Discussion:Personal Property Rental
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Discussion Forum Index --> Tax Questions --> Personal Property Rental
| 18 June 2007 | |
| I have a client who works construction and gets paid W-2 wages, he just started a new job and with his first check he had wages and rig rental (welding rig)seperated on his paycheck, but they withheld ss tax from both the wages and rig rental. He told his employer that rig rental isn't subject to SS tax but the employer says it is. He wants me to give him some kind of proof that it is not subject to ss tax. Any thoughts on where to find something that says personal property rental is not subject to SS tax? | |
| June 18, 2007 | |
| I say it is, actually. Have a similar client, and it's all on the Sch. C. They're doing him a favor by paying 1/2 the SS taxes...tho' it should go on a Sch. C, he'll have expenses to claim...so how are they going to report that at year end? | |
| 18 June 2007 | |
| If the taxpayer is in the business of renting personal property, they are supposed to report it on Sch C and pay SE tax. It's not subject to SE tax if the rental of the property isn't conducted as a business. But I agree with JR, it sounds like it's ongoing and could be a business. | |
| 18 June 2007 | |
| It sounds to me like they're paying wages, and the employee has expenses to be reported on form 2106 | |
| 18 June 2007 | |
| I've struggled with this in the past when a self employeed client gets 2 1099's, one for rent, the other for non-employee comp., in some cases I have agreed with the above posts, it's regular & continuous & for profit, but in other cases it seems to me that it is ppr. Where do you draw your line on that subject? In this case the man is on a temporary job (all of his jobs are temporary) some jobs pay for the rental, others do not, they pay only for his services. This job pays for the rental of the rig, but the next job might not. There is such a thing as personal property rental, but how do you make your determination as to when it is really rental, and when it is self employment? | |
| 18 June 2007 | |
| If rental of personal property is not a business, report income on Line 21 and expenses on Line 36 with a description of PPR. | |
| 18 June 2007 | |
| JR it's not always subject to SE tax, as Solomon said if it's not a business, it's other income on line 21 with a description of PPR. See Pub 525 page 14. "if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business." I already knew that, I was just wanting some feedback on how others determine when it is the level of a business, thus subject to self employment. Or are you saying that in your opinion, it always rises to the level of a business? In the case of my client, he has 10-12 employers in a year, all on a W-2; some pay rental for his rig, others do not. So I'm not sure on the regular and continuity part. But the first part, if the primary purpose is income or profit, how do you determine that? It seems like that would always be a person's primary purpose for renting out anything. Any thoughts? I'm trying to think this out, not just on the client I mentioned, I come across this a lot and it's one of those things I go back & forth on in my head. Just want some opinions of how others determine this. | |
| June 18, 2007 | |
| I believe that the presumption, in my mind, is that it is a business. You'd have to show me somehow that it wasn't. If his job is connected with the rental of the rig, which it always is, then it is by definition, business. I'm trying to imagine scenarios where you might rent personal property and it not be business. I think we're talking about renting out your chainsaw to someone, or your vehicle...A personally owned item that you're not using to generate income normally or continually. This ain't it. | |
| 19 June 2007 | |
| another thought - the employee should possibly be charging the employer sales tax on the rental...if it is a business....and remitting it to his state. If it is a "reimbursement" of an employee paid business expense for the benefit of the employer, then there would be no se tax & the employee would be paying the sales tax with their rental agreement. | |
| 20 June 2007 | |
| JR is correct...personal property rental is always "Schedule C" income subject to SS/MC. | |
| 27 August 2007 | |
| Sorry to bring up an old subject, but this is exactly what I was looking for. Sounds like the concensus is that the PPR should be Schedule C income, reported on a 1099misc, box 7, correct? My client that I will be doing payroll for, pays his employees $9.00 per day for ChainSaw Rental. So we were going to cut a second check for the saw rental amount, and send him a 1099misc at year end. However, I have seen others put it in box 1 (rental), others put it in box 7, non-employee comp. | |
TheTinCook (talk|edits) said: | 27 August 2007 |
| It goes in Box 1 of 1099-Misc. In the instructions for 1099-misc they have an examply where the contract payment must be prorated between payment for the operators services (Box 7) and rental of his equipment (Box 1). Check it out.
If the employees are w-2 emloyees you might want to think about treating it as a reimbursment of employee business expense. Also to rebut personal property rental income is not always sch C income. | |
| August 27, 2007 | |
| I was thinking about treating it as reimbursement; however, with each payroll, some of the employees send in their expenses, which will be more and sometimes less than the amount they are paid as a flat rate. So, some weeks it would be taxalbe to the EE and the ER, and other weeks not taxable. So, in the past they had just sent the 1099 out at year end for the amount of the difference between what they were paid and thier expenses. I guess that way the EE is paying the tax on the amount over paid, and not the ER. | |
| 23 August 2008 | |
| how about when a Dr owns a corporation and then leases equipment to the corporation to get money out. How does this work for SE tax and what form does the Dr report the inocme and expenses on | |
RoyDaleOne (talk|edits) said: | 23 August 2008 |
| FYI:
http://www.irs.gov/businesses/small/article/0,,id=146830,00.html http://www.irs.gov/businesses/small/article/0,,id=146822,00.html In additional, the rental can be classified as wages and not rents. This would resuit in a payroll tax problem. The rents must be reasonable. | |
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