- quote -

And depending on circumstances, client name might not be
available. (Consider a computer consultant who gets $10 cash
for telling someone how to connect at Starbux.)

- quote -

That's fine; but if some of those expenses are of the type
that already exists on another line, shouldn't they be
included there?

Seth

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pgattocpa[at]excite.com wrote:
- quote -

Maybe correct sometimes after all. How many tax "tales" do
we hear our clients tell about what they heard from the
barber as to what they could deduct, or... maybe from a
realtor telling how you don't have to pay tax if you take
your profit and plow it back into the same property? (that
was actually yesterday from a client)

ChEAr$,
Harlan

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pgattocpa[at]excite.com wrote:

- quote -

Sorry, that should be:

"Don't let the tax tail wag the business dog."

Peter C. Gatto, CPA

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Seth Breidbart wrote:
- quote -

I agree with the client name; my omission. Remember though,
we are dealing with someone who wants to do as little as
possible. Baby steps . . .

- quote -

Are you implying that you have never seen a
taxpayer-prepared Schedule C with a "Misc. Expense"
description that could conceivably have been included on an
explicit line? If you did, did you tell the taxpayer that
they would need to amend their return merely to make the
descriptions comport? If these are truly small jobs with
small expenses, there is no reason to "go from the sublime
to the ridiculous" when it comes to descriptions.

If the amounts turned out to be relatively large compared to
the explicit expenses, then obviously they would go to the
proper lines.

That being said, presentational issues are *so not* what
this thread is about. It's about getting a taxpayer to
report all of his income and all of his legitimate expenses.
(As we all know, income, whether legitimate or not, must be
reported.)

- quote -

Here is the related quote from my post:

"Additionally, you will get an idea of whether these small
jobs truly are hindering your growth or whether it's worth
the time to do them."

What if he finds that he has done 7 small jobs for Bob?
Don't you think he might want to call Bob and try to convert
the work to one larger job that can be done in less time but
be more profitable (econmies of scale work with small
businesses and time as well as for large businesses and
materials).? What if he finds he did 7 small jobs for 7
different people. Don't you think he would want to know
that so he can consider telling them, "No thanks" the next
time thay ask for help?

If all a business does is worry about the IRS, then they are
not worrying about their business enough. Don't let the tax
tale wag the dog.

Peter C. Gatto, CPA

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- quote -

Why is an invoice necessary? A _record_ of some sort (such
as a scribbled note showing payer, date, amount) ought to
suffice. (Even the payer might not be required.)

- quote -

If it's cash, why deposit it at all? (OK, depositing it
makes another record, but surely one should suffice.)

Seth

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<pgattocpa[at]excite.com> wrote:

- quote -

Better would be a note with date, amount, client name.

- quote -

Unfortunately, expenses are supposed to be characterized by
the type of expense, not the size of job they're related to.

- quote -

Why? The IRS doesn't care.

Seth

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The consensus is correct...report all income and expenses no
matter how much of a hinderance...I am now an EA, and
retired from IRS after 31 years....You just do not want to
go there with them...and lastly, I think when you track it
you will be amazed at how much income and related expenses
you generated from these "Small" contracts...

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el_roachmeister[at]yahoo.com wrote:

- quote -

I don't understand a couple of things:

1) Why would you ask the question if you were merely going
to rationalize what you have already decided to do after
seeing the responses? Did you expect a group of tax
professionals to agree with the non-reporting of income and
expenses?

2) If your expenses truly "even out" against the income, why
do you think there will be tax due? See next item.

3) Why would you take on work that "hinders your growth"
especially if it gives you no net income? For that matter,
why would you take on work that hinders your growth even if
it provided incremental income? One of the things that
hinders growth is not learning when to say "No" to business.

4) Why do you think an IRS auditor is going to believe that
you are "just be[ing] honest with the auditor" when you
aren't even being honest on a tax return that you are
signing under penalty of perjury?

5) Since you brought up the growth of your business, why
would you do something that will cause you to waste time in
the future (an IRS examination)? You can't make money while
you are answering questions, providing support for every
deduction, providing proof that you are not hiding income
(proving the non-existence of something is always "fun"),
etc.

I like one of the alternatives given to you with a
modification since you added a fact not in the OP: Put the
"small income" money in a shoebox. Put the "small expenses"
receipts in the shoebox. At the end of the year add up the
income and call it "Small Jobs Income" on the Schedule C;
add up the receipts and call it "Small Job Expenses" on the
Schedule C. I would add a piece of paper that said how much
time you spent on each small job. You will probably spend
less than 30 minutes doing this if there are as few small
jobs and related expenses as you claim.

Additionally, you will get an idea of whether these small
jobs truly are hindering your growth or whether it's worth
the time to do them.

On top of that, you don't have to worry about telling an IRS
auditor about how honest you are with the items that you
deemed worthy of reporting.

Peter C. Gatto, CPA

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<el_roachmeister[at]yahoo.com> wrote:

- quote -

Entrepreneurs whose time is valuable may pay a bookkeeper to
do books. Compare cost of probable P/T worker to your lost
income and choose.

- quote -

Actually, USPS sells them by the roll or sheet or other.
Online even with mouse clicks + VISA. Get a VISA card for
business only, and use it to buy stamps online and other
little stuff like at OfficeMax. Balance of time to grow
your business.

- quote -

You will have admitted to a crime. Ramifications beyond
there is a whole 'nother topic.

- quote -

Maybe; most taxpayers gather every little dinky expenditure
for return prep, whether all gross income reported or not.
It reduces tax balance to be paid 4/15, or increases amount
of refund, they seem to intuitively know. Allegedly the
human condition.

Fred F.

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- quote -

I think you are being disingenuous. If the income and
expenses really even out, then you are not making any money.
So why are you doing the small jobs? I suspect that the
expenses (a stamp?) are much less than the income, and you
are just making excuses for not reporting all of your
income.

- quote -

You do not have to keep track of each stamp you use. You
have one bookkeeping entry, and one receipt from the post
office, for $37 each time you buy 100 stamps. If you
seriously believe that you have to keep track of each
individual stamp, maybe you need to sit down with an
accountant and review the accounting procedures for your
business.

- quote -

And the auditor will be honest with you and tell you that
you have to report and pay tax on all your income, and the
IRS doesn't care how much of your time it takes. He will
also tell you that you have to pay the back taxes on the
income you didn't report for the last three years, plus
interest and penalties. And once you honestly admit to not
reporting all your income, I'm sure you can expect to devote
a lot of your valuable time to the detailed annual audits
that you will be subjected to.

- quote -

What is the total of all these small amounts for a year?
I'll bet it's enough for an auditor to care about. And,
since it has been your routine practice to underreport,
there are multiple years involved.

Bob Sandler

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el_roachmeister[at]yahoo.com wrote:

- quote -

Definitely.

- quote -

If you're going to deduct it as an expense, yes. Why not
in this case, just buy a roll of 100 stamps and record the
37$ expense?

- quote -

It's up to you how to conduct your business and yourself
during an audit, but following your procedure above, the
auditor will also be honest and somehow he and you will come
up with the unreported income and it will be added to your
tax bill without his even allowing offsetting expenses.
Yes, they can do that.

ChEAr$,
Harlan Lunsford, EA n LA

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el_roachmeister[at]yahoo.com wrote:

- quote -

How do you know that "it all evens out" unless you track
both your income and expenses. In any case the IRS requires
that you report all income. if you don't want to track your
expenses that is fine, as long as you only report those
expenses that you track.

- quote -

Only if you want to deduct that expense.

- quote -

Again, how do you know it evens out?

- quote -

You might be very surprised.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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wrote:

- quote -

No, if you choose not to deduct some, the IRS won't mind.

- quote -

Do you really buy individual stamps? Wouldn't it be more
efficient to buy a sheet or roll of them at a time? Then
just keep the receipt.

- quote -

They might feel that they need a poster boy for criminal
prosecution for failing to report income. Why volunteer for
that position?

Seth

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<el_roachmeister[at]yahoo.com> wrote:

- quote -

Just a suggestion to help you grow your business. Don't
waste time asking questions when you're not going to pay any
attention to the answers.

--
Phil Marti
Clarksburg, MD

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el_roachmeister[at]yahoo.com wrote:

- quote -

One thing you should know, however. If the IRS knows you
are not reporting all income (regardless of how they gain
this knowledge), they are authorized, by law, to estimate
the unreported income based on information they have. Once
they make such a determination, their calculation is
considered prima facie evidence. It then becomes your
burden to prove them wrong. They do not have to do a
complete audit for this, just get enough information to make
a guess. Obviously, they would try to make it as high as
possible.

Also, if their estimate is high enough, it could change the
statute of limitations on assessments to 6 years, rather
than 3.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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The consensus seems that I need to report every income, no
matter how small. But the way I see it, for each small
income I don't report, there is also a small expense I don't
bother reporting. So it all events out. If I want to get
nit-pickly about every penny about income received then do I
need to be also as meticulous about tracking my expenses?

That is why I said this can be quite a nuisance and
hindrance to my business growth if I am bogged down in
accounting for these small amounts.

So where does one draw the line? Do I need to have a
complete audit trail for each 37 cent stamp I purchase for
my business?!

I'll just be honest with the auditor and say I generally
don't report small income because it is not worth my time.
I also don't report small expenses so it evens out that way.
If they want to fine, that's ok, but I am sure they have
better things to do than make sure they get their taxes for
those small incomes.

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- quote -

Another result of keeping honest books is that there won't
be any worry if or when his customer gets audited, and IRS
starts looking into the expenses the customer has listed.

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<el_roachmeister[at]yahoo.com> wrote:

- quote -

If it's such a nuisance, just forego payment. No
bookkeeping, no tax liability.

Yours is one of the more novel justifications for tax
evasion I've seen, but if you can find the time to put the
cash in your pocket you can find the time to write a note of
how much it was and who it was from to drop in your tax
file.

--
Phil Marti
Clarksburg, MD

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"rick++" <rick303[at]hotmail.com> wrote:

- quote -

Sure don't agree with that answer. Assuming he does not
declare $5,000 worth of small jobs, then that much more tax
burden is dumped on the rest of the tax payers. Now
multiply that out by every self employed person in the US.
All of a sudden the numbers get much bigger. Over 10 million
people in the US are self employed according to s Census
report I found on the NET> (May not be accurate) Grin

I bet his customers want a receipt so they can use it in
calculating their income tax.

Kinda like the guy who always says "Pay me in cash so I
don't have to show it.

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el_roachmeister[at]yahoo.com wrote:

- quote -

You are legally obligated to report all your taxable gross
income. It doesn't matter whether you invoice the customer.

--
Alan
http://taxtopics.net

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