Tax Issues 2
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
No. You should report the actual income you received, and ask the company to file a corrected 1099. Similarly, if a company reports too much income on a 1099, checks off the wrong box on the 1099 (marking your earnings as lotto winnings, for instance); or makes any other mistake, you should ask them to file a corrected information return.
I did work for a company based in another country. They paid me but didn't send a 1099 to the U.S. government. Do I have to report that income?
Yes.
How will the IRS know whether or not I report all my income?
There are any number of ways the IRS can and does find out about unreported income. Here are a few of them:
- 1099 information returns filed by companies are matched against your income tax returns by computer. .
- Jealous neighbors or associates you have a falling out with could report you. .
- One of your customers could be audited and trigger an audit of companies with which it does business. .
- Your return could be kicked out at random for a compliance audit. .
- Some other circumstance could cause the IRS to audit part of your return and, due to your answers or some discrepancies, cause the IRS to dig deeper, getting bank records and/or examining the way you live to determine if you are hiding income. .
- Your return might have attracted notice because you made a large (over $10,000) bank deposit or cash purchase.
No matter what the mechanism, if the IRS discovers you have purposely under reported income (or misrepresented facts on your return) you could be charged with fraud.
Do I have to file a business return to report my spare_time income, or can I just include the income on Form 1040?
The answer depends on how regularly you make money at what you do an ( whether or not you carry out the income-producing activity in a businesslike way. If you regularly seek customers and regularly make money, you will need to report the income as business income on Schedule C or Schedule C-EZ. You will also have to pay self-employment tax if you make more than $400 profit. .
If you seldom make money from the activity and it is something like scuba diving or decorative painting that could be considered a hobby, you may not have to file a business return. You will need to report the income, though, and may benefit from reporting the income on Schedule C or Schedule C-EZ.
I wrote and sold three short novels this year. All of my self-employment income came from advances against royalties on those books. Since the payments were royalty, can I report the royalty payments as supplemental income (Schedule E) and avoid the self-employment tax?
No. Writers, photographers, artists, and others who create books, dramatic works, artworks, music scores, and other creative works have to report royalties on Schedule C as business income.
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |
