Oh, this is an old thread. As I recall, this was a lawful money redeemer who did contract work and the payer sent a year-end Form 1099 to the filer. Of course the IRS wanted its cut when the computer flagged the return. I believe there where several IRS/filer letters back n forth and the filer would respond saying: no, there was an error, I made lawful money, not private credit (sample deposits included). And the IRS would respond with letters like this one with "the nonemployee compensation is taxable". OK, granted. but who says the filer made "nonemployee compensation?" That's another custom defined term the IRS likes to use.
A payment of a kind? sorry not that kind of payment (Federal Reserve notes). The filer respectfully declines to treat his/her lawful money income as taxable and won't be paying the bankers' tax. The IRS responses always avoided the filers argument - nothing about lawful money or the deposits made. Each side just kept refusing the other's offer. Until, finally, the filer won. Zero amount due. May have the final letter here somewhere.ยง 31.3406(b)(3)-1 Reportable payments of rents, commissions, nonemployee compensation, etc.
(a)Section 6041 and 6041A(a) payments subject to backup withholding. A payment of a kind, and to a payee, that is required to be reported under section 6041 (relating to information reporting of rents, commissions, nonemployee compensation, etc.) or a payment that is required to be reported under section 6041A(a) (relating to information reporting of payments to nonemployees for services) is a reportable payment for purposes of section 3406.
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