Amending a Tax Return to Change Self-Employed Income to Something Else

how to add tax to something

fingolfinxtp said: 01-09-2013 05:06 PM

Amending a Tax Return to Change Self-Employed Income to Something Else

I installed and fine-tuned a sophisticated computer system for my friend and got some and got some money. I accepted payment in checks, I got no 1099-MISC (my friend was too lazy). I got about 11000, out of which about 6000 was the equipment I installed in his basement, about 4000 I retained as a profit. I was filing a tax return by myself, so I filed this amount as a self-employed income (schedule C and schedule SE).

following factors from the pub 535 apply:

1. I did not depend on income from this activity

2. This is one-time activity, never before, never after

3. This activity is way outside what I normally do, my primary motivations were:

- to spend time with my friend

- learn something new by doing it.

I wonder, today, can I reclassify this income as misc income, report deductions on 1040A and claim back the SE tax?

How likely is it to trigger the audit?

How likely is it to trigger the audit if I reduce the amount of the deductions taken?

Will it still trigger the audit if I reduce the amount of the deductions claimed to a point where I will owe more tax and pay the said tax? (Just to avoid reporting any SS subject payments for this period of time).

No 1099-MISC was ever filed. Please, share your thoughts.

Re: Amend Tax Return: Change SE Income to Other Income

Quoting fingolfinxtp

I installed and fine-tuned a sophisticated computer system for my friend and got some and got some money. I accepted payment in checks, I got no 1099-MISC (my friend was too lazy). I got about 11000, out of which about 6000

was the equipment I installed in his basement, about 4000 I retained as a profit. I was filing a tax return by myself, so I filed this amount as a self-employed income (schedule C and schedule SE).

following factors from the pub 535 apply:

1. I did not depend on income from this activity

2. This is one-time activity, never before, never after

3. This activity is way outside what I normally do, my primary motivations were:

- to spend time with my friend

- learn something new by doing it.

I wonder, today, can I reclassify this income as misc income, report deductions on 1040A and claim back the SE tax?

How likely is it to trigger the audit?

How likely is it to trigger the audit if I reduce the amount of the deductions taken?

Will it still trigger the audit if I reduce the amount of the deductions claimed to a point where I will owe more tax and pay the said tax? (Just to avoid reporting any SS subject payments for this period of time).

No 1099-MISC was ever filed. Please, share your thoughts.

Bubba Jimmy said: 01-09-2013 07:04 PM

Re: Amend Tax Return: Change SE Income to Other Income

Whether you depend on the income or not is irrelevant. Whether you did it once or many times is irrelevant. Whether you normally do it or not is irrelevant. You engaged in an income-producing activity and received actual income. Such an activity is rightly subject to the SE tax. Many self-employed people receive no 1099-MISC. You are required to claim your correct expenses.

If you were driving a race car, you might perhaps classify it as a hobby. Installing computer systems is not a hobby activity.

Re: Amend Tax Return: Change SE Income to Other Income

Source: www.expertlaw.com

Category: Taxes

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