I worked for an insurance company as a sales agent. I was paid commisions as an advance to the policy holder paying their premiums. I had an agent account which basically showed what they advanced me. As premiums came in it was taken off the account. When you leave this company and you have a balance in your account, no renewals are paid to you(off your account). If you terminate contract before 2 yrs. you get no renewals regardless of account balance. I ended my contract after 1 yr. I had a balance of 5,000 dollars in my account, money they advanced me. They demanded immediate payment of account with threats of collection. Even though my policy-holders were still paying in. I ended up claiming this on bankruptcy, 1 1/2 yrs later. Than I found out my sales director turned this in as earned income to IRS. They are now coming after me to pay on money I never earned. Help me...I have tried to explain but they don't understand how insurance payment works. Am I wrong?
2007-11-19 04:19:41 · 4 answers · asked by Kelly 2 in Business & Finance ➔ Taxes ➔ United States
Yes, you need to pay taxes on an advance paid to you by an employer.
If you got out of paying your employer back by declaring bankruptcy, he is still going to send in your advance, either as wages or as cancellation of debt.
If it is cancellation of debt, you are not going to have to pay SS and Medicare taxes. If you receive a 1099C for this money, enter it on Line 21 of Form 1040, not subject to self-employment taxes.
If they include this advance on your W-2, they will have paid SS and Medicare taxes on this money, as will have you. Include it on Line 7 of Form 1040.
The premiums paid on those policies after you left your employment before 2 years are irrelevant, according to the terms of your contract.
2007-11-19 07:59:31 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
If you got the money as an advance, then yes it's taxable income. If later they had deducted the amount from your pay, you wouldn't have paid tax on it again.
Did you get the money, even though you hadn't earned it yet and as things turned out, never did? If you got the money, it's taxable income to you.
2007-11-19 13:43:24 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
It would be treated as cancellation of indebtedness which is taxable unless the taxpayer is insolvent. Bring this to the attention of whoever does your tax returns.
2007-11-19 12:47:42 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Wartz is correct, but it would not be included in income if it were discharged in bankruptcy as well.
2007-11-19 17:29:57 · answer #4 · answered by Mark S 5 · 0⤊ 0⤋