1099 & social security
My husband, mid 50s, is a truck driver. He gets paid a bonus every 3 months based on his safety record. He also gets paid a bonus at the end of the year based on the number of miles he drove during the year. The bonuses roughly amount to $5, 000 each year. He is not an owner operator. He is an employee of the trucking company and receives a weekly paycheck from them.
His employer originally reported these bonuses on a 1099 NEC. I told them they couldn't report income paid to an employee on a 1099 Non Employee Compensation Form. We did not receive anything stating that this 1099 NEC was canceled or deleted or otherwise corrected to zero.
- Is that a problem?
Employer then sent us a 1099 MISC but put the dollar amount in box number 1 for rent. He did not rent anything to them. So I told them again and they got a little snarky but sent another 1099 MISC with a check mark in the corrected box at the top and put the amounts box 3 other income.
Last year, 2024, our accountant filed the 1099 along with Form 8919. This year the accountant said they didn't want to cause trouble for my husband with his employer so they just listed it as additional income on line 8 of the 1040.
Will this 1099 MISC income if reported with Form 8919 be included in his social security wage base when he retires and they calculate his monthly benefit amount?
It is my understanding that if it's reported as additional income on line 8 of the 1040, it will NOT be included in his wage base for social security. Is that correct?
Additionally if it is reported as additional income on line 8, could we run into issues with the IRS and having to communicate back and forth to explain and prove where this other income came from?
If it's reported as additional income on line 8 of the 1040, would we end up owing additional taxes or penalties on that money? By this I mean in addition to the amount that was calculated on the 1040 and paid with the 1040.
I'm also concerned with our social security system potentially failing us by the time we retire.
Could this extra $5,000 a year make a difference in the amount he will receive as a benefit when he retires?
Is it enough of a difference to make it worth arguing to have it reported correctly?
I understand we're going to end up owing taxes on this $5,000. That's not the issue. The issue is that we ran into a situation in the past where worker's compensation only used the wage base of social security (W2 amounts) and that ended up with him losing close to $200 a month and benefits. This was a different employer.
The consequences of incorrect reporting have far reaching effects. I apologize for the long post, but the details are important.