Generally, Box 7 Nonemployee Compensation is present when an employer pays $600 or more of fees, commissions, prizes and awards for services performed by a nonemployee, other forms of compensation for services performed for your trade or business by an individual who is not your employee.
Follow the instructions below to correctly enter the Form 1099M w/ box 7 completed:
1. Click Add Form
2. Select Schedule C or Schedule CEZ (depending on amount of expenses, typically if expenses are <$5,000 then use the Schedule CEZ)
3. Complete the required information on the Schedule C/CEZ
4. Click Add Form
5. Select Form 1099M
6. Complete the information required on Form 1099M
7. Click the field labeled "Link To", under box 7
8. Click "Choices" from the grey area below the actual form
9. Select the Schedule C/CEZ that you created (this will link the box 7 amount to the schedule created)
10. Navigate to the Schedule C/CEZ to double check your entry is correctly linked in the Income Section
This type of income generally produces Self-Employment (SE) tax to the taxpayer/spouse. As a tax preparer make sure that the individual whom received this form actually performed some kind of work for their compensation. In most cases, the taxpayer received this form because they worked for someone who did not consider them as an employee, therefore SE Tax is required to be paid by the taxpayer.
Need more help, watch our quick video below...