The UAW-FCA-Ford-General Motors Legal Services Plan has issued a 1099-MISC form to each Plan participant who was eligible to use the Plan in 2018. The tax form shows that the 2018 taxable value of your legal services fringe benefit is $21.93. You will receive the form in the mail by or before the IRS deadline of January 31, 2019.
Below are some answers to common questions you may have about the 1099 you received for the 2018 tax year.
Why did I get this 1099?
All Plan participants get a 1099 because the IRS considers the legal services benefit you receive to be a taxable fringe benefit.
I’m an active employee and get a W2 from my employer. Why did I get a 1099?
The $21.93 legal services fringe benefit amount wasn’t included on the W-2 you got from your employer because it was decided that the Plan should provide the legal services fringe benefit tax notice to active workers who are Plan participants.
Why is the legal services benefit being taxed as income?
Since 1992, the IRS has considered employee fringe benefits to be taxable under the Internal Revenue Code. Before 1992, the cost of legal services to each eligible participant was tax exempt.
Did everyone with the legal services benefit get a 1099?
All active and retired Plan participants and surviving spouses who were eligible to use the benefit in 2018 have a 1099.
I didn’t use the Plan in 2018. Why do I have to pay taxes on a benefit I didn’t use?
All individuals are taxed on the value of the Plan benefit because they were eligible to use the benefit. We hope you will use this valuable union-negotiated benefit in the future by calling us at (800) 482-7700.
Can I opt out of getting the legal services benefit?
The benefit was negotiated by the UAW and your employer and is in your 2015-2019 collective bargaining agreement. You can’t opt out of the right to receive your valuable union-negotiated contract provisions, including your right to use the legal services benefit.
What is the $21.93 amount based on? How was it calculated?
The Plan took the total 2018 cost to provide the legal services benefit to all eligible participants (active and retired members and surviving spouses) and divided that number by the number of all eligible participants. In 2018, it cost $21.93 to provide the legal services benefit to each eligible participant.
Are all Plan participants getting the same taxable amount on their 1099?
All Plan participants have the same taxable amount of $21.93 on their 1099 – whether they used the Plan or not in 2018. We hope you’ll use your valuable legal services benefit in 2019.
Will I have to pay $21.93 in taxes?
You will not pay $21.93 in taxes. That number is the taxable value of the legal services benefit in 2018. Depending on the tax rate that applies to your taxable income, you will owe federal income taxes between only $2.19 and $8.11 on the $21.93 taxable amount.
How do I deal with this 1099 on my IRS tax form or tax preparation software program?
Specific questions about your tax return should be directed to a tax preparer. However, in general, you should handle the 1099 as follows based on information provided by our tax preparation experts:
- Read your 1099’s full Box 7 instructions. Box 7 is for non-employee compensation. Please especially read the last sentence, which states: “If you are not an employee but the amount in this box is not SE [self-employment] income (for example, it is income from a sporadic activity or a hobby), report this amount on the “Other income” line of Schedule 1 (Form 1040) (or Form 1040NR). (Emphasis added.)
- The instructions for 1099 Box 3 don’t apply.
- IRS instructions state that miscellaneous income is placed on Line 21 of new Schedule 1 (Other income) for those using Form 1040 or Form 1040NR. Schedule 1 is a new form that the IRS created due to 2017 federal tax law changes.
- You don’t have to file a Schedule C with your tax return because the 1099 reported amount is not self-employment income.
Someone told me that because I got a 1099, I need to file a Schedule C with my tax return. Is that true?
You don’t need to file a Schedule C because the $21.93 value of the legal services benefit is not self-employment income. The $21.93 on your 1099 shows the taxable value of your legal services fringe benefit in 2018 – not self-employment income.
How did you get my home address?
The Plan got your home address from the Plan sponsors FCA, Ford, General Motors and International Union, UAW for their respective employees, retirees and surviving spouses who were eligible to use the legal services benefit in 2018.
Does the IRS know about the income reported on my 1099?
The IRS has received a copy of the 1099 you received.
Should I send the Plan the amount that I owe?
Don’t send the Plan any money. The taxable value of your legal services benefit should be reported on your IRS Form 1040, new Schedule 1. For more information, see the question above “How do I deal with this 1099 on my IRS tax form or tax preparation software program?”
Will I get another 1099 in 2020?
All Plan participants will get a 1099 for each tax year that the Plan is open.
My spouse and I each work for a Plan sponsor and each got a 1099 from UAW Legal Services. Is that right?
As individual employees of a Plan sponsor, you and your spouse each have your own 1099, just as you each have your own W-2.
I received a 1099 that doesn’t have my full name/has a partial-incorrect name/has a partial- incorrect address. What do I need to do?
The UAW Legal Services Plan received your name and address from the employer Plan sponsors, so you will need to contact the employer involved to provide the correct information. After you provide that information, we will receive a corrected 1099.
- Active employees of a Plan sponsor should contact the employer office that handles name and address changes.
- Retirees and surviving spouses should contact their Plan sponsor at the following numbers.
For FCA, call: (888) 409-3300.
For Ford, call: (800) 829-8833.
For General Motors, call: (800) 489-4646.
For UAW, call: (313) 926-5000.