All your income, even that not reported on 1099s, must be reported on 1040
Sunday, January 29, 2012
You're an honest person, right? So you include every penny you make on your tax returns, right?
Yeah, I know. But I had to ask.
The Internal Revenue Service depends on full voluntary compliance by all of us. And that means reporting all our income, even when we don't get official tax statements listing that income.
Technically, a person who pays you for a job isn't required to send you (and copy the IRS) a 1099-MISC if your earnings are less than $600.
But that amount applies to the payer's reporting requirement. It has no bearing on your filing requirements.
It's just flat-out wrong that if you don't get a 1099 or the payment is less than a certain amount that the income is tax free.
Another amount that often is cited as free from tax is $400 in self-employment earnings. That figure only applies to the amount that triggers the self-employment tax, the independent worker's version of payroll withholding. Income taxes still are collected even when you don't have to file Schedule SE.
The bottom line is that all earnings are taxable and you are still required by law to report all payments, be they $599.99 or $5.99.
What if you don't report undocumented earnings? How will the IRS ever know?
Let me answer that with another question: Do you really want to find out the specifics of just how IRS does its business?
So take today's Daily Tax Tip to heart and don't make matters worse for yourself by not reporting all your income, regardless of whether you did or didn't get a 1099.
Count all cash payments of all amounts, as well as the fair market value of bartered services and that $50 you won in the lottery scratch-off game.
Remember, the IRS generally considers all income received in the form of money, property or services to be taxable income unless the tax law specifically says otherwise.
Keep that in mind when you're entering your income on your tax return.
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