You know that old saying about the cobbler’s kids going barefoot, right? Well, I’m the tax geek version.
A lot of years I file for an extension. And when I do, I also tend to wait until the drop-dead October filing deadline (it’s Monday, Oct. 17, this year) is upon me before I complete my 1040.
Why the delay? I’m so busy writing about taxes that I just don’t have time to focus on my own. That’s my story and I’m sticking to it.
But another reason that I need, OK take, extra time to file my return is that I’m self-employed. And that’s a lot more tax work than simply getting a W-2 and entering in that information.
Each year, I receive 1099-MISC forms for most of my self-employment jobs. That includes a tax statement detailing payment for my work here with Bankrate (and thanks accounting and payroll departments for being so efficient!), as well as similar forms for other projects.
But like all self-employed workers, I also get some payments for which I don’t get a 1099. The law requires that a 1099 be issued only if the amount earned is $600 or more. Less than that, and the paying company doesn’t have to mess with creating and sending out the form.
That money, however, whether it’s reported on an official tax statement or not, is still taxable income.
That’s right. Just because you don’t get a 1099, that doesn’t mean that the money’s free from the tax collector’s clutches. It just means that it’s not as easy for the Internal Revenue Service to verify that you got the money and owe taxes on it.
So even without the documentation, I have to double-check my income records to see how much I made so I can report it to Uncle Sam.
It’s a big pain. And this type of income is why the IRS hates us self-employed folks.
OK, hate is probably too strong a word. But the tax collector definitely is skeptical about how many of us report income for which there’s no record that the IRS can check.
That’s why independent workers who file Schedule C along with a Form 1040 are near the top of the IRS audit list.
Personally, I don’t want to find out how tough the IRS might be in tracking down all my earnings, whether recorded on a 1099 or not. And I don’t want to tempt tax fate by simply not including the nonreported amount on my return.
So I put down every last dollar I earn. You should, too. It might cost you a few bucks when you file, but that’s definitely going to be less that what it will cost you if you don’t report the money and the IRS eventually finds out.
Have you ever not reported some earnings? Was it just a little, or all the way up to the $600 reporting threshold? I promise not to rat you out!
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