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Old 08-11-2009, 02:52 PM
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Income reporting requirements? 1099's recieved only or everything?

I am looking for the following info:

We run a service based business
We have always filed our taxes appropriately and through a CPA.

We provide all clients with an invoice to pay from (recorded in Quickbooks)
Only a handful of our clients send us a 1099 at the end of the year

What are the potential cons of only reporting income that we receive a 1099 for and omitting other sales? It seems as though this would reduce the gross income shown, and the other omitted invoices are likely being reported to the IRS in a lump sum deduction (with other similar expenses for our clients) so how would they be able to detect this?

I assume that the IRS could audit one of our clients that did not provide a 1099 and review all receipts/invoices, but then do they actually follow the trail of every single reciept/expense claimed?

thanks - I'm sure some of you have some strong feelings about this kind of thing... but please give me a realistic idea of how the IRS would track this and the potential consequences?


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Old 08-12-2009, 01:42 PM
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Join Date: Jan 2007
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First of all you should generally report all your income irrespective of whether or not you have received a 1099-Misc from a Vendor.

Per the IRS code section 61, "Compensation for services, including fees, commissions, fringe benefits, and similar items" is considered taxable income and must be reported.

The IRS may not have a method of directly tracking what your gross income is, but in the possible event of an audit, if you have failed to report any income deliberately, you would be subject to severe penalties and possible interest and in the event of what amounts to a flagrant disregard of IRS tax code there could be substantial fines!

I would suggest that you have a CPA report all your income and have him suggest some year end tax planning to save you taxes using legal and accepted strategies that are available under the current law!

Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.

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