Should I file my 1099?

Question

I have a 1099 in which I made $3500 dollars. If I file it, I will owe $200 dollars, if I don't, I will recieve $700. What is the likely hood they will audit me? And if they do, what will be the penalty?

Answer 1

They will find you. Are you sure you will owe $200? Don't you have deductions to go with the income?

Answer 2

Absolutely file it. The $200 in taxes is much less than the headache, penalties, and now jail time you would face if you got audited. The penalties are usually stiff - 25% a year. On top of that, you just asked on a public forum if you should scheme to avoid taxes. If you got audited and the IRS decided to go full blown and find out what you posted here, YOU WILL GO TO JAIL.

Pay the $200 because it is cheaper than not doing so and because the headaches and worries of being audited for the next three to five years isn't worth it.

Although you may not be an ideal audit candidate today, if you make a considerable amount in the next few years (earnings, lotto winnings, whatever), you may get audited. In that case, they'll go back three or more years and check all of you taxes.

Finally, if it was $3,500, it may have already been reported to the IRS. This happens a lot if it came from investments or from a diligent employer. Not filing it today may set up a red flag, an audit, a penalty and jail time.

Answer 3

Receiving a Form 1099 means the payer reported to the IRS that you were paid that income. The IRS matches 1099s with tax returns, so it is almost 100% certain they will catch it if you don't report the income.

You may be able to reduce the tax owed by including business expenses that you incurred while earning that income: mileage, telephone, supplies, and so forth.

For self-employment (1099) income, there's an extra tax, the Self Employment tax of 15.3%. But it's only charged on your profit after deducting business expenses. That means every dollar of business expense that you can document saves you a lot of tax.

Answer 4

The likelihood of you getting audited and caught was relatively low UNTIL YOU POSTED THIS QUESTION!

Of course you have to file it! If you received a 1099, the issuer has also provided the same information to the IRS, silly!

BTW...the penalty for getting something wrong by mistake on your tax return is you have to fix it and pay and extra taxes & penalties. The penalty for evasion (which is what you are PUBLICALLY proposing!) is usually jail-time!

Pay what you owe, why wouldn't you?

Answer 5

File the 1099 and deduct any expenses you had associated with making that money.

If you don't file it, the IRS will eventually catch up with you and you will pay interest of around 8% compounded daily from the due date of the tax until it is paid. It's a sure bet they will catch you and then watch you for years to come.