Field, Jr., Attorney at Law

Re: Tax on loan from employer taxed as self employment tax

to ensure that this is corrected properly, you should consult a tax attorney, cpa or enrolled agent. the first step should be to contact the company that issued the 1099 in writing and request a corrected form 1099. at the same time a written response to the irs notice should be sent (certified mail return receipt requested), with a copy of the loan agreement and your letter to the company requesting a corrected form 1099. the irs may accept your documentation or will contact the company notifying them of the complaint. keep in mind that there are critical time limits for responses to irs notices.

Read more
Answered on 6/02/06, 11:58 am


Related Questions & Answers

More Tax and Taxation Law questions and answers in California