I realized after submitting my federal tax forms in April that I had forgotten to add $100 income from watching a friend’s dog for a week. She gave me cash, so I know that if I were audited, nothing would show up. But, I’m concerned about the ethical and moral issues. Several people whom I respect have told me that I shouldn’t report the money- it’s not much, and the late fees I would have to pay now are much more than the amount I originally owed on it. Some said if I really feel guilty about it, donate 10% of it to the Church. I really don’t know what the best thing to do is. I would like to have it be as simple as giving $10 to the church, but something is telling me that I should report that $100 and pay the penalty. Could someone advise me on what I should do?
In the grand scheme of things this seems pretty minor. If it really bothers you, file form 1040X - Amended Return. Report the extra $100. I doubt it will have much effect on the amount of tax you owe. Any penalty will be based upon the amount of tax that had gone unpaid. It’s going to be an extremely tiny amount. In fact, it’s probably going to cost the IRS more to process your amended return than any extra tax you will pay. I wouldn’t bother. But if you’re STILL uncomfortable about it, make an anonymous donation to the Church.
In 2011, I had forgotten a small amount of income on my tax return for working at the polls, which is not something you receive a W2 form for. My CPA refused to file an amendment b/c he said the IRS would be suspicious of amending for such a small amount. So he simply included the income in my 2012 taxes. I was satisfied with this.
I, personally, would be satisfied with not reporting it, seeing as the government steals such a massive percentage of income, but if your conscience calls you to do something, by all means follow it.
This was an exchange between friends -
You were watching a friends dog … that is really equivalent to a a gift … in appreciation = your friend gifted you $100 …
Since you could ‘gift’ any person you want up to $13,000 in 2012 year tax free - see here:
irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes … rest easy and sleep well
Yes, if it really was a gift. That is, you agreed to watch the dog for free, and then after the friend returned, she decided to give you a gift for being so nice. But if the fee was agreed upon by both of you before she left on her trip, it was not a gift.
Although it isn’t technically correct, I would just wait until next year and add it to next year’s return, rather than filing a 1040x.
In 2011 I made $250 income from working at the polls. There was no W2 for this, so I simply told my CPA about it. He accidentally forgot to include it in my return, but I didn’t notice it until the following year. My CPA refused to file an amended return for that amount of money. However, he did say he could add it to my 2012 income, so that’s what we did. I paid taxes on the income, but I didn’t invite “undo attention” from the IRS. Of course, I had nothing to hide–it’s just that my CPA said that amending a return for that amount of money would make the IRS suspicious.
From the tone of your post, I’m guessing your conscience is already telling you to file :shrug:
That would also seem to suggest the $100 was by prior agreement
Add it to your income when you next file your returns.
Oh my, how could you forget something like this? This is unforgivable. :eek:
Just add it to your income on next year’s tax return. Like BettyBoop416 says, the amount it’s going to take the IRS to process the paperwork is going to be more than the penalty. If it really bothers you, file a 1040X. Or file it with next year’s taxes. I guess technically it would be considered part of your income, but it is so minor, it doesn’t make much of a difference.
God bless you. :blessyou:
^ this. Then you’re paying the taxes on it without needed to pay anything extra :).
Gosh - I would watch a friend’s dog without charging them … I often do things for friends while they are out of town - never thought of charging a fee …
I used to open/shut and empty trash for the office building my company rented space in - when the owner’s were out of town … I never negotiated a fee - that is not how I make a living - its something you do because its helpful … and I was there everyday any way … they usually gave me a small gift or a gift card to a restaurant - but I did it expecting no compensation …
So - :shrug: when the OP said this was for a friend - I take that to mean an individual they would help in any circumstance … now with gas the cost it is - I could imagine someone giving you out of pocket costs … but to consider this “income” means that she could - rightly - deduct the costs incurred … travel to and from the location, calls to update the owner on the dogs well being, and any out of pocket costs …
And if you are being that conscientious - she needs to also pay the employer and employee’s social security and medicare - …and the cost for the accountant to file the amended return :rolleyes: the income probably becomes a loss at that point
First you don’t know if there was a charge!
It may be the friend insisted on giving the $100 in gratitude for the favor and wouldn’t take no!
Second, you know nothing about this person’s financial situation and it may be the $100 was agree because there was quite a bit of work involved and they needed the money.
Do you know this friend wasn’t helping them out financially with the ‘job’ while helping them to save their pride?
I’ve done it as I’m sure many have - I’ve ‘created’ a job for someone to help me out, so I could pay them, when I knew they needed money but would never allow me to simply gift them to help them out.
Pride saved and financial troubles eased.
Of course, I’m not assuming any of that applies here, but I was taken aback at you seeming to take some sort of judgmental moral high ground on this poster, implying they should have looked after the dog for nothing.
You don’t know that wasn’t their original intention.
Worst case scenario: OP won’t go to hell until after federal prison.
Depending on the dog, it is likely that much of the money you were “paid” went towards looking after it anyway. It’s not like it’s $100 clear. It’s more like your friend was just giving you some money to cover expenses. I wouldn’t even see this as income.
Anyway, for such a trivial amount it is simply not worth your time and the time of the IRS to worry about it. You will cost the IRS more money to re-process your tax than the tax would be worth.
I agree with advice that if you feel guilty, a donation to the church or another charity would be a good way to balance the books so to speak. Or if you feel really guilty, just put the $100 on your next tax return.
Whoa - yourself … the OP said they did this for friend - I assumed the $100 was something like a “thank you” … that was my thought :shrug: … others jumped on me …
So my point - if it was a real “job” negotiated and entered into by two people - a contract - then the $100 is the gross NOT the net - and you do not report gross income on your taxes - that is not what would be reported …
All legitimate expenses would be deducted from that gross payment - like the cost of mileage [or gas, oil, insurance] … the cost of any phone calls made regarding the health and well being of the dog, any out of pocket expenses and even the cost of the tax preparation for this small business is deductible - the cost of a business license …
Also - if the net was then taken as a draw [what a sole proprietor takes] then the person needs to pay their FICA and Medicare tax as well …
And if this person is truly operating a business [which all this guilt over not declaring income is supposedly about] = then they also should have gotten a business license …
FYI - I am a small business owner … I understand what it means to own and operate a business - legitimately … it truly is more complex then declaring something on your federal tax return …
Thus if you are going to feel guilty - for not being honest - then be totally honest about the entire process … get the business license - if you did not do it … then rectify that oversight too - which in my community is a minimum of $80 …an under payment/oversight far more egregious then not paying the federal and state tax a $100 [in real profit] would be …
Also … again - if they took care of the dog and if that was all they did - their profit could not be $100 as there had to be or should have been some cost to provide the service involved :shrug: …
Guilt over underpayment of income taxes, FICA and Medicare taxes plus operating a business without a license :eek:
This is a venial sin, AT MOST.
I agree totally. Used to be that if you had **erasures **on your return, even if the final numbers were correct, you could have been audited. I doubt the level of suspicion in the IRS has changed any. Just report it next year.
Thanks so much, everyone! You’ve been a great help. Adding the $100 to this year’s tax returns sounds like the best thing to do. I hadn’t thought of that!
I don’t think that $100 makes any difference. Look at the tax tables, and see what $100 difference would have made, even if you did report it. That varies, depending on your income. So, the question cannot be absolutely answered here.
But, if you’re going to split hairs about this, consider. What were YOUR expenses to do this job? did you have to give the dog water? OK, that’s $100 less the cost of the water. Food? OK, $100 less than the cost of the food.
We don’t have all the cards on the table, for this question.