cpabsd Posted March 21, 2010 Report Share Posted March 21, 2010 My client had a very sick child for all of 2009. One of his coworkers donated some sick leave to my client so that he could be with the child at Children's. Client received a 1099-Misc reporting the value of the sick leave as Box 3 Other income. Is this correct? Could it be treated as a gift and backed out? I know I have to report it on Line 21 but if it could be backed out that would be great. As an aside, the child passed away. Do I need to report date of death for dependent? Will there be any problems e filing this return? Thanks! Bonnie Quote Link to comment Share on other sites More sharing options...
Eli Posted March 21, 2010 Report Share Posted March 21, 2010 A few years ago I was on the receiving end of over 400 hrs of donated sick leave due to an illness. I never received a 1099 for any of it. You should be able to efile the return. Just make sure to put the number of months the child was alive in the box asking for 'months lived with you'. My condolences to your client. Eli Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted March 21, 2010 Report Share Posted March 21, 2010 I think that if a child is alive at any time during the year you show 12 as the number of monthes living with you, same as a birth. I don't believe that it is necessary to show a date of death, just next year you don't claim the dependent. As for the donated sick time, I believe that would just be shown on line 21. I don't believe you can show it as a gift. (At least, the client is not having to pay SS or SE tax on the income). Quote Link to comment Share on other sites More sharing options...
jainen Posted March 21, 2010 Report Share Posted March 21, 2010 >>put the number of months the child was alive<< That number is 12. According to the instructions to Form 1040, "A child is considered to have lived with you for all of 2009 if the child was born or died in 2009 and your home was the child’s home for the entire time he or she was alive." As for the sick leave, I don't know. It seems to me the gift was of intangible rights to income, and the actual payment came from the employer in the ordinary course of the employment relationship. In that sense it was appropriate to put it on a 1099 if not the W-2. I mean, he couldn't very well charge it to the friend! So it would go on Line 21 if you want to call it taxable. But believe it or not the tax system really is kinder and gentler--at least, if the money in question is no more than a few thousand and does not constitute most of the taxpayer's support for the year. In the interest of fair tax administration (not to mention PR), I really doubt the IRS would enforce the 1099 if the taxpayer disclosed the non-conforming treatment as exempt. In my opinion this should be done on Form 8275, but others in this forum prefer offsetting entries on Line 21, perhaps with a sad note attached. Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 21, 2010 Report Share Posted March 21, 2010 My deepest sympathies to your poor client. Quote Link to comment Share on other sites More sharing options...
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