How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask PDtax Your Own Question

PDtax
PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1866
Experience:  32 years tax experience, including four years at a Big 4 firm.
Type Your Tax Question Here...
PDtax is online now
A new question is answered every 9 seconds

my daughter received a 1099MISC for an award she received while

Resolved Question:

my daughter received a 1099MISC for an award she received while serving as a City year volunteer. City Year is an educational focused nonprofit organization that unites young people of all backgrounds for a year of full time service to keep students in school and on track to graduation. Volunteers receive a modest stipend to help meet living expenses and (some) also receive awards at the end of the year to help fund college expenses. Her award was for $5350.00 and was reported in box 3 of form 1099MISC. Is this income subject to self-employment tax?
Submitted: 2 years ago.
Category: Tax
Expert:  PDtax replied 2 years ago.

PDtax :

Hi from Just Answer.

PDtax :

I reviewed the service terms for working at CityYear.org, and it meets all the tests of employment. The recipient is paid for work, and has to adhere to work requirements like a uniform, adherence to hours and duties, and a list of other requirements.

PDtax :

Normally, Box 7, nonemployee compensation, would be used for payment to an independent contractor. That's what makes this interesting; one enrolls in CityYear.org for a lot more than just a job.

PDtax :

good afternoon.

PDtax :

And Box 3 is normally for prizes and awards, which would not be subject to self employment tax.

Customer:

The money received was for the "nicole smith can do spirit award. I believe this is why it is reported in box 3 as opposed to box 7. We reported it on line 21 as a "prize/award" and now the irs is charging se tax and I cannot find anything to support the entry!

PDtax :

that's it. as an award, no self employment tax. it's not pay for work, it is an award.

Customer:

But how do I convince the irs of this?

PDtax :

the IRS position is that the award comes from compensation for services. Can the award be won without performing the service?

Customer:

No... the service is unpaid. They work a 40 hr week on stipend but then are required to also perform hundreds of hours of volunteer service throughout the community.

PDtax :

does every volunteer receive the stipend?

PDtax :

Hmmm... I might have an idea that works to your benefit,...

Customer:

every corp member receives the 40 hour stipend. The award is only given to one individual at the end of the year. All corp members are expected to do the additional (hundreds) of hours of volunteer work as unpaid service.

PDtax :

So the reality is these awards are pay for services. IRS has a point. But they didn't count on this...

PDtax :

I would then claim the tax deductible expenses that went along with this year of service. Since your volunteer had to travel (unpaid) to a location for a year or less, certain expenses incurred will be deductible.

PDtax :

Travel to that location, including trips made in advance to secure housing, etc. would be deductible.

PDtax :

Because of the concept of a tax home, your student would not be able to deduct meals and daily travel to the school or service location. I believe the student could deduct transportation from the first location to any others during the day.

Customer:

the 1099 is from the "corporation for national and community service". Pay for attitude and commitment to community. I am not putting it on a c. I am not claiming temp living she worked the job for two years.

Customer:

All corp members did the volunteer work. Only my daughter received the award.

PDtax :

But they all get paid. Yes?

Customer:

All get paid the stipend.

PDtax :

Did she get any more $ than anyone else?

Customer:

Yes.

PDtax :

Ok. That's how to defend the position with IRS. How was her stipend reported to her?

PDtax :

How much was the stipend, how much was the award?

Customer:

$5350.00 more intended to be used toward a college degree, grad school or to pay off existing student loans. Her stipend was reported on a form w-2 with fica withholding. Minimum wage at 40 hours a week. All corp members worked in excess of 60-80 hours a week at various service projects throughout the community. Only a select few (I believe their were 4 in 2011 of the 100+ corp members doing service) that received the awards.

PDtax :

got it. The form 1099-misc allows the reporting of awards like yours as a prize, not subject to se tax. You should be successful in explaining this award was not for compensation, since not all volunteers received it, but was instead a prize.

Customer:

The award was presented to my daughter "whose spirit, idealism,can do attitude and commitment are a source of leadership and inspiration for City Year corps members and others in the community.

PDtax :

Then this should not be subject to SE tax. Once you make the same arguments you made here, you should win.

Customer:

I will just have to word our response as best I can and hope for an intelligent irs employee. I was really hoping for an IRS reference but have been unsuccessfull finding one. You have been helpful allowing me to bounce my thoughts off someone with experience. I guess you earned your fee on this one. Thanks. I will click the "excellent" tab for you.

PDtax :

Thanks from Just Answer.

PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1866
Experience: 32 years tax experience, including four years at a Big 4 firm.
PDtax and 4 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.