2020 – 03/02 Court rules that self-employment (SE) tax is owed on deferred compensation payments. Independent contractors are self-employed and pay SE tax on their net earnings. One contractor sold cosmetics in exchange for commissions and a deferred comp plan. After retirement, she collected $115,261 from the plan, and was issued Forms 1099-Misc marked “nonemployee compensation.” She reported it as “other income” and paid no SE tax on it. When the IRS issued deficiency notices, she argued that the amounts weren’t SE income but were for the sale of her business’s goodwill. The U.S. Tax Court found there was no contract to sell goodwill and the payments were subject to SE tax. (TC Summary Op. 2020-10)


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