OT: A Buisness Question

I do some work for a small company on the side to help with the tuition bills and I am having I guess sort of a tax issue.

I have already done my 2012 federal and state taxes and got refunds from both and now here in march this company accountant sends me a 1099 for about 12000.00 today.

I don't have a buisness name or license so thats why I got a 1099 I presume which is fine but we supposed to have a cash arrangement. Stil not a problem but they did not pay me 8k in labor theya re getting that number from whjat they wrote em checks for but about 5K of that 12k is where I purchased materials and they were paying me back for those materials but it was a check from the for material reimbursemnet and labor.

I don't think I should have a 1099 for the whole 12k should I? That would equate to me paying taxes twice on the 5k of material since I purchased it whith my already taxed money from my paycheck.

I need some advice on how to approach this both short and long term.

I too work for a colleague and get paid by a 1099. Included in that is the reimbursement for travel expenses and such. I simply keep a spreadsheet record of that, and deduct the amount from the 1099. Report the rest.

Hopefully you paid enough in taxes with your other job or you will owe the IRS a chunk

Yes I have to pay estimated taxes every quarter. You don't want to owe the IRS too much by the end of the year.

jkerekes said:

I too work for a colleague and get paid by a 1099. Included in that is the reimbursement for travel expenses and such. I simply keep a spreadsheet record of that, and deduct the amount from the 1099. Report the rest.

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Won't this method get you into hot water with the IRS? If I report 8K as Income and and the 1099 from the company is 12K won't that raise the red audit flag?

I have very little experience with this and I am trying to learn quickly.

I am a full time work,full time student, and I helping my mother out as she lost her job late last year and still has my younger sister to take care of. I can't be in debt to the IRS I am barely keeping the boat floating as it is.

Actually, I wasn't as clear as I should be. You report on the 1040 the whole 1099 amount, but in another area, you report your business expenses.

Unless he bought tools,uniforms... Laptops
He probably doesn't have business expenses

my advice is to go see an accountant - a GOOD accountant ...

Absolutely
Since he's already done 2012 taxes
This is an interesting one

Hopefully you put away $2k

based on what you've posted, here's one question I'd be sure to ask:

"If I'm supporting my mother and sister - could I legally claim them as dependents?" ...

I never thought of it that way Ron but I should be able to as I supported them for more than half the year. I guess it would be a good idea to see what comes out better my mother using my sister as a dependant with no income for x amount of months of for me to claim both of them.

You can always file an amended return.

You report the full 1099, as the IRS gets a copy of that form too. Then, as stated above, you deduct the amount of purchases from the total to get net income. I believe that a Schedule C is required. If you aren't sure, then a tax professional should be consulted.

Word to the wise - don't count on cash business being un-reported. The company you deal with will claim your charges as a business expense, and the IRS will be aware of it.

An accountant would help, but it is something like this:
The employer spent over $600, so they are supposed to supply a 1099, which they did. Therefore, this is now documented.
1) you have to file an amended 2012 tax form
2) File a Schedule C or C-EZ
3) $12000 is the revenue
4) Cost = $5000 materials, + $x driving expenses, + $x other expenses
5) Probably about $6000 is the profit, which is taxable

Then you will owe Fed tax (~$1500 if you are 25% such as a student, etc) + State tax (yes, re-file there also) + Social Security tax (I think). Obviously, documenting more "costs" is to your advantage, but you still will have taxes to pay.

You'll have to file an amended 2012 return which will need to include schedule C. That's where you report your business income and expenses. You should also have filed a quarterly estimated tax payment on which you should have paid both the required income tax and social security/medicare tax of 13.3% (that's both your half and the employer half).

Ron's advice is spot on. Get thee to an accountant. Now. Don't put it off and hope they won't notice. You may have to cough up some serious cash to cover the taxes you didn't pay, but if you correct it sooner rather than later you may be able to avoid penalties. The penalties will kill you because they accrue from day one, even if the IRS doesn't get around to your case for a couple of years.

I don't have a buisness name or license so thats why I got a 1099

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form 1099 is for non-employees, W2 for employees. There is nothing wrong with getting 1099, except this is kind of late.

we supposed to have a cash arrangement

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was it written? If it was "just come and I pay you" phone call, then it was your fault.

4) Cost = $5000 materials, + $x driving expenses, + $x other expenses

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You must have all original reciepts to claim any of these.

file an amended 2012 return

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Make sure you do it before April 15th
You still will have to pay penalties and interest for not paying estimated tax.