Monday 17 March 2014

What to Do If My Receipts Do Not Match My 1099?

If you're self-employed or perform contract services, you may receive 1099s from your customers at the end of the year. 1099-MISC forms show income you receive for services you provide, but you may not receive a 1099 from every customer. For example, if a customer paid you less than $600 for work, he is not required to send you a 1099. Because of this, it is common for self-employed individuals to have discrepancies between invoices and the amounts reported on 1099 forms.
1099 Reported to IRS
When you receive a 1099 from your customer, your customer furnishes the same information to the IRS. This means the IRS has your self-employment income information in their system and expects to see a reflection of the 1099 income on your tax return.
Receipts Total More than 1099
If your gross receipts total more that your 1099 amounts, report the amount of your gross receipts as income. Because you may not receive 1099s for all the income you earn as a self-employed individual, your gross receipt amount is probably more accurate. Many self-employed taxpayers use a cash basis method for accounting purposes. This means you report income and expenses in the year you actually receive the money or pay the bill. If you operate using the cash basis method, make sure you exclude unpaid invoices from your gross receipt calculation before you report the income.
Receipt Total Less Than 1099
If your gross receipt total is less than the amount reported on your 1099, you'll need to determine which figure is accurate. If you earn less than the amount shown on your 1099s, you may have an erroneous 1099. For example, if you charge a customer $700 for a job and receive a 1099 from the customer that shows you received $7,000 for the job, you have an erroneous 1099. If your 1099 forms are accurate, go through your bank statements and match your self-employment income deposits to your invoices. Make sure you recorded all your receipts correctly. Since the IRS retains all 1099 information received under your Social Security number, you should attach a statement to your tax return when you receive erroneous 1099 information.
Reporting 1099 Income

Most 1099-MISC income you receive as a self-employed individual is reported on IRS Schedule C, Profit or Loss from Business. If you have business income in addition to your 1099 income, total all amounts and report the income on line 1 of Schedule C.

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