Yardley CPA Posted April 4, 2019 Report Share Posted April 4, 2019 If this post needs to be moved to the off topic section, so be it. I wasn't sure. It's been a season of odd circumstances, today is no different. If you have a MFJ couple who have been long time clients. All information they have given you in the past looks to be 100% legitimate, W2's, 1099's, mortgage interest, real estate taxes...etc. The wife passed away two years ago. The "husband" remarried. All the previous information given to me in the past was given to me again this year in the way of W2's, 1099's etc. In addition, I'm told that the new spouse received payment in the form of cash amounting to $1,578 and he would like to claim all of it on the return. There was no 1099 Misc issued and I recognize these payments should be made through payroll. He indicated it was casual labor and she performed various duties at a restaurant. I'm not comfortable with this situation and I will not be preparing the return. However, it has me wondering...what happens if the return is prepared and the "cash" is included. How does the IRS treat treat this? Assuming it's placed on a Schedule C and does have self-employment tax calculated. Is the IRS looking to match a 1099 against this income? How is it scrutinized? What ramifications does the preparer face? Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 4, 2019 Report Share Posted April 4, 2019 I have clients who make money dog-walking, babysitting for children/disabled/elderly/even pets on an occasional basis, handyman work for individuals/one-time-type work, and other paying gigs for individuals, seldom for businesses, and very seldom over $600 for a person. So, no 1099s expected or received. The clients report their income, some keeping better records than others. I report all income. I might suggest better recordkeeping &/or depositing it in their bank for a better paper trail. But, if I have no suspicions, I prepare their returns. Your client's work for a restaurant should've been on payroll or at least a 1099 for sporadic, casual labor. Urge her to talk with the restaurant this year. Explain to her what to say &/or print out some plain English explanations. 3 Quote Link to comment Share on other sites More sharing options...
Yardley CPA Posted April 4, 2019 Author Report Share Posted April 4, 2019 4 minutes ago, Lion EA said: I have clients who make money dog-walking, babysitting for children/disabled/elderly/even pets on an occasional basis, handyman work for individuals/one-time-type work, and other paying gigs for individuals, seldom for businesses, and very seldom over $600 for a person. So, no 1099s expected or received. The clients report their income, some keeping better records than others. I report all income. I might suggest better recordkeeping &/or depositing it in their bank for a better paper trail. But, if I have no suspicions, I prepare their returns. Your client's work for a restaurant should've been on payroll or at least a 1099 for sporadic, casual labor. Urge her to talk with the restaurant this year. Explain to her what to say &/or print out some plain English explanations. Great suggestions. Thank you. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted April 4, 2019 Report Share Posted April 4, 2019 You can't NOT report income just because you got it in cash and did not get a form for it, although I have had people tell me that they can. So i don't generally get suspicious just for that reason. Now if that was the exact amount needed to get them in the sweet spot for EIC, I would definitely want to ask more questions. Or I had a potential client this year start to hand me his papers and tell me how much he wanted his income to be total since he was applying for a loan. I handed the papers back and told him that was not how we did returns here. 4 1 Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted April 6, 2019 Report Share Posted April 6, 2019 On 4/4/2019 at 3:37 PM, Gail in Virginia said: Now if that was the exact amount needed to get them in the sweet spot for EIC, I would definitely want to ask more questions. Been in that situation Gail! 1 Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 8, 2019 Report Share Posted April 8, 2019 Let's keep it within our business: We are suppose to be able to file the taxes for the capo if he escapes prison and walks to our doors and states that he made a few millions last year... CORRECT? We are supposed to file the taxes for the prostitute in the corner and I normally don't issue 1099 to her nor do I have her on my payroll, DO YOU? As state before, as long as they don't hit the sweet spot for EIC or as long as they don't want to make their return look better as requested by the realtor, I add their cash and I like those type of clients. Send them my way. (I am talking about this paragraph, not the two examples above) 1 Quote Link to comment Share on other sites More sharing options...
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