MS - Independent Contractor/Tax question

For various reasons, i had to file for an extension for my 2018 tax filing, so I am just now having the return prepared. In going through my records, I see no record of having received a 1099 form from any companies I shopped for. I only shop for about 10 MSCs, the most common MSCs discussed here.
I don't see any 1099s linked to my account info/profile, so I am sending emails to the MSCs.
Is this typical? I probably was only paid $600+ for a couple of them. I am a very part time shopper. Yes, I realize all income is claimed regardless of 1099 issuance. Thanks

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Only MSCs that paid you $600 or more in FEES, needed to send 1099s to you. Could it be that they were all less than that in fees? Very few MSCs include reimbursements in the 1099 calculation.

I assume that you kept your own records of which payments were fees and which were reimbursements. If not, it is vital that you start doing so, if only to avoid confusing yourself at tax prep time.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
I mostly shop for reimbursement, sometimes small fees, so this may be the reason for that. Thank you.
I print out my entire year of PayPal payments. It's really helpful to tally up all of the "under $600" companies that way.
JAS, the IRS doesn't consider it taxable income, either!

Edited 1 time(s). Last edit at 10/06/2019 06:52PM by ceasesmith.
How many sheets of paper is that?!!!

@SoCalMama wrote:

I print out my entire year of PayPal payments. It's really helpful to tally up all of the "under $600" companies that way.
@JASFLALMT wrote:

How many sheets of paper is that?!!!

@SoCalMama wrote:

I print out my entire year of PayPal payments. It's really helpful to tally up all of the "under $600" companies that way.
Less than 30.
Well, reimbursement being non-taxable would have been good to know. H and R block sure considered it taxable.

Edited 1 time(s). Last edit at 10/07/2019 05:28AM by nolimitem.
Maybe you need to consider filing an amended return if that was the case. Tkae what they filed and add all of the costs that were reimbursed as business expenses. I assume they used Schedule C for your MS transactions? If not, they made and even bigger booboo.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
They did. I knew she was messing it up, but I didn't know how to fix it which was why I took it to a pro in the first place. Currently going through a refi and the broker told me he heard HR block works for the government so they try to not give deductions, etc. Not sure the validity, but I won't go back either way.
Not valid that they work for the government as far as I can tell. Their purpose is to get you a refund large enough that you won't object to their fee being so high. I did their mandatory preparer training with them, which I had actually passed out of based on a pre-test so my training was no cost. My classmates were far from the brightest bulbs on the string. There were so many issues in class with just the concept of who could and could not be claimed as a dependent that it took several sessions just to sort out that pretty simplistic concept. At the end of the training the brighter shinier 'bulbs' were able to bull their way through the HRB software to get a return to declare itself complete and checked. As a long time TurboTax user, I can tell you that TT is much easier, clearer and accurate in what it does--it just doesn't come with 15# of manuals for reference. Did your preparer pull out their manuals to check Schedule C rules???

If your business made a profit and you claimed reimbursements as income, you likely should amend your returns for any years this occurred. HRB should do this for you at no charge, but they may try to wiggle out by stating that you did not indicate that some of your 'income' was reimbursements. Good luck.

Edited 1 time(s). Last edit at 10/07/2019 05:08PM by Flash.
@Flash, isn't their a second method where you can claim all income, including reimbursements, and then deduct all of them back off as expenses before calculating the business income?

I have always avoided that since my reimbursements are so high, I figured it would be a red flag.

I have been using the H&R Block software for about 20 years now and know it well, and it clearly walks you through the Schedule C if you have the small business version. I'm always shocked the people will take their taxes to part-time preparers instead of just investing a little into the software.
I have a brilliant CPA firm doing mine. I think it’s $750 each time. Worth it for my situation.
I have myself do mine. It costs me $0, and I learn about the different forms, how the calculations work, how to optimize my situation, etc. Worth it for my situation.
@SteveSoCal wrote:

@Flash, isn't their a second method where you can claim all income, including reimbursements, and then deduct all of them back off as expenses before calculating the business income?

I have always avoided that since my reimbursements are so high, I figured it would be a red flag.

I have been using the H&R Block software for about 20 years now and know it well, and it clearly walks you through the Schedule C if you have the small business version. I'm always shocked the people will take their taxes to part-time preparers instead of just investing a little into the software.

Absolutely. I include fees and reimbursements on the top line of Schedule C and subsequently deduct the reimbursements out as expenses. The net effect, of course, is that I am only paying tax on fees.

I did get an H&R software package at one point so understood what they said in the H&R Block training that their self-preparation software was considered a gateway to have the purchaser need to come on in to H&R to finish off the return because it was unclear as to what they were actually looking for here or there.
Absolutely. I have chosen to list all revenue (fees plus reimbursable expenses) on "the top line" and then deduct expenses "lower down". That means that all expenses are claimed in the year they are incurred, but if they are paid the following year by the MSC, it increases my "income" for that year. In the steady-state, it doesn't matter. Both methods are legal, so it is really a matter of preference.

I have used Turbo Tax for decades. I suspect that other self-prepare tax programs would be equivalent, although there is a belief by some that H&R Block uses their canned tax-programs as a loss-leader to get more clients to walk into their offices for help when they run into something that they don't understand.

When I have seen what tax preparation services charge for even 1040 E-Z forms, I just shudder. IMHO, if you really think that you (I do not mean you, Steve) need someone to prepare your taxes, then go to a real CPA, not to the pop-up offices of H&R Block and their ilk.

@SteveSoCal wrote:

@Flash, isn't their a second method where you can claim all income, including reimbursements, and then deduct all of them back off as expenses before calculating the business income?

I have always avoided that since my reimbursements are so high, I figured it would be a red flag.

I have been using the H&R Block software for about 20 years now and know it well, and it clearly walks you through the Schedule C if you have the small business version. I'm always shocked the people will take their taxes to part-time preparers instead of just investing a little into the software.

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
@myst4au wrote:

If you really think that you need someone to prepare your taxes, then go to a real CPA, not to the pop-up offices of H&R Block and their ilk.

Agreed! I have always prepared my own taxes because I like to understand the laws and my income streams/deductions, but I also have an accountant that answers questions for me as needed. The accountant has been great for helping me make decisions about how to represent my different businesses.
She did. She told me in 2019 I couldn't deduct reimbursements as a business expense. She was a "senior" tax preparer in all ways. It was $450 for them to do them. I'm fine paying but not if they're wrong. Also I clearly had my spreadsheet and all my receipts as verification. I was prepared. They were not.
LOL. You do NOT deduct the reimbursements -- you deduct the purchases (for which you were reimbursed). Semantics, I know. You end up paying taxes on the fee portion ONLY.

I always do my own taxes -- but I happily take tax shops when I can get them. When they screw them up badly, I just submit an amended return.

This year, it was difficult to look/act ignorant as the preparer carefully and step-by-step showed me how my refund would be reduced if I declared my self-employment income. It was painful. He got out the books and schedules and walked me right through it. And, sure enough, my refund declined by about $3500 if I claimed my SE income. "And," he carefully explained, "of course, you MAY choose to declare that income. I'm merely showing you how it will affect your refund if you do. Also, since it includes several more pages/schedules/forms, the cost of preparing your tax return also goes up, so that will make your refund go down even more".

Of course, I'm assuming that's the information the client was looking for. I was so sad to "rat" that guy out! He was so careful, and so helpful! I put every positive in the report I could! But I was appalled, because I think most of the customers in these places don't know any better, and would just not have declared the self-employment at all.

(Of course, I did not declare it on that return, either. No one could possibly not follow his careful instruction; of course, anyone wants the max refund! LOL!!! And after watching that careful demonstration, the customer wouldn't have any idea that his tax return was not properly prepared.)
@nolimitem; perhaps there was some misunderstanding. You indeed could not deduct reimbursements as business expenses had you had not considered those reimbursements as income. It sounds like the preparer may not have understood how the industry functions, or how the payments to you worked.

If it's allowed to simply leave your reimbursements off your income reporting (which I understand it to be), I can't understand how deducting them after reporting them would not be allowed....but that's how to fix it. Simply adjust your income to not include the reimbursements and you don't have to worry about deducting them.
IMHO, you should seriously consider filing an amended return. It seems that all you would need to do is change the entry on one line on Schedule C, and then redo the arithmetic on that page. Look for where Schedule C results are moved on the main 1040 form, and correct that entry. Recalculate the total tax you owe. Then wait for the e=heck to arrive from the IRS.
@nolimitem wrote:

She did. She told me in 2019 I couldn't deduct reimbursements as a business expense. She was a "senior" tax preparer in all ways. It was $450 for them to do them. I'm fine paying but not if they're wrong. Also I clearly had my spreadsheet and all my receipts as verification. I was prepared. They were not.

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
@SteveSoCal wrote:

Agreed! I have always prepared my own taxes because I like to understand the laws and my income streams/deductions, but I also have an accountant that answers questions for me as needed. The accountant has been great for helping me make decisions about how to represent my different businesses.

The understanding of the laws and the taxability of your different types of income streams allows you the confidence of knowing that you can plan your taxes and have them be correct. There are so many different situations and scenarios that even careful and reputable CPAs are going to need to look up the answers to some. And even then, they rely on the specific interests of their clients to guide them to information they otherwise would not have thought about.

Did you know, for instance, that if the custodian for your IRA charges an annual fee for managing your account that the fee is deductible if you pay the fee with funds from OUTSIDE the IRA but that it is not deductible if you allow the fee to be taken from the IRA itself? Did you know that if you own a rental house and the agreement with the tenant is that they will mow and keep the bushes trimmed that IRS considers their 'lawn service' to be income from the property just as their rent is? If it would have cost you $2000 per year to provide lawn service and their rent is $12000 per year, your 'income' from the property needs to be stated as $14000?
I learned to do peraonl income and business taxes at my mother's knee, and using pencil, paper and adding and subtracting "by hand." BUT, I also learned to read the tax publications and to call in a pro when it comes to more arcane matters.

The first thing that I did, when teaching myself to use Lotus 1-2-3, was to see if I could recreate Schedule C and the Form 1040 and connect them, lol. (It worked, btw).

For two years, when I first had income property, self-employment income, 1099 income AND investments besides and IRA (1981-1982) and again for the first year that I had a small business corporation (1992?) I used a CPA who specialized in small businesses to set up my record-keeping systems and check my tax forms (after I filled them out.) After that I read, read, read, IRS publications and, eventually tried out 2 different tax prep programs. In 10+ years of using Turbo Tax, no issues whatsoever. But, I still need to drill down into at least one arcane portion of an IRS bulletin each tax season, just to be safe.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.
@Flash wrote:

@SteveSoCal wrote:

Did you know, for instance, that if the custodian for your IRA charges an annual fee for managing your account that the fee is deductible if you pay the fee with funds from OUTSIDE the IRA but that it is not deductible if you allow the fee to be taken from the IRA itself?

Yes, I did.

Did you know that if you own a rental house and the agreement with the tenant is that they will mow and keep the bushes trimmed that IRS considers their 'lawn service' to be income from the property just as their rent is? If it would have cost you $2000 per year to provide lawn service and their rent is $12000 per year, your 'income' from the property needs to be stated as $14000?

I did not know that, but it makes sense since it would be an imputed income.

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
My mother was a bookkeeper and did her taxes by herself by hand well into her 80's. They got more complicated with time with stocks, bonds, partnership income (with me), and eventually stepped-up basis cost items. Nothing fazed her. I did my taxes by hand, and when I discovered Lotus 1-2-3 in about 1983, I created all of the calculations that I needed there. That way I could see what happened if a number changed, or if I found another deduction. When I had all the numbers entered to my satisfaction, I copied them by hand into the paper forms.

Later I discovered someone who would sell me an Excel macro that printed the forms ready to go, and I switched to that. I moved to Turbo Tax in the early 90s. In a recent year, I had to file in DE, PA, and NJ and I had W-2, 1099, Schedule C, partnership income, and more. Turbo Tax made that so easy, other than requiring a manual adjustment of income (only for PA). I used to request paper copies of the tax publications, but now I read them online. As you stated, there is always some arcane issue that arises.
@walesmaven wrote:

I learned to do peraonl income and business taxes at my mother's knee, and using pencil, paper and adding and subtracting "by hand." BUT, I also learned to read the tax publications and to call in a pro when it comes to more arcane matters.

The first thing that I did, when teaching myself to use Lotus 1-2-3, was to see if I could recreate Schedule C and the Form 1040 and connect them, lol. (It worked, btw).

For two years, when I first had income property, self-employment income, 1099 income AND investments besides and IRA (1981-1982) and again for the first year that I had a small business corporation (1992?) I used a CPA who specialized in small businesses to set up my record-keeping systems and check my tax forms (after I filled them out.) After that I read, read, read, IRS publications and, eventually tried out 2 different tax prep programs. In 10+ years of using Turbo Tax, no issues whatsoever. But, I still need to drill down into at least one arcane portion of an IRS bulletin each tax season, just to be safe.

Shopping Southeast Pennsylvania, Delaware above the canal, and southwestern NJ since 2008
CPA here. If you have more than just very basic income sources (W-2 wages, interest, dividends), I encourage you to have someone prepare your taxes. And not just H&R Block - they don't give a **** about accuracy, just speed. I have seen soooooooo many self-prepared returns that are just plain butchered. This includes returns prepared using TurbTax. There is a lot of bad advice floating around, both here (the forum in general, not necessarily this particular post) and elsewhere. When things get messy, people tend to do whatever benefits them the most rather than take the time to figure out what's actually correct. There's a lot of "well it's not that big a deal" mindset, too.

Edited 1 time(s). Last edit at 10/15/2019 04:46PM by swanderson.
If one ever gets on IRS' "bad side", it can become a "big deal".

smiling smiley

(And I'll reiterate my tax advice: The only tax advice to take off a public forum is "consult a tax professional". LOL!!! )

Edited 1 time(s). Last edit at 10/15/2019 09:33PM by ceasesmith.
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