How Much Can I Make Without Reporting to Irs

Edit Story

Ask the taxgirl: Reporting Income Under $600

This article is more than 9 years old.

Taxpayer asks:

I made 599 from one employer and 150 from another employer. Do I have to claim these amounts as income since they are below the $600 threshold?

taxgirl says:

Yes. Income is income, no matter the amount.

The reason that this gets confusing for individual taxpayers is that the threshold for required reporting from the payor is $600; in other words, if payments are over $600, a federal form 1099 must be issued. There is no such corresponding requirement for reporting the income: you have to report all of your income, from whatever source, on your tax return unless it's otherwise excluded.

This usually leads to the question, "How will the IRS know if I don't report it?" They might not. But what if they do? It's easy enough for the IRS to trace this, trust me. I have represented a number of taxpayers who assumed that it would be fine to leave out a little check here and there on purpose. But it's not fine. If you get caught, you will be responsible for paying the tax plus interest and penalty. You may also be subject to criminal prosecution: underreporting is a crime and you're signing a tax return on penalty of perjury.

You should also keep in mind that failing to report income may lead to the loss of certain deductions and credits which rely on taxable income limits (such as childcare and dependent credits).

Additionally, leaving out income on your tax returns can affect other financial transactions - such as mortgage and credit applications (you don't want to be in a position where you have to explain to the bank that you really, really make more money, you just didn't include it on your taxes).

And of course, there's the whole morality argument. It's the law. And it's the right thing to do. That alone should count for something.

--

And let's make sure we understand a few things, ok?

1. Unless you have a representation letter in hand, you and I don't have an attorney-client relationship, capiche? I mean, I'm sure you're a nice person. I appreciate you stopping by the blog. But it doesn't mean anything more (I'm having a weird deja vu to a couple of bad dates in college).
2. Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. This blog isn't meant to offer you legal advice. I'm just calling it like it is. If you have real questions – i.e. you're hiding in a closet while the feds bang on your door – you need to consult with a tax professional. If you live in my corner of the world, that might be me. But see #1.
3. I do work at a law firm. Some might even say I'm a partner at said law firm. But this blog is in no way affiliated with my law firm. The other partner and my malpractice carrier insist on it. And I have to live with one of them. And it's not my malpractice carrier. So, again see #1.
4. I'm not responsible for anything anybody says on this blog except me. But play nice. I don't want to have to throw you out of here (there's that deja vu to college again).
5. And one more thing. I'm not here to help you cheat the system. That should be obvious. But just in case it's not, the IRS wants me to reiterate that I'm not. So consider this your Circular 230 Notice:

IRS Circular 230 notice: In order to comply with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this blog.

It will also fail to make you rich, lose weight, get white teeth or regrow hair that has been lost. I can't guarantee dates or life matches (in fact, it's arguable that if your friends find out that you read a tax blog, you could lose points). I have never made a good stock tip and I can't buy your gold. I'm also miserable at making pie.

If you still have a question, check out these tips before you "ask the taxgirl."

--

Want more taxgirl goodness? Sign up to receive posts by email, follow me on twitter (@taxgirl) or hang out with me on Facebook.

• Print
• Reprints & Permissions

How Much Can I Make Without Reporting to Irs

Source: https://www.forbes.com/sites/kellyphillipserb/2012/02/09/ask-the-taxgirl-reporting-income-under-600/

Share this post