Report all your income, even if you don't get official tax documentation
Saturday, October 08, 2011
It's called an income tax. That means the IRS get a piece of just about every type of money you get.
For most filers, that means wage income.
That's great for the Internal Revenue Service because it gets a copy of workers' W-2 forms. Tax agents can then easily compare the amount reported on the tax document to what's on the taxpayer's Form 1040 (or 1040A or 1040EZ0).
The IRS also gets copies of the many other statements detailing taxpayer income.
Sometimes, though, individuals get taxable money that isn't documented by third parties.
This is frequently the case for self-employed folks.
A payer isn't required to issue you a 1099-MISC if your earnings are less than $600. But you're still required to report those payments of $599.99 and less.
Don't ask for tax trouble: It's tempting to let these smaller payments slide. C'mon, how will the IRS know about that loot?
Do you really want to find out the answer to that question?
Money, especially in bank accounts, is traceable. So are PayPal transfers.
You can be sure that if the IRS ever audits you, the examiner will want to know exactly where your money came from and, more to the point, why you didn't report it.
The ease with which income can be under reported or completed omitted from a return is why small business Schedule C filers are prime tax audit targets.
Professions where individuals routinely receive tips also tend to get extra attention from the IRS.
So don't make matters worse for yourself by not reporting all your income, regardless of whether you did or didn't get a 1099.
Don't miss the Oct. 17 deadline: Did you miss the first filing tip designed for tax procrastinators looking to meet the drop-dead filing date? Find it at this special blog page, Countdown to Oct. 17, 2011.
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