Posted in: 1099s, Communication, In this week's e-newsletter, IRS regs, Latest news & views, Tax compliance
The nature of the worker/company relationship is one key in determining if a payment is 1099-reportable. But this artist took things a bit too far. Just in time for Valentine’s Day, a recent U.S. Tax Court rules on when love is more like work.
In the case, a woman moved into her boyfriend’s home. She cooked and did light housekeeping for him, but did not contribute to his art business. There was no contract indicating that she would perform any task for pay.
The boyfriend gave her checks totaling $10,500, many marked “wages” in the info line. At the end of the year, he reported them as payments for business services and issued her a 1099-MISC.
When she didn’t include the $10,500 as income, IRS took her to court. But the judge ruled that the payments were actually gifts, since there was no contract, and that whatever tasks she performed were unrelated to his business.
She’s now off the hook for the back taxes.
No word on whether the couple is still together. But we’re betting not.