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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1732
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I just got paid for a construction job I did 4 years ago. Total

Resolved Question:

I just got paid for a construction job I did 4 years ago. Total payment is $31,500. However, I earned that money over a 2-year period. The guy paying me want to claim I earned it all this year. I live in Minnesota. Can't I claim it over two years? Do I have to file retro? What if this guy won't file proper paperwork so I can file over two years?
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.

Anne :

Hi

Anne :

Have you previously reported this income in the 2 years that you state you made it in

Anne :

I see you're no longer online, so let me just lay out the rules for Self Employment income per the IRS..

Anne :

Although the person that PAID you the money SHOULD have sent you a 1099 MISC in the year that you earned the money, the truth is you were responsible for reporting that income whether you received the 1099 or not

Anne :

So that was why I asked you if you had already reported the income

Customer : no, this income wasn't claimed in the two years it was earned.
Customer : Is it too late for me to file the 1099 now?
Anne :

are you the payer?

Anne :

or the payee?

Customer : Payee
Anne :

the payer is responsible for filing the 1099 MISC with the IRS........since he states you earned it this year, and you didn't claim in the year you actually earned it, I'm afraid you're sort of stuck

Anne :

Did you take the expenses for this job in previous years>

Customer : No. It was a real mess. I worked for my dad on a home rehab project. At first, he said we would be part ownersand I would get paid after sale of house. Then he said I was a "contractor" and he would pay me along the way. Now he says I am a contractor who is getting paid in one shot...now that the place has sold. He changed his sorry depending on how the wind blew. None of this is in writing since he is my dad. Big mistake.
Customer : He changed his story
Anne :

Yeah......life is a tough teacher....

Anne :

Ok........have you continued to be a contractor

Customer : Not in that kind of work. Now only floor installing. I never make enough to file very often.
Customer : To be clear, I am a floor installing contractor. Only odd jobs. Never advertise.
Anne :

do you still know (have a list) of the expenses that you had with this $31,500 job?

Customer : I am sure I could find something.
Anne :

and have you already claimed those expenses in the year you paid them?

Customer : No
Anne :

OK......as a cash basis tax payer, Schedule C, you must report the income when you receive it, which if I'm reading your question correctly is now.........is that ri?

Anne :

right?

Customer : Part of the problem is my dad never actually said how much I was going to get paid so I did file, not knowing what the earnings would be. Sometimes he said I would get a percentage of the house sale, other times, a percentage of profits.
Customer : Yes
Anne :

Did you ever file papers to be a Partner with your Dad, and did you have any cost basis in the house?

Customer : Sorry.."so I did not file.."
Customer : No Papers filed and none of my money went into the house.
Anne :

Ok.........well, you're going to have to file the Sch C

Anne :

this year

Anne :

It will include the $31,500 from the other job, plus any other odd jobs you got paid for this year

Anne :

Are you married? have children?

Customer : Not married, one child I do not get to claim on taxes.
Customer : However, I am getting married later this Yeats, in Oct.
Customer : This year in Oct.
Anne :

Ok.......does your new wife have any children at home:

Customer : No
Anne :

Well, as long as you're married by 12/31, you're married for the whole year for tax purposes, but its the SE tax on this money that is going to hit you fairly hard

Anne :

You will be paying 15% on the NET (after your expenses) which you will have to be able to substantiate for the IRS should they ever ask you.

Customer : Ok
Anne :

On the full $ amount, you're looking at $4450

Customer : I had 30percentage in my mind so, although it's a lot, it's better than what I thought. I that lower because I will be married?
Customer : Is that lower
Anne :

No, just the mathematical formula............Net SE income x .9235 x .153 That's your SE tax

Anne :

You could have additional tax also if your Standard Deduction (for Married filing Jointly) which is $12,200 for 2013, and you get 2 exemptions, 1 for you, and 1 for your wife, at $3900 each for a total of

Anne :

$12,200 + $7800 = $20,000

Anne :

that is the amount that is tax free from both your earnings and your new wife's earnings

Customer : ok
Anne :

so depending on how much your wife earns, you could be in the 15% tax bracket PLUS the 15% SE tax

Customer : She earns around $65,000 annually
Anne :

Please ask if you have questions

Anne :

Then you're estimate is close

Customer : Taxed for less due to contributions to tax deferred account.
Customer : Shoot.
Anne :

Let me give you the tax rates for 2013

Anne :

Here's an easier web site

Anne :

http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/

Anne :

that's where I got the $ amounts from

Customer : Thanks Anne.
Anne :

yes, you can have an SEP

Anne :

You can deduct any health insurance you have to pay for yourself as long as you are not eligible to be carried on anyone else's health deduction

Anne :

SEP-self employed retirement plan\

Anne :

these can make a difference in the $ amount of taxes you will pay on the $31,500

Anne :

give me a second, I'll tell you what you can put into an SEP

Customer : Ok
Anne :

You can put up to 20% of your Net SE (less the 1/2 adjustment of SE tax on page 1 of 1040) into a retirement plan

Anne :

This is not to be taXXXXX XXXXXghtly

Anne :

this is tax derferred money, and there are penalties for early withdrawl

Anne :

and you may not go above the $5000 allowed per year

Customer : i am here. I may have hit a button that shows me earlier convo.
Customer : Can't see your responses .
Anne :

but I wanted to let you know that giving money to a retirement plan is available.

Anne :

Hold on, let me change the format...ok?

Customer : On an iPad, can I retrieve our convo later somehow? But I can't see your response anyway.
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1732
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and 5 other Tax Specialists are ready to help you
Expert:  Anne replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Anne replied 1 year ago.
Now you should be able to read the whole conversation.........
Expert:  Anne replied 1 year ago.
Where do you cut off.......what is the last sentence you can see?
Expert:  Anne replied 1 year ago.
can you see my typing now?
Customer: replied 1 year ago.
yes
Expert:  Anne replied 1 year ago.
if you feel you did not get the full conversation, then can you please let me know what the last statement you see is?
Customer: replied 1 year ago.
you answered my question well and I thank you! Again, sorry for the technical issue but I can now see everything. Have a good night!
Expert:  Anne replied 1 year ago.

Thank you......you too!

 

Please do not accept again since you have already paid me!

Expert:  Anne replied 1 year ago.
Thank you for the accept, and the excellent rating!

Please feel free to ask for me by name if I can help you in the future.

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