Business Taxes and Legal Issues

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Old 02-15-2009
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Default Do you have to report income without a 1099?
During the course of the year, I've worked for several people, some small jobs and big ones.

However, many have not sent me a 1099, granted I got paid through paypal for many jobs, but not sure what to do here.

Any advice would be helpful. Thanks
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Yes, you have to report all income, whether it's on a 1099 or not.
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Many of my clients [for no good reason at all] have never,ever sent me a 1099 but I am still responsible for reporting all of that income, regardless.
It doesn't matter how you get paid - be sure to report it and pay your SE and Federal taxes on all of it.
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Don't you have to have a W-2 or some type of document to send in?

I have 2 W-2's and some 1099, how would I handle what I've been paid by paypal with?
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Originally Posted by TammyVA View Post
Don't you have to have a W-2 or some type of document to send in?

I have 2 W-2's and some 1099, how would I handle what I've been paid by paypal with?
No, you don't have to have anything to send in.

You report income on Schedule C, which is to report profit/loss from a business.

You use Schedule SE for self-employment taxes.

I've been filing self-employed for quite some time now. I only have one contract that sends me 1099s, and that's for a company that I do about $5000 a year of work for. All my other clients don't send me 1099s for whatever reason, but I still have to report that income.

Whether we like it or not, money, especially money in bank accounts, received by PayPal, etc. is traceable, and if the IRS were to ever audit you for any reason at all, they'd want to know exactly where that money came from, and why you didn't report it, so it really is best to report it as what it is, business income.
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Okay, thanks a lot. Do you know of the best resource to use to find all the deductions I can take?

I need all the help I can get. Thanks
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
One more thing, if you have a W-2 or 1099, do you still report all that under Schedule C?

Thanks
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Originally Posted by TammyVA View Post
Okay, thanks a lot. Do you know of the best resource to use to find all the deductions I can take?

I need all the help I can get. Thanks
Yes - hire a good accountant! I got a recommendation from a friend who has owned a small business for years, so he is very familiar with small businesses. Her comment was that he was forever finding deductions she didn't know about, and the savings usually covered a good portion, if not all, of his fee.

Good luck!
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Originally Posted by TammyVA View Post
One more thing, if you have a W-2 or 1099, do you still report all that under Schedule C?

Thanks
W-2 Income is reported on line 1 of the 1040 and not on the Schedule C. For a list of business deductions download Pub 535 from www.irs.gov.
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Thanks, I am getting an accountant but I want to understand part of what's going on.
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Yes, even with an accountant, everyone should understand what is going on with their taxes. 1099s are not required for total yearly payments to a contractor of less than $600 (this is considered casual labor) but this money is still reportable as income by the recipient.

Jenny
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Old 02-15-2009
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Default Re: Do you have to report income without a 1099?
Tammy,
I would also suggest that you hire an accoutant or educated tax preparer (and not one of those tax time only places since they hire off the street and train based on their software programs).

W-2's are issued by employeers and taxes and other employee items are deducted thereby giving you a net pay. These are reported on 1040 forms. 1099's are issued by your clients and no taxes are deducted. 1099 payment are income and reported on schedule C and taxes are reported on schedule SE.

Like Rebecka said information can be found on the IRS website. It is best to gather all receipts, paypal reports, accounting software records and any other records that you have to take to your preparer. They can help you decide what is allowable.
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Old 02-16-2009
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Default Re: Do you have to report income without a 1099?
1099s are only required when you earn more than $600 in a year from a given entity, but that doesn't mean you're not still obligated to report the income.

If you are ever audited and they look at your bank records and the numbers don't match what you've reported... they're going to get you, and it may not be pretty.

Plus, it's important to know that the IRS looks much closer at home-based businesses so the odds that you'll be audited tend to be higher.

Also something else to remember is that for some occupations, you can take a self-employment credit. This may not apply to most of you here, but notaries, for example, earn a credit against SE tax for notarial fees. HOWEVER.... a credit to SE tax means a reduction in contributions to Social Security, so if you don't have a solid method of retirement or fallback in case of disability, you do NOT want to take that credit.
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Old 02-18-2009
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Default Re: Do you have to report income without a 1099?
All good and informative stuff. Question, if someone does pay you more than $600 and does not provide you with a 1099, don't THEY get in trouble when you report it on your return?
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Old 02-18-2009
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Default Re: Do you have to report income without a 1099?
Originally Posted by obvusa View Post
All good and informative stuff. Question, if someone does pay you more than $600 and does not provide you with a 1099, don't THEY get in trouble when you report it on your return?
Maybe, maybe not. Because you didn't get a 1099 from them, you'll simply be reporting it as business income, which you don't list the specific source for. For instance, I only had one client that paid me over $600, so just one 1099. But that was only a portion of my income. The rest was various payments for smaller projects throughout the year. I didn't itemize that income, I just put XX dollars on the Schedule C, business income. So there's no real way for the IRS to even know where that income came from, unless they audit me and request to see my books. Which is unlikely, as my less than 10K income isn't worth it for the IRS to have fits about!

However, the person paying you more than $600 could get in trouble if they are unable to account for where the money went, and they try to deduct it as a business expense.

It wouldn't be your return that alerted the IRS to that, though. It would be the return of the person paying you.
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Old 02-18-2009
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Default Re: Do you have to report income without a 1099?
That makes sense... Thank you! It was one of those questions that just "hangs around" in my head.
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Old 02-19-2009
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Default Re: Do you have to report income without a 1099?
It's a good question, though! Mt FT job (for now) is shared with a bunch of accountants and I see auditors here on a regular basis and overhear all kinds of things. I just asked one of them about this and he said that if the IRS audits a company who paid you more than $600 and failed to issue a 1099... it's likely the IRS could pull your file. They may just issue you a letter notifying you of the discrepancy and advise you to amend your return if you need to.... but even if you didn't get a 1099, you should have reported the income anyway so the letter is nothing more than a perfunctory issue to be filed away with that year's return.
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Old 02-19-2009
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Default Re: Do you have to report income without a 1099?
Thanks Marian, good to know. I'm sure, we all like our friends at the IRS.:prrr: Who's for FairTax?
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