Photo credit: cohdra from morguefile.com
As freelance writers, we are personally responsible for reporting all of our income, whether the client gives us a 1099 or not. But you may still get that nagging feeling, “If the client doesn’t even have my social security number, how will they catch me if I don’t report it?” That’s a good question that you are probably better off not asking.
Here’s the deal. There are those who are conscientious objectors to war who will give you all sorts of subversive advice on how to evade taxes to avoid financing the death of strangers in foreign lands. Personally, I see paying the taxes I owe as a patriotic duty that shows I love my country enough to contribute to its success. I’m not happy about the war, but if I fail to pay my share, how many mouths will go hungry? How many kids will be cheated from a proper education? It just seems like good karma to pay what I owe. Failing to pay my taxes will not stop the war.
But I can’t expect the same attitude from you. What I can do is lay out all the information so you can make up your own mind.
The Rules
The IRS requires you report all income. If it’s not on a 1099 form, you have to report it as income on Schedule C. Your clients are required to report any income they pay you over $600 and send you the 1099 for your records. Sometimes you might not get the 1099, but don’t assume that means they did not send one. Things do get lost in the mail.
The Risks
If the client sends a 1099 that reports a lower income than you claimed, it will trigger an audit. Even if you did not get a 1099, the client has up to three years to amend the return. Plus, if you don’t provide your Social Security number, the client must withhold up to 31% to cover your tax liability, putting you both in a pickle.
Understand that the IRS is much more likely to pursue you for an audit that some large corporation, even if it’s obvious that corporation is evading taxes. It’s easy and cheap to go through you records. The records of a corporation can take years to sort through for a single audit. The IRS goes for the easy pickings.
That being said, you have to make up your own mind. Is the risk of failing to report all your income worth the reward? You decide.
