Have a Tax Question? Ask a Tax Expert
Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
How are you today?
I'm fine, thanks.
Did you see my question?
Unfortunately, you would need to file your tax return. However, you should not be scared if you cannot pay the entire amount due when you file
The IRS will allow you to set up payment plans
What about the State Of California?
They will allow you to make payment plans as well
How can I best document my income?
Do you keep a bank account?
The deposits in your bank account would be one way to count up your income
But don't include gifts, loan proceeds, and other non taxable sources
So you're suggesting that I provide a number based on my deposits, but I would not actually submit copies of my statements?
No you would not submit your actual bank statements to the IRS, you would just keep them in the event you are audited
I guess my main concern now is that my margin is so slim, I have nothing left over to give to the State or Feds after I pay my bills
You know you can deduct all your business expenses
So like the soap you use to wash cars, the mileage you put on your car when you run errands, etc
I guess so. I don't really consider myself as being in business, I'm just scuffling, doing whatever
Again, I would need back-up if I get audited
Yes, you would need backup - but it's good to start keeping that documentation for future years
Any time you aren't employed by someone else, and you perform services, you are self employed
legally & technically self-employed. How likely do you think it is that they might go after someone in my situation? Wouldn't setting up a payment schedule pique their interest?
No, they don't "go after" you if you are making payment arrangements
they "go after" you if they realize you've been making money and not been paying taxes
I guess that's what scared me most, that if I agreed to payments, they'd want me to support my income & expenses with hard copy.
You will have your bank statements to back you up.
Which would reflect money coming in, but not so much money going out, as a lot of my out of pocket expenses are cash payments
You will have to have a log book or some sort of backup for that, or else you can't deduct it.
Yes. Okay, so I'm filing a 1040 with no 1099's...is there any other tax form/extensio i should be considering given the dearth of info I have ?
The 1099 is just where people who pay you report that they have paid you to the IRS. Without any 1099s according to the IRS you haven't earned anything. They won't know what you've earned until you file your tax return
I'm clear on that. I guess I'm wondering if there are any forms regarding self-employment that would be appropriate and/or useful?
You will fill out 1040 schedule C and schedule SE to calculate your tax
Got it. I guess that does it for me. Thanks very much, you have eased my concerns quite a bit. This is VERY STRESSFUL for me!
Yes, I realize it is very stressful...and I'm glad I could make you feel better
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