tax implications of signing bonus and student loan repayment

[Dr. Wexler]

My wife received a signing bonus paid on a 1099. This was months before she provided any professional services. Turbotax implies that we must have a business and should be applying for business deductions if we were paid on a 1099. For regular pay purposes, she is paid on a W2 as an employee.

She is also getting a portion of her student loans paid. This was also reported on a 1099.

The way turbotax phrases the questions I'm losing faith that the information is getting put in the right locations on returns. For the first time last year, I hired an accountant to do our taxes. They were much simpler then. It was a total waste of >$500 despite common lore being that having a professional prepare your taxes saves you money.

Between these 1099s and a Roth IRA rollover I'm starting to wonder if I should start shopping for a professional tax preparer.

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[doc05]

it's not that complicated. you can use turbotax if you like. it will work fine.

 

[Plastikos]

TT does have some issues with things like that. Just name your business bonus and loan repayment. It also keeps telling me after every section how its going to give me my biggest refund ever, while Im pretty sure a simple line of code could keep it from taunting me like that if it was told to check the box with all the red numbers before saying such rude things.

 

[happy887]

You do not need a business name or have to own an entity to report 1099 income. The bonus would get reported on schedule C and then flow to your 1040 as "other income." You will have to pay FICA (SS and Medicare) taxes on that income. Depending on your tax bracket you might owe some taxes on the tuition reimbursement as well as the IRS looks at that as income. You will still be able to deduct any expenses your wife incurred finding her job, as you will just list yourself as a sole-proprietor. If your wife is ever going to be paid as a 1099 outside contractor in the future, I would definitely incorporate for liability reasons and deductions. You could for example, use a portion of you house for "business" and depreciate that portion of your house an expense, you could deduct utilities, mortgage interest, etc... I am a CPA and I can tell you yes you are far better off hiring a professional tax preparer. I have seen people under/over pay tens of thousands of dollars using turbo tax. I would stress, never go to a liberty tax or H&R block. You want to find a "CPA" as this is a professional designation that takes a bachelor degree + master degree + plus a 4 part comprehensive exam that is said to be harder than the bar.

- I am a CPA who is contemplating medical school.

 

[Dr. Wexler]

You do not need a business name or have to own an entity to report 1099 income. The bonus would get reported on schedule C and then flow to your 1040 as "other income." You will have to pay FICA (SS and Medicare) taxes on that income.

Follow-up question. Does that mean I don't have to pay estimated quarterly taxes on the ongoing student loan repayments that gets reported on a 1099 for 2016?