Have you ever worked as an independent contractor and you were not given a 1099 form to report your income? What do you do? Do you report it or ignore it?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
If that ever happened to you, my recommendation is to report your 1099 income. It does not matter if the one that hired you did not issue you a 1099, it’s still your responsibility to report the income. You might be thinking: “But the IRS did not receive a copy of the 1099, that means, I got tax-free income! No need to report it!”
Unfortunately, here are the tax traps that you need to consider:
1. Longer audit periods – if you did not report more than 25% of your income, the IRS have 6 years to audit your returns instead of 3 years.
2. Multiple-year audits – if you get audited, there is a potential that the IRS will go back three years or six years, if applicable to determine that you did not omit any income.
3. Interest & Penalty assessment – you will be assessed various interest and penalties based on the amount that you omitted. For every dollar that you saved from omitting the income, the IRS wants around $1.70 or more.
To summarize, not reporting your income can expose you to longer audit periods, multiple-year audits and penalty assessments. So please, report your income.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
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