Discussion:1099 misc for client
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Discussion Forum Index --> Tax Questions --> 1099 misc for client
| February 12, 2008 | |
| Client sold some computers to a business that will refurbish and resell. Computers were for personal use and never used for business by my client. Client found out the business will give him a 1099-misc. $4,000. Options are 1. not report and if a cp2000 arrives explain it then. 2. Report on line 21 and same amount on Sched A as misc item. not subject to 2%. However using line 21 means AGI is higher and Child Tax credit gets reduced by $300. Client would rather take the $300 hit then get a letter if it's left off. Advice and/or comments on reporting a different way. Thank you. | |
| 12 February 2008 | |
| what was the original cost of the computer? Shouldn't this be a Sch D item?
I wouldn't ignore it because the IRS gets a copy of the 1099. By knowingly ignoring it you may be penalized under the "preparer knowingly filing a fraudulent return.taxea | |
| 12 February 2008 | |
| Presuming no gain for Sch D, I would attach an explanation for the 1099 mismatch people to see. It will probably look plausible in context of the entire return. We're to follow IRS instructions in preparing returns, which is not to create a nonexistent "hobby business" or a phony Sch C business just 'cause we don't want to be bothered with a CP-2000 affair.
A statement attached to a return has more plausibility than the exact same statement furnished in response to an enforcement inquiry. Especially a CP-2000, where the inquiry is the proposed tax. A preparer penalty is not possible if the 1099 were ignored completely. The return is not false, nor merely incorrect, at all under these facts. IRS says a personal items sold at a loss is simply not reported. | |
| February 13, 2008 | |
| Taxea - the cost is higher so a loss. Since it's personal use, no Sch D.
Thanks for both your comments. I agree it should not be ignored. | |
| February 13, 2008 | |
| Why not have the company that issued the erroneous F 1099 Misc correct it? If equipment was sold (no services provided), there shouldn't BE a F 1099 Misc.
And, I'm assuming the amount is in box 7, which creates a bigger issue than if in box 3. | |
| 13 February 2008 | |
| Similar situation. Client received a 1099-misc for health products (non-deductible as medical) he purchased for personal consumption … not sure of boxes checked. Should not be income, should not be a schedule C. (Wish he would have at least sold some so I could do a C-EZ) I did some research on board going back to 06 and did not find a good answer to how to handle it in the return.(There was a personal cell phone discussion in 06) There is a suggestion above to “attach an explanation for the 1099 mismatch people to see.” How do we do this with efile?
Snowbird 06:44, 13 February 2008 (CST) | |
| 13 February 2008 | |
| Put the 1099 income on a Schedule C and then either use Returns/Allowances or a Cost of Sales expense line to eliminate the Gross Income. This reports the 1099-MISC, but removes the taxability of it at the same time. Then disclose with an attachment the reason you had to do this. Takes care of the problem. I do this with 1099 issued under SSN that should have been to a corporation. Issuer was using old ID information and this is generally the easier method toi fix. Now understand, it is our obligation to not abuse this method and use it only when necessary. | |
| 13 February 2008 | |
| When you convert a true nonbusiness return into a return with "C," you can significantly increase odds of audit selection due to the way DIF and the "return classes" work. Also, nowadays different IRS functions respectively work them, with differing skills due to the consequential grade structure. | |
