You've gathered all your tax statements and you've discovered that you actually made more money than the Internal Revenue Service knows.
Woo-hoo! Tax free income!
Wrong.
Sure, your neighbor paid you $400 for the weekend you spent making him a bookcase for his office. And you got $300 for the article you wrote about the project.
Since both jobs paid less than $600, neither your neighbor nor the magazine had to issue you a 1099-MISC. That means the IRS didn't get a copy either.
But technically, even if you don't get a tax statement the income is still taxable.
This reminder to put all your earnings on your return is the day-before-filing-extension-deadline Countdown to Oct. 15 tax tip.
OK, I hear you. Just how would the IRS ever find out?
Good question.
Now I have one for you. Do you really want to personally find out just how
and how well the IRS does its job?
Your cousin's payment would be
hard to trace. But you can bet the woodworking magazine has a record
even if it didn't issue an official tax document.
And you are, after all, an honest person, right? Right?
While you're taking some time to self-reflect, here's one more thing to think about.
If you're self-employed or receive tips as part of your job, the IRS is likely to pay special attention to your returns. The tax agency knows that employment situations where cash tends to change hands are where it loses a lot of collections.
So don't give the IRS anything to find if it does take a closer look at your return.
Uncle Sam, the Treasury, budget deficit hawks and all your law-abiding
fellow taxpayers thank you for also following tax law and reporting all your income, officially documented or not, on your 1040.
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