Is it ok to not claim all expenses??

Question

Tax Question ~

What if your income from 1099's is alot less than expenses?

What if you want to show an income this year?

Is it possible to just throw receipts away & not claim them to balance out what you want to claim as income?

There was more income throughout the year....we just dont get a 1099 from that income.

The business has claimed a loss the last 4 years. I think last year was our last year to claim a loss.

Im only claiming income from 1099's.

If i have to i will claim "other" income. It looks like i might have to!!

Ok, with OTHER income it is about even. I guess this is what i am going to HAVE to do....its better than under reporting expenses. We should still be able to claim a small gain this year to keep the IRS off us...:P

Answer 1

Why would you want to do this?

The IRS is concerned with 2 things. The big no-no is under reporting income. The little no-no is over reporting expenses.

You want to under report expenses? Why? If your business has a loss you can deduct the loss which will net out with other income you need to report. Meaning, less taxes to pay.

There is a rule called the "Hobby Loss" rule that you might be concerned about. I can understand your not wanting to show a loss because your business is close to being declared a hobby.

Or perhaps you don't have any other income to net against the business loss. I can't be certain of your situation or motivation for wanting to do this.

But the straight answer is yes. Yes you can under report expenses. There is nothing wrong with showing fewer expenses than you really had.

If you want to know more, please add to your question and I'll check back. If the amounts are large you might want to get a professional tax preparer to help. You might be able to use a loss to get money back from the IRS. Good Luck!!!

Important Note: All income is taxable and reportable regardless of whether you get a 1099 or not.

Second Important Note: Showing a small gain is a good idea since you say that you have shown a loss for 4 years in a row. The 4 consecutive years of losses would support the IRS position that you don't have a business, rather a hobby. You should also work towards showing a gain again next year. I promise you that you don't want the IRS to audit you and declare the last 4 years a hobby - they could do that. Show a gain, albeit a small one.

Answer 2

you can do whatever you want. If your not making a loss claim for more than three years in a schedule c business on your tax returns chances are good that no one will even look twice at it. your tax preparer or the IRS. if there is no 1099 to report income you can omit it and if you feel like omitting expenses that is easier yet. (morality not being the question here right?) Expenses can always be classified as personal and not business but I think if you show a break even ish stance of income and expenses thats your best bet for being in the clear

Answer 3

You can under report expenses...

However, the IRS has changed how they look at losses. Now, they want you to be profitable 3 out of 5 years and it's a sliding scale. So basically, you can show a loss 2 of 5 years. There are exceptions for start-ups, etc.
The danger in showing so many losses is being re-classified as a hobby. If the do this, they can go back and re-classify previous returns.

Answer 4

In an ethics class for Enrolled Agents, it was stated that it is both unethical and illegal to not report all expenses that you have receipts for. This is because you can manipulate your AGI (Adusted Gross Income) and thus your Earned Income Credit and tax liability.

Note: Read the fine print just before where you sign on the 1040. I says " Under penalties of perjury, I declare that I have examined this return... and to the best of my knowledge and belief, they are true and correct and accurately all amounts and sources of income...."

Failure to not report all expense would not accurately report income.

Deductions are not the same as expenses.

Deductions reduce your taxable income

Expenses reduce your net income and Adjsuted Gross Income (AGI)

Not claiming deductions is fine because they do not reduce your AGI. and therefore have no effect on your EIC.

Answer 5

You don't have to claim all the deductions that you are legally entitled to. But you DO have to claim all income, whether you got 1099's or not - by not claiming the other income, you are leaving yourself open to charges of tax fraud if you get caught.

Answer 6

You ae supposed to claim all income (not just morally, but legally). Do you still have a loss when you obey the law?