Schedule C or Form 4137 + Schedule U ?

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Subject Author Date Schedule C or Form 4137 + Schedule U ? T 03-30-2007  Re: Schedule C or Form 4137 + Schedule U ? A.G. Kalman 03-30-2007  Re: Schedule C or Form 4137 + Schedule U ? Frederick Lorca 03-31-2007
Posted by T on March 30, 2007, 4:35 am Please log in for more thread options W2 Employee gets a severance package ($4K). Employer issues a 1099 for this. Employer does not want to issue a W-2 for the $4K. Tax Preparer (CPA) suggests filing a Schedule C for Employee for this. (I thought Schedule C was for Sole Proprietors and not W2 Employees) TurboTax suggests filing Form 4137, and a 1040 Schedule U for this. (Won't this trigger an audit?) CPA's suggestion results in $300 more in taxes. What's the right thing to do here? << ======================================================= >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ======================================================= >> Posted by A.G. Kalman on March 30, 2007, 11:25 pm Please log in for more thread options T wrote: > W2 Employee gets a severance package ($4K). > Employer issues a 1099 for this. > Employer does not want to issue a W-2 for the $4K. > > Tax Preparer (CPA) suggests filing a Schedule C for Employee > for this. (I thought Schedule C was for Sole Proprietors and > not W2 Employees) > > TurboTax suggests filing Form 4137, and a 1040 Schedule U > for this. (Won't this trigger an audit?) > > CPA's suggestion results in $300 more in taxes. > > What's the right thing to do here? The CPA's recommendation is incorrect. Severance pay is taxable compensation and belongs on a W-2. Taxpayer should prepare a substitute W-2 (Form 4852). Include the employer's name and EIN (found on the W-2 received) and enter the "wages" on Line 7a of the 4852. Answer questions 9 & 10. Include the "wages" with other amounts on Line 7 of the 1040. Taxpayer should prepare the 4137 and its corresponding Schedule U to compute his half of the soc. sec. taxes and medicare taxes and post it on Line 59 of 1040. Enter the employer's name and EIN on the 4137 and everywhere you see the word "tip" or "tips" change it to "severance". Paper file the tax return. << ======================================================= >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ======================================================= >> Posted by Frederick Lorca on March 31, 2007, 10:15 pm Please log in for more thread options > W2 Employee gets a severance package ($4K). > Employer issues a 1099 for this. > Employer does not want to issue a W-2 for the $4K. > > Tax Preparer (CPA) suggests filing a Schedule C for Employee > for this. (I thought Schedule C was for Sole Proprietors and > not W2 Employees) > > TurboTax suggests filing Form 4137, and a 1040 Schedule U > for this. (Won't this trigger an audit?) > > CPA's suggestion results in $300 more in taxes. > > What's the right thing to do here? Follow Alan Kalman's instructions and use Form 4137. IRS has new Form 8919, "Uncollected Social Security and Medicare Taxes on Wages," under development which they anticipate releasing in October of this year. "Tax Products Posting Schedule" http://www.irs.gov/formspubs/article/0,,id=169088,00.html Frederick Lorca << ======================================================= >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2006) - All rights reserved. >> << ======================================================= >> Similar Threads Posted Where do I report dividends paid on Form 5471 Schedule C or Schedule F March 12, 2008, 9:23 am Where to deduct: Schedule C or Form 2106 April 5, 2008, 4:45 pm schedule C February 27, 2007, 10:30 pm Re: LLC did not give schedule K-1 November 1, 2006, 4:52 pm Re: LLC did not give schedule K-1 November 2, 2006, 12:48 am Re: LLC did not give schedule K-1 November 2, 2006, 11:56 pm schedule C inventory January 23, 2007, 2:23 am Schedule K-1 for IRA holding? March 16, 2007, 10:35 pm Schedule C Depreciation March 19, 2007, 11:12 am Schedule M-3 for 1065 March 30, 2007, 4:35 am