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Should 1099 Box 7 Include Fees Deducted by the Payor for Payment Processing

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  • 01-31-2013, 04:20 PM
    Jane0218
    Should 1099 Box 7 Include Fees Deducted by the Payor for Payment Processing
    First I need to explain why I received the 1099 for 2012.

    I did not work for anyone in 2012. All I did was what you will read below. My last job was as a bookkeeper in 2009 (I'm not sure if this info is needed, but am throwing it in).

    I posted links to products for a company on my Facebook wall and also on Twitter. It was all done online.

    The company would get 'campaigns' from retailers, and the campaigns would show up in my account. I would click a button that read "SHARE" and the link and a short description of the product (that I created) would be posted by the company to my Facebook wall, and sometimes to my Twitter account.

    I earned money whenever someone clicked on the link to take a more detailed look at the product.

    The company issued a debit card and would load monthly the amount I earned (LESS 3% for a processing fee) onto the debit card.

    I earned over $600 (around $800) in 2012, so I've received a 1099, but I have 3 questions:

    1) They put in Box 7 (Nonemployee compensation) a gross amount, not the NET amount that was paid to me (NET=what I earned less 3% processing fee). I'm not sure if this was OK for the company to do or not. I thought that a 1099 should show only amounts actually paid from 1/1-12/31/12.


    2) The company has included in Box 7 $10.80 that I earned but haven't been paid for, and probably won't ever get paid for. They changed how they're doing things and have decided not to have people post to Facebook or Twitter any longer. So the $10.80 is sitting in my account as earned, but I've never received it (less the 3% processing fee)

    3) Was Box 7 the correct box or should it have been put in box 3-Other Income? I've read that if it should have been 'Other Income' I'm supposed to record it first as Nonemployee compensation, and then subtract it out somewhere and and reclassify it. That is confusing me

    Thank you very much for reading this.
  • 01-31-2013, 05:26 PM
    Bubba Jimmy
    Re: Should 1099 Box 7 Include Fees Deducted by the Payor for Payment Processing
    If they were compensating you for something you did for them (posting links for their company) and you are not their employee, then what you received was non-employee compensation. If you had expenses, such as the 3% fee, then deduct them on your Schedule C along with any other expenses you incurred to make this money.
  • 02-04-2013, 09:23 PM
    Jane0218
    Re: Should 1099 Box 7 Include Fees Deducted by the Payor for Payment Processing
    Quote:

    Quoting Bubba Jimmy
    View Post
    If they were compensating you for something you did for them (posting links for their company) and you are not their employee, then what you received was non-employee compensation. If you had expenses, such as the 3% fee, then deduct them on your Schedule C along with any other expenses you incurred to make this money.

    Thanks for replying. I don't want to raise any red flags with the IRS, so I'm not sure if I'll take the 3% deduction for the bank fee.
  • 02-04-2013, 09:42 PM
    Lehk
    Re: Should 1099 Box 7 Include Fees Deducted by the Payor for Payment Processing
    there is no reason that should raise any red flags. bona fide business expenses can and should be deducted, why pay income tax on income that wasn't really income because it was spent on earning that income?
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