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Avoid the Red Flag of IRS Form 1099

RedflagIn struggling through my taxes (along with everyone else this time of year), the number-crunching reminded me of the 1099 "red flag" that probably triggered my tax audit in 2010.  Don't let this happen to you!
In past years, I just included my 1099 revenue within my "revenue totals."

IrsBELOWsignhbNear the end of my audit in 2010, which I survived thanks to appropriately accurate records and having every receipt requested by the auditor, the auditor revealed her hand. After an hour and half of  "inquiries", the I.R.S. iron lady finally asks, "Where is this specific 1099 revenue reported?"  She knew the exact amount of money and the person who sent the 1099.

Thank goodness the 1099 was included in my reported revenue, I could show her in my records in about 2 minutes. However, this 1099 wasn't broken out separately on the tax return. Because I didn't list the 1099 revenue as a separate line item, the I.R.S. thought I was hiding income.

Back to last night...

This year all 1099 income is going on the 1099 line in the tax return.

But then, don't forget to subtract that 1099 income reported on a 1099 line from your Schedule C total revenue. You don't want to count it twice.


Information on business accounting and taxes for artists and makers from ASK Harreite  can be found with this link or in the left column under Business Information and Tax Accounting

This post was updated on March 12, 2022.