I am a physician finishing training and starting a job in a few months. I will be employeed by a private practice, but have a contract with the local hospital for 3 month income guarantee, relocation expenses and sign-on bonus. The sign on bonus was paid 12/05. I received a 1099-MISC for the bonus. What form # should be put in Box 7? Is it '1' because it is nonemployee compensation and should be carried as "wages, salaries, tips, etc" on the 1040? I only came across this because when I tried to E-File and it would not let me if I had a "1" Form in Box 7 of the 1099-MISC. So I ended up looking into it more and getting thoroughly confused.

How much is the bonus? If it exceeds $600, you will need to file Schedule C and Schedule SE to claim the bonus as self-employment income.

Thanks. Yes it is over $600. I never would have thought that the sign on bonus would be considered self employment. Had I not wanted to E-file (where the error came up - you can't E-File with Form 1 in Box 7 on a 1099-MISC), I would have never known.

Good thing you found out.

That simple error would have eventually cost you 2-3 times what the actual tax will be.

You know, I really still don't get it. It says "Box 7 income is self-employment income if it comes from an activity you carry on regularly to make a profit". This was a one time situation, not something done regularly. What do I put for what the self employment activity was? Signing a document that took 2 seconds?

Sorry, no one says U.S. taxes or tax policy was fair (or, in many cases, ever makes sense). That's just the law.

Similar item - Husband is Army Reserve and gets a signing bonus paid out over a few years. This year he got a 1099-MISC for the $1000. My confusion is on the entering it it asks what "form" and number of "Copy"? What do I choose? Form 1 - 1040, 2 - attachment worksheet, 3 -sch c??

Select Schedule C. That way, he can deduct a fair amount of his expenses (uniform costs, travel to drills, etc.) on the Schedule C and mitigate the added tax from Schedule SE.

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