Author Topic: Improper 1099 amount  (Read 1248 times)

BTDretire

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Improper 1099 amount
« on: April 02, 2018, 06:48:26 PM »
 I know a few deck hands that work on boats, most the deck hands
I'm familiar with are quite friendly with drugs, often called crackheads.
  I talked with one the other day and he was lamenting that the captains of
two boats he worked on sent him 1099s and they were for inflated amounts.
  His statement, "I'm not like the rest of those crackheads, I keep all my records and know how much I earned"
I suspect it is true that the captains are well aware many of their deckhands don't have a clue how much they earned,
and the captain can put pretty much what he wants on the 1099. The captains pay in cash, The other thing that is true, the deckhands, have little will to pay taxes on the 1099 or even file a return.
 They often stay at someones house when they are on land, they don't own a car, they basically have nothing except a cellphone, their clothes and what money they have, is spent on drugs.
 So here is this fellow, knowing his 1099 is inflated, would like to continue to work on the boats, but if he makes a big stink, that may not happen.
 What are his options.
 

FIPurpose

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Re: Improper 1099 amount
« Reply #1 on: April 02, 2018, 07:04:14 PM »
I think there may be a way to anonymously give the info to the IRS.

Other than that for his taxes this year, he can just request an amended 1099.

This is negligence at best, tax fraud at worst.

NoStacheOhio

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Re: Improper 1099 amount
« Reply #2 on: April 03, 2018, 06:28:22 AM »
I've only ever had the opposite problem, and I just reported the correct number on Schedule C. Maybe @SeattleCPA or one of the other tax pros on here has a better answer.

SeattleCPA

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Re: Improper 1099 amount
« Reply #3 on: April 03, 2018, 07:11:46 AM »
I've only ever had the opposite problem, and I just reported the correct number on Schedule C. Maybe @SeattleCPA or one of the other tax pros on here has a better answer.

One of the tax accountants in our office worked on a fishing boat before becoming an accountant. (His dad was the captain.)

That connection and his stories make me doubt some of the details provided here. (Sorry.)

E.g., I wonder if the 1099 amount includes not just the cash money the boat pays to deck hands, but the value of the meals and other expenses. So someone gets $10,000 in cash and $5,000 in meals and then the 1099 says $15,000.

BTW, the same thing sort of happens with 1099-Ks which small businesses get from credit card companies. The 1099-Ks often show way more than the cash the business actually receives, including state sales tax, employee tips, bank fees, etc.

In either sort of situation, the easier approach is to use the 1099 amount and then treat the noncash amount as an expense:

Example #1: Deckhand received $10K in cash but got 1099 that reported $15K with extra amount food. In this case, report $15K as gross income and the $5K as meals.

Example #2: Small restaurant receives 1099-Ks reporting $400K of charges but only received $320K because $40K of the charges were for sales taxes and $40K were for employee tips. In this case, report $400K as gross income and then the $40K of sales tax and $40K of tips as expenses.

BTW, this sort of 1099 matching is one of the most important things you can do to prevent an audit:

IRS Audit prevention tips


BTDretire

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Re: Improper 1099 amount
« Reply #4 on: April 03, 2018, 02:10:05 PM »
I've only ever had the opposite problem, and I just reported the correct number on Schedule C. Maybe @SeattleCPA or one of the other tax pros on here has a better answer.

One of the tax accountants in our office worked on a fishing boat before becoming an accountant. (His dad was the captain.)

That connection and his stories make me doubt some of the details provided here. (Sorry.)

No problem, but  which details? :-)
 I've been working on a marina for 18 years. Crackheads, lots of them, theives, yep. Captains that don't share up correctly, all the time. Captains that don't pay for their service work, yep. Captains that pay cash to their 1099 recipients, no doubt about it. Deckhands that get less than $100 for a two week trip, sure thing. Deckhands selling the captains, fish or shrimp while the captains not around, yep. I've seen deckhands drop a $60 fish overboard during unloading and then when the boat leaves the unloading dock, deckhand takes a little swim to retreive the fish. Deckhands that don't pay taxes, that's almost a joke. Captains that don't pay any taxes, yes.
A year after 1099ing a supplier I got a letter from the IRS, asking me to collect 28% to pay this guys taxes.
 I never bought anymore from him. He also skipped out on a large fuel bill, dock rent bill, and finally had the boat repossesed for not making payments. (there's long story about that and more, with a firing, possible jail and loss of a 30 year pension)
 
Quote
E.g., I wonder if the 1099 amount includes not just the cash money the boat pays to deck hands, but the value of the meals and other expenses. So someone gets $10,000 in cash and $5,000 in meals and then the 1099 says $15,000.

 Interesting point and I'll follow up on that.
In all these years, I have never heard anyone say they paid for food on the boat as a deckhand, but maybe.

Quote
BTW, the same thing sort of happens with 1099-Ks which small businesses get from credit card companies. The 1099-Ks often show way more than the cash the business actually receives, including state sales tax, employee tips, bank fees, etc.
Quote

In either sort of situation, the easier approach is to use the 1099 amount and then treat the noncash amount as an expense:

 Oh! Very good idea, I'll pass that along.
         Thanks


SeattleCPA

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Re: Improper 1099 amount
« Reply #5 on: April 04, 2018, 10:43:09 AM »
In all these years, I have never heard anyone say they paid for food on the boat as a deckhand, but maybe.

So I just walked down to the office occupied by the accountant who used to work on a fishing boat.

He confirmed that when he worked on boats "fishing" for crab (in Alaska), you got charged a pro rata amount for food, fuel and bait.

He also noted that when he worked on other fishing boats, that was not the arrangement.

In any case, I would think an easy way to deal with this is to show, e.g., the $10,000 that appears on the 1099 as the gross income... and then if one really only got say $8K to report the $2K difference as expense.

BTDretire

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Re: Improper 1099 amount
« Reply #6 on: April 04, 2018, 01:37:41 PM »
In all these years, I have never heard anyone say they paid for food on the boat as a deckhand, but maybe.

So I just walked down to the office occupied by the accountant who used to work on a fishing boat.

He confirmed that when he worked on boats "fishing" for crab (in Alaska), you got charged a pro rata amount for food, fuel and bait.

He also noted that when he worked on other fishing boats, that was not the arrangement.

In any case, I would think an easy way to deal with this is to show, e.g., the $10,000 that appears on the 1099 as the gross income... and then if one really only got say $8K to report the $2K difference as expense.

 I'll pass this along, commercial fishing may have sublte differences here in the Gulf, the boats are small, 35ft to 65ft, obviously we have some bigger also. The boats take 5 to 15 day trips.
  So far I haven't caught up with the fellow with the problem, but I'm interested to see about the food.