Author Topic: Do you report "all" your income in your tax returns?  (Read 4941 times)

tomatops

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Do you report "all" your income in your tax returns?
« on: September 14, 2016, 11:08:27 AM »
Since starting the MMM journey, I've earned side hustle money on the odd occasion, not to mention my savings account income is so low thanks to index funds, etc., that it's almost inconsequential. Basically looking for people's input on tax reporting on income that never makes it in the form of a tax slip.

So obviously, the tax man will always say report every little nickle and dime, but do people really?

Cranky

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Re: Do you report "all" your income in your tax returns?
« Reply #1 on: September 14, 2016, 11:24:09 AM »
Yes.

Never f*** with the tax man.

nereo

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Re: Do you report "all" your income in your tax returns?
« Reply #2 on: September 14, 2016, 11:27:23 AM »
A resounding yes.
Also, why did you feel the need to put quotes around the word: all?

Don't screw with the IRS and don't be a dick to your fellow citizens.  If your savings account, side gig, etc are small it won't make much of a difference on your taxes anyway, so just report it already.

iris lily

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Re: Do you report "all" your income in your tax returns?
« Reply #3 on: September 14, 2016, 11:34:19 AM »
Hmmm, it just occurred to me that I didnt report about $135 i won as prizes in a flower show.

wenchsenior

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Re: Do you report "all" your income in your tax returns?
« Reply #4 on: September 14, 2016, 11:40:57 AM »
Yes.

nereo

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Re: Do you report "all" your income in your tax returns?
« Reply #5 on: September 14, 2016, 11:44:40 AM »
Hmmm, it just occurred to me that I didnt report about $135 i won as prizes in a flower show.
Easy enough to fix, file form 1040x 1080x if you previously filed a[ny] 1040 1080.  See for 8938 for instructions at www.IRS.gov.

edited correct form number.  brain fart.
« Last Edit: September 15, 2016, 07:36:30 AM by nereo »

BTDretire

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Re: Do you report "all" your income in your tax returns?
« Reply #6 on: September 14, 2016, 03:06:04 PM »
I once dropped a digit, $11,101 became $1101 when transferring from my monthly form
to add up my income. Did my taxes, then while doing some calculations unrelated to
my tax bill I noticed the discrepancy. I gulped, and went to my account and ammended my return. His comment, "most people would have just ignored it."

Rural

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Re: Do you report "all" your income in your tax returns?
« Reply #7 on: September 14, 2016, 05:26:23 PM »
Yep. Huge potential downside for small potential gain. IRS don't play.

johnny847

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Re: Do you report "all" your income in your tax returns?
« Reply #8 on: September 14, 2016, 06:54:27 PM »
Hmmm, it just occurred to me that I didnt report about $135 i won as prizes in a flower show.
Easy enough to fix, file form 1080x if you previously filed a 1080.  See for 8938 for instructions at www.IRS.gov.

You mean 1040 and 1040X

johnny847

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Re: Do you report "all" your income in your tax returns?
« Reply #9 on: September 14, 2016, 06:55:39 PM »
And to answer your original question, yes I do. Including my side income reselling gift cards.

Ricksun

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Re: Do you report "all" your income in your tax returns?
« Reply #10 on: September 14, 2016, 07:10:12 PM »
Silly question; most of us here are really smart and even if they are cheating their taxes they should not admit to it in writing!

I have no side hustles, so not even an opportunity.  I'd be terrified myself even if I did have the opportunity though.   I'm still terrified about a $6.50 1099 INT form that came in 2 months after I did my taxes 7 years ago that I never got around to amend.

Ricksun

johnny847

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Re: Do you report "all" your income in your tax returns?
« Reply #11 on: September 14, 2016, 09:43:03 PM »
Silly question; most of us here are really smart and even if they are cheating their taxes they should not admit to it in writing!

I have no side hustles, so not even an opportunity.  I'd be terrified myself even if I did have the opportunity though.   I'm still terrified about a $6.50 1099 INT form that came in 2 months after I did my taxes 7 years ago that I never got around to amend.

Ricksun

You can rest easy. There's a statute of limitations. http://www.forbes.com/2009/10/08/IRS-tax-audits-statute-limitations-personal-finance-wood.html

Mrs. S

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Re: Do you report "all" your income in your tax returns?
« Reply #12 on: September 14, 2016, 10:12:50 PM »
Yes, even the tiny exempted interest in my savings account.

csprof

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Re: Do you report "all" your income in your tax returns?
« Reply #13 on: September 15, 2016, 06:43:39 AM »
Since starting the MMM journey, I've earned side hustle money on the odd occasion, not to mention my savings account income is so low thanks to index funds, etc., that it's almost inconsequential. Basically looking for people's input on tax reporting on income that never makes it in the form of a tax slip.

So obviously, the tax man will always say report every little nickle and dime, but do people really?

No.

... you're allowed to round down amounts under $0.50 as long as you're consistent about rounding up between 51-99c.  So if someone pays you a nickel, you can safely ignore it.  Just hope they don't pay you $0.51.

ender

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Re: Do you report "all" your income in your tax returns?
« Reply #14 on: September 15, 2016, 07:17:46 AM »
Given all the shenanigans I legally do with respect to manipulating my income, deducting things, and saving in tax advantaged accounts, I absolutely file taxes correctly.

Oh, and to me lying on your taxes is.... lying, which doesn't exactly jive with my desire to be honest in life.

TravelJunkyQC

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Re: Do you report "all" your income in your tax returns?
« Reply #15 on: September 15, 2016, 07:34:45 AM »
Yes, absolutely! I live in Canada but am also a US citizen. I do my tax reports in both countries (although only end up paying in Canada since I don't make enough to pay in both - the two countries have a deal). However, I realize that my situation is JUST unusual enough that if either government decides to be a pain, they could poke around. I don't f*** with that. Like someone higher up on the thread said, not reporting everything would be minimal gains for what could be a huge pain in the butt.

Spork

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Re: Do you report "all" your income in your tax returns?
« Reply #16 on: September 15, 2016, 07:48:43 AM »
Yes, even the tiny exempted interest in my savings account.

This brings up a side question. 

I am darned near religious about trying to understand and follow the letter of the law when it comes to taxes.  I don't like taxes, but I am in no way willing to break the law -- or even bend it.

That said, if I read this:   My limited understanding here is that interest payments under $10 don't have to be reported.  I've got a couple of money market/savings accounts that pay almost nothing and I almost always get one or two that pay under $10.  The financial institutions don't even send me a 1099.  I only know the interest amounts from looking at my own records/statements.

Am I supposed to be reporting this?  I know it probably doesn't matter.  $8 of income is likely not to change my tax -- and if it does, not by much.

brian313313

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Re: Do you report "all" your income in your tax returns?
« Reply #17 on: September 15, 2016, 08:24:48 AM »
One thing about the IRS is that they don't throw people in jail for honest mistakes. If so, I'd be long gone by now lol. I'm self-employed and do my own taxes to save money and at least once/year I make some sort of mistake. A couple months later I'll get a notice and I usually have to pay a late filing fee and sometimes interest but not usually. It's still cheaper than an accountant and I do use an accountant occasionally to make sure I'm not missing anything big. My errors are between all the tax collectors, not just the IRS. I do my best to file everything correctly but I also don't fret too much about it any more. The IRS has also been kind and returned money when I've accidentally overpaid :). One time, they returned to me .01. The stamp cost more than that. I had just mis-typed the last digit when paying on-line. Another time is was over 3k, however, this was a period overlap problem. I had to send it right back once they gave it to me. I'd paid the right amount, just didn't file correctly.

With This Herring

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Re: Do you report "all" your income in your tax returns?
« Reply #18 on: September 15, 2016, 08:29:16 AM »
Tomatops, please report everything.  I certainly do.  Besides the ethical consideration, the IRS can figure out that you have been receiving (and failing to report) side hustle income.  Do you deposit it in your bank accounts?  That's a red flag.  Do you spend it in place of money that would have otherwise come out of your bank account on a regular basis?  That's a red flag.  Also, realize that our tax system is very complex.  If you are audited, there is a good chance that the IRS will find some sort of error.  Do you want them to find the error AND that you have been INTENTIONALLY understating income?  They will be less forgiving if you did anything intentionally.  Also, KNOWINGLY and INTENTIONALLY understating income is tax fraud, which means there is no statute of limitations.  And, surprise, your obviously good financial knowledge through your ability to achieve FIRE will support the IRS argument that you knew better.  The IRS is going to be a lot more understanding of someone who is scraping by waiting tables and thought their employer was putting all their tips on the W-2 than someone financially savvy who FIREd at a young age and is just padding their nest egg.

Ricksun, you are fine.  The taxes on that would be $1, after rounding up.  The statute of limitations has passed, it was very obviously not an intentional omission, and the amount is de minimis.  At my previous firm, we didn't file amended returns for less than a $100 error (if I recall correctly), because it was not worth our client's time, our time, or the IRS time.

Yes, even the tiny exempted interest in my savings account.

This brings up a side question. 

I am darned near religious about trying to understand and follow the letter of the law when it comes to taxes.  I don't like taxes, but I am in no way willing to break the law -- or even bend it.

That said, if I read this:   My limited understanding here is that interest payments under $10 don't have to be reported.  I've got a couple of money market/savings accounts that pay almost nothing and I almost always get one or two that pay under $10.  The financial institutions don't even send me a 1099.  I only know the interest amounts from looking at my own records/statements.

Am I supposed to be reporting this?  I know it probably doesn't matter.  $8 of income is likely not to change my tax -- and if it does, not by much.

That page of instructions is for the banks and businesses who are paying interest.  If a bank holds a bunch of accounts and pays interest on them, the bank is not required to send out 1099-INT forms for totals under $10.  (Though some do anyway.)  The bank's obligation to send out 1099s is not related to your obligation to report all income.  That being said, the IRS understands that most people will not think to report savings account interest unless they get 1099s...  Officially, however, you are supposed to report ALL income.

sol

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Re: Do you report "all" your income in your tax returns?
« Reply #19 on: September 15, 2016, 08:31:33 AM »
I'm pretty sure that at some point in my life I've probably failed to keep track of the final negotiated price of something I've sold on craigslist.  I sell a lot of stuff on craigslist, and I suspect the IRS wants me to keep track of all of it, exactly.

I think those sorts of cash sales are probably the most common form of unreported income tax fraud, intentional or not.  It doesn't generate any paperwork, so it's up to you as the seller to write it all down promptly before you forget.

jwright

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Re: Do you report "all" your income in your tax returns?
« Reply #20 on: September 15, 2016, 08:35:07 AM »
I'm pretty sure that at some point in my life I've probably failed to keep track of the final negotiated price of something I've sold on craigslist.  I sell a lot of stuff on craigslist, and I suspect the IRS wants me to keep track of all of it, exactly.

I think those sorts of cash sales are probably the most common form of unreported income tax fraud, intentional or not.  It doesn't generate any paperwork, so it's up to you as the seller to write it all down promptly before you forget.

I would assume that most items sold on Craigslist are sold for a loss.  A used car, used bike, etc.  You are receiving less than your cost basis from the sale.  This would be a personal loss and not deductible so nothing to report.

If you sell something for a gain, then you should report the gain to be in compliance.

robartsd

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Re: Do you report "all" your income in your tax returns?
« Reply #21 on: September 15, 2016, 09:07:06 AM »
While I would certainly report income from a regular side hustle if I had one, I do not track incidental monetary "gifts" received from friends who I've helped out. I call these "gifts" even though they are clearly offered in exchange for the service rendered because they are typically below market rate for the services rendered - if they were employing me, there would be serious violations of employment law and I would not offer services at that rate as a business. Also, these "gifts" and the market value of the services rendered always fall below the IRS standards for the gift tax.

I also always report to the cent unless I am forced to round (most e-file methods require rounding), in which case I round in my favor (I'm sure the extra pennies I get are cheaper than processing my paper return would be - if they care about the pennies, they can fix the e-file system to track them).

BlueMR2

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Re: Do you report "all" your income in your tax returns?
« Reply #22 on: September 15, 2016, 11:15:16 AM »
Yep.  *Everything* gets reported.  Including things many people don't even think of, such as winning small objects in drawings, state use tax (the tax I have to pay on Internet purchases that don't already include tax), etc.  Don't invite the man in to your life by being shady.  Give him all his money.  We desperately need it for infrastructure these days...

Spork

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Re: Do you report "all" your income in your tax returns?
« Reply #23 on: September 15, 2016, 01:16:31 PM »

Yes, even the tiny exempted interest in my savings account.

This brings up a side question. 

I am darned near religious about trying to understand and follow the letter of the law when it comes to taxes.  I don't like taxes, but I am in no way willing to break the law -- or even bend it.

That said, if I read this:   My limited understanding here is that interest payments under $10 don't have to be reported.  I've got a couple of money market/savings accounts that pay almost nothing and I almost always get one or two that pay under $10.  The financial institutions don't even send me a 1099.  I only know the interest amounts from looking at my own records/statements.

Am I supposed to be reporting this?  I know it probably doesn't matter.  $8 of income is likely not to change my tax -- and if it does, not by much.

That page of instructions is for the banks and businesses who are paying interest.  If a bank holds a bunch of accounts and pays interest on them, the bank is not required to send out 1099-INT forms for totals under $10.  (Though some do anyway.)  The bank's obligation to send out 1099s is not related to your obligation to report all income.  That being said, the IRS understands that most people will not think to report savings account interest unless they get 1099s...  Officially, however, you are supposed to report ALL income.

Duly noted.  It's not worth going back and finding, but I will make a point of tracking down the pennies in future filings.  I suspect it will amount to pretty much no difference, but I'd rather it be correct.