1099 signing bonus

[pnthayer]

I have a doctor client that received a 1099 (box 7) for $50,000 for signing on with a new practice. $25,000 was paid to her student loan. Most of that was interest for which she received a form for. Because of her and her husband's income they are unable to deduct the interest. She has always been a W2 employee with no unreimbursed expenses so has nothing to offset any of the 1099. I'm pretty sure I already know the answer, but is there any way to reduce this income? This 1099 combined with them not making the estimated payments I suggested has them looking at a pretty hefty tax bill. 

[jklcpa]

At this point in time there are hardly any choices. Since you've said the student loan interest isn't deductible because of income level, that pretty much rules out any significant benefit of suggesting an IRA, if they can contribute at all, and especially if either is covered by a retirement plan through their employer.  That would leave any HSA contribution they may be eligible to still make for 2014.  It seems like spitting in the ocean, and the funds are probably needed for the tax bill anyway. 

[kcjenkins]

Wish I had that problem, don't you?  Seems like when they got that bonus they should have made an extra estimated payment, but then, you said they did not make the estimated payments you suggested, so it's clear they knew better.  

[Cathy]

Sign on "bonus" listed on 1099 as "non-employee" compensation as you said it was in Box 7. Bonuses to employees should be paid through payroll where taxes are deducted, etc. It was more than likely paid after the "employee" worked for a certain amount of time. You might want to have client check with office manager as it appears this bonus was improperly paid....contract worker versus employee. Doctors normally pay big bucks to send their managers for training. I don't think the doctor(s) had enough knowledge themselves to decide how the check was to be issued. At least the client might get reimbursed for any FICA or Medicare taxes the employer should have matched.