IRS Sees Red in Unreported Income

A question posed by a taxpayer in the San Francisco Chronicle posed an interesting situation, especially for small business entrepreneurs: what happens when 1099 income from independent contracting does not match reported income on a taxpayer's 1040?

Two scenarios exist. First, taxpayers may not be reporting income for payments received in December because they want to defer the income to the new year. However, companies filing 1099s will report the income during the calendar year regardless of when the taxpayer deposits the check.

Second, some companies are negligent in issuing 1099s for a variety of reasons. Whether a taxpayer receives a 1099 or not, he or she should still report income on the 1040 despite the fact that a 1099 is not present to back up the return.

The result of any unreported or mis-reported income presents a red flag for the IRS, which could lead to an audit. Tax preparers and advisors should counsel their clients that they should adhere to tax rules of file appropriately.

You may like these other stories...

Bank Leumi said to face $300 million demand in tax caseDavid Voreacos and Greg Farrell of Bloomberg reported on Wednesday that New York’s banking regulator will ask for more than $300 million to settle an investigation...
Mike "the Situation" Sorrentino, one of the stars on the former TV show "Jersey Shore," is in the middle of…well, a tax situation.On October 23, the erstwhile reality show attraction was arraigned...
Deal to lock in US tax cuts is bubbling up on the HillSome US lawmakers are exploring a post-election deal that would lock in permanent tax cuts for major corporations and low-income families, Richard Rubin of Bloomberg...

Already a member? log in here.

Upcoming CPE Webinars

Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.
Nov 18In this session Excel expert David Ringstrom, CPA tackles what to do when bad things happen to good spreadsheets.
Nov 19How do you minimize redundant work and unnecessary steps to maximize the amount of work moving through your firm?
Nov 20Kristen Rampe will share how to uncover new opportunities with your clients by asking powerful questions.