Taxes Made Simple

Lisa (not self-employed) asks:

I do not run my own business. I work as an employee at a media company. However, my financial advisor has a program where he pays a “finder’s fee” everytime somebody refers a person to him who becomes a client. Are these finder’s fees taxable, and how do I report them if they are?

Answer:

Lisa-

Yes, these finder’s fees are taxable. Generally speaking, all income is either investment income, employment income, or self-employment income. This obviously isn’t investment income; and you clearly aren’t an employee of your financial advisor. As such, this income defaults to self-employment income.
You’ll end up filing a Schedule C to report income from a business and Schedule SE to calculate the self-employment tax due on your finder’s fees.

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