For some taxpayers it may seem that they have an ever-expanding collection of 1099s. 1099 income is simply a fact of life for many Americans due to various jobs held. investments and savings they had, and other sources of income they received. Unfortunately, no person is perfect, and in some cases the number of 1099s received can become overwhelming. Other times, income received from sporadic work that ceased early in the tax year may result in the taxpayer forgetting about the income, and failing to include it on his or her income tax return. Or, the taxpayer may simply believe that the IRS or California Franchise Tax Board will never notice their missing income. All of these situations can lead to the taxpayer facing penalties, fines, and other serious consequences.
If you have been contacted by the IRS for a failure to file income taxes or a failure to include certain sources of income, a Sacramento tax lawyer can provide representation. All too often taxpayers believe they can fix their tax problem through smooth-talking or that the failure to file an accurate tax return is not a big deal. These taxpayers often end up compounding their liability through misstatements or false statements. If you have a tax problem, contact the lawyers of the NewPoint Law Group, LLP, LLP today by calling 800-358-0305 or contact us online today.
Understanding the Array of 1099s a Sacramento Taxpayer Can Receive
The days where just a single W-2 is received are long gone for most taxpayers. In today’s complex and rapidly changing world, most taxpayers can expect to receive at least one 1099 in addition to several other tax forms. The 1099 itself is fairly complex because there are numerous versions issued on the basis of the source of the income reported. The most commonly received 1099 is probably the 1099-MISC that is utilized for different contractor income purposes. Generally, this form is received when you have performed non-employee work for a business or organization.
However, there are many other forms of the 1099 form that taxpayers can receive. Some of the variations of this form include:
- 1099-S issued for real estate income
- 1099-B for broker transaction income
- 1099-G listing unemployment insurance income received by the taxpayer
- 1099-INT containing interest payment income received
- 1099-DIV listing income received through dividends paid
- 1099-R stating pension plan income received
The above lists only the more commonly issued 1099s. There are still forms not listed above, but the obligation to report the income remains. Furthermore, if the individual earned or was paid less than $600 and did not receive a 1099, that does not mean(s)he can forego reporting the income. Once again, the duty to report and pay taxes remains undisturbed.
What Happens if I Fail to Report 1099 Income?
What happens after you fail to report some or all 1099s depends largely on the circumstances surrounding the reporting and tax filing failure. If the amount you failed to report is significant and badges of fraud are present, you could face a particularly serious situation. Badges of fraud are actions and circumstances used by IRS agents to determine whether tax fraud is likely. They include:
- Failures to keep adequate tax records
- Premature destruction of tax records
- Lying to an IRS agent
- Rude or abusive behavior towards an IRS agent
- Steps to conceal wrongdoing
- Implausible statements and explanations
If these badges are present, the IRS may seek a civil fraud penalty regardless of your true intent. And if badges of fraud are present and your underpayment is greater than $10,000 you may be referred for criminal prosecution. Felony tax evasion can carry a penalty of up to 5 years in prison and a fine of up to $250,000. The taxpayer is also responsible for the costs of prosecution and restitution of the unpaid tax, including penalties and interest. While penalties of this type are reserved for serious wrongdoing, many taxpayers can meet the above criteria before they even realize it. If they receive an IRS audit or questioning by an agent, they can quickly find themselves facing a potential prison sentence.
Facing an IRS or FTB Audit in Sacramento?
If you have failed to include income in past tax filings or have already been contacted by the IRS, the time to take action is now. Speak to a Sacramento tax attorney who can stand up to the IRS and work to protect you from the severe penalties in which tax filing and payment errors can result. To schedule a free and confidential consultation, call 800-358-0305 or contact us online.