Guest wrote:If you follow the instructions from the IRS directly, our income is not subject to self-employment tax.
I believe the only people who would benefit from calling this "self-employment" are those people who are very near to retirement. This is clearly not self-employment.
Do you mean the instructions that enumerate what Box 3 can be used for? A scholarship for service is not found in that list.
Or maybe the instructions that mention if you do
ANY work for
ANY money found in Box 3, you are responsible (not ASEE) for reclassifying that money to Box 7, which is subject to SE tax. So you are responsible for telling the IRS why your 8 or 12 week internship does not constitute ANY work.
It's not hard to justify, but you cannot pretend it's as black and white as you want it to be. Like I said previously, your accountant (if you choose to use one) will be responsible for the justification if the IRS starts asking questions. If your accountant is daring, you will likely not be paying any SE tax. If your accountant is conservative, you will want to save your money because he'll ask you to pay a bunch of taxes.
There's a reason why SMART refuses to give guidance on this point. Because one of the beginning cohorts (as late as 2008, I believe) was actually brought on as employees of the Naval Postgraduate School over their summer to handle this very issue: whether or not the internship counted as contract work/employment or whether it was something else. SMART knows it's hard to find direction in the IRS manuals, and therefore refuses to comment on the issue.
As well, if you've read the IRS instructions, you'll know that they specifically mention a 1099-MISC is not to be used for scholarships/fellowships.
Good luck.
[quote="Guest"]If you follow the instructions from the IRS directly, our income is not subject to self-employment tax.
I believe the only people who would benefit from calling this "self-employment" are those people who are very near to retirement. This is clearly not self-employment.[/quote]
Do you mean the instructions that enumerate what Box 3 can be used for? A scholarship for service is not found in that list.
Or maybe the instructions that mention if you do [b]ANY[/b] work for [b]ANY[/b] money found in Box 3, you are responsible (not ASEE) for reclassifying that money to Box 7, which is subject to SE tax. So you are responsible for telling the IRS why your 8 or 12 week internship does not constitute ANY work.
It's not hard to justify, but you cannot pretend it's as black and white as you want it to be. Like I said previously, your accountant (if you choose to use one) will be responsible for the justification if the IRS starts asking questions. If your accountant is daring, you will likely not be paying any SE tax. If your accountant is conservative, you will want to save your money because he'll ask you to pay a bunch of taxes.
There's a reason why SMART refuses to give guidance on this point. Because one of the beginning cohorts (as late as 2008, I believe) was actually brought on as employees of the Naval Postgraduate School over their summer to handle this very issue: whether or not the internship counted as contract work/employment or whether it was something else. SMART knows it's hard to find direction in the IRS manuals, and therefore refuses to comment on the issue.
As well, if you've read the IRS instructions, you'll know that they specifically mention a 1099-MISC is not to be used for scholarships/fellowships.
Good luck.