Received $12500 from "whistle blowing" an old employer regarding microsoft software. Received a 1099 and income reported in box 7. Claimed as other income on 1040 (this was in 2008) and now the IRS is stating that this is self employment income....Anyone know anything regarding this type of income? Thank you...
asked 12 Mar '11, 00:29
You are not self-employed, so this cannot be self-employment income. It is relatively the same as receiving an insurance settlement. It is taxable income.
I would challenge the IRS to show in any publication or instruction where it states that this type of income is self-employment income. When you challenge them to look it up for you, they have the burden of supporting their position.
In IRS Pub 525, pg 36, Whistleblower income is discussed--under the heading Miscellaneous income/other income, not self-employment income. Please also note the information regarding deductions from this income.
answered 16 May '11, 17:57