I know there are a lot of small business owner here so can't hurt asking. I did a small consulting project for a local business. I didn't charge a whole bunch of money, less than 1k. Do I have to declare this income? I really don't want the hassle of doing more work on my taxes. I didn't really think of the Tax implications. I guess the business has to report the expense if it is more than $600 bucks. I am thinking maybe I shouldn't cash the check.
Take my advice with a grain of salt and ask others too because I am far from a tax expert and hate doing tax work... Assuming they didn't take taxes out and you won't get a w2 from them, I think all that you need to do is file a Schedule C in addition to your regular tax return forms. With such small income/expenses you'd likely qualify for the Schedule C-EZ which will make things a lot more simple. Hopefully you've already filed as a sole proprietorship otherwise you may need to do that first (it's not expensive but I believe that you have to go down to the county clerks office to do so). I have a sole proprietorship that I haven't done much work for in the last couple of years so my memory is a bit hazy. /rant Whatever you do don't go to HR Block or the like to file it...made the mistake of doing that a couple of years ago. They charged an arm and a leg to do the Sched. C and went back and revised previous tax returns to account for depreciation of some equipment that I owned, which I'm sure I probably should have done but it was only $2-3k worth of equipment and I only netted about $2k at most per year from the work. In other words, even if I did get audited (which won't happen with my income) it wouldn't be much money to have to come up with. They ended up getting me an extra $30 on a previous years return but charged me like $150 for the amendment. /rant
This is probably better advice than mine. Though if you expect it to grow into anything more over time then it might be a good idea to get in the habit of filing it now and keeping track of that income separately.
This is one of the reasons why I was against the $600 reporting mandate. The chances of an audit for the $1000.00 is very minimum to none.
I don't report it, but well you know. When in rome. I do some side consulting work too pc-repair wise.
This. And, if they didn't pay you on a 1099 they likely didn't report it either. You'd know if they paid you on 1099 as they'd ask for your SS#. If they didn't, they either listed your fee as a business expense, or not at all.
You'll be fine with that small of an amount. It is similar to the money people make on eBay, through adsense, garage sales, etc. It doesn't pay for the IRS to go after such small fish. With that said, you also have the option of possibly making even more money in deductions if you file the income. If you can prove that the tools or other expenses incurred for you to perform that job were more than you got paid, you could file your sole proprietorship at a net loss, which helps with bigger returns. People do this all the time (including me), and it is perfectly legal. Just think of it as the Donald Trump loophole.
You should be OK regardless, but the company is still going to be reporting that they paid you. It's not that hard to fill out a schedule C. You'd just be turning down money that you earned if you don't.
Don't know why filing the extra form isn't worth $1,000 to you. H&R Block will probably do it for you for less than $1,000. But, I agree with the earlier suggestion of tax evasion. IRS audits a minority of returns and they want to catch the big cheaters, not guys who fail to report $1,000. And, if they do catch you, it's not like they'll be throwing you in prison or something -- just paperwork and some incremental payment. So, by doing nothing you get a big benefit in headache saved, a tiny benefit in taxes saved, and the risk is a very small chance of getting caught and losing the benefits you had sought. But, if you don't like being a cheater, that's great -- take the money you earned and use it to hire someone to sweat the tax complexity.
If you filled out a W9 for them, they're likely reporting it and you should, too, especially if you receive a 1099 early in the new year. A CPA will charge you to help fill out a schedule C, but it's pretty simple to do it on your own. Your CPA might not even charge you for something so small if he/she already does your other taxes. Whatever you do, don't go to the big box CPAs who are mostly data entry people. Find a real CPA who won't charge such ridiculous prices.
Are you incorporated by any chance? If you are, you are supposed to file quarterly earnings. You can even do it online and it's easy to do.
Isn't there a line for "other sources of income"? I imagine that's where drug dealers claim their earnings.
I can't suggest you not to report it. All I can say is that your chance of audit are very very low. Its not hard to fill out the additional forms. As others stated, just add it to the 'additional income section or something. Its not illegal to make mistakes on tax forms. Its illegal to dodge. As long as you fill out some form or claim it somewhere, you're ok. Here is the issue: If the company reports the payment, it doesn't matter if you deposit the check or not.... the IRS is still looking for it and you're still subjected to (again, the very very low risk) an audit if its not on your tax return.
I'll just parrot what everybody in this thread has already said, and tell you that the chances of an audit are very, very low. If you want to avoid even a small likelihood of hassle, just add it to your supplemental/additional income page.
