Hunting Down Missing Income Statements

Hunting Down Missing Income Statements

March 04, 2024

By now, you should have most of the tax statements from employers, banks, and investment companies you need to complete your 2023 tax returns.

But if you received any additional income doing freelance work or selling items online, you might still be missing certain 1099 statements you’ll need to accurately report this income. 

The $600 question

The rule of thumb says that companies don’t need to issue certain 1099 statements to taxpayers for total payments of less than $600.

Since many freelancers and side hustlers might not reach this $600 threshold with any one client, they might think they’re off the hook.

But this isn’t so. Self-employed workers should report all of the payments they receive from customers and clients, regardless of whether they receive a 1099 statement or not.

Income you may need to chase down on your own

Some employers or vendors you received payments from may not issue 1099s. Then it becomes your job to get the right numbers on your own.

Undependable or defunct clients

Many companies—particularly smaller startups—don’t have robust accounting processes in place to make sure they mail 1099-NEC (Nonemployee Compensation) statements to independent contractors or make them available electronically by the annual January 31 deadline.

If you haven’t received a 1099-NEC from a client, reach out to them and ask them to email a PDF version to you as soon as possible.

If one of your clients went out of business last year, they’re technically still on the hook to get this statement to you. If they no longer have a payroll system or accountant who generates these statements, they can simply print out a blank 1099-NEC statement and fill out the information manually. If they do this, make sure they include the employer's name, address and Tax ID number.

Income from online marketplaces and payment vendors

If you sold more than $600 worth of goods on Ebay, Amazon or any other online marketplace or received payments of $600 or more sent via Paypal, Venmo or other online payment platforms, you’re supposed to receive a 1099-K (for Payment Card and Third Party Network Transactions) statement from each vendor.

In reality, however, the rules are a bit shaky. The $600 threshold was supposed to go into effect in 2023, but the IRS has delayed it several times. In 2024, online payment platforms are only required to report combined payments above $5,000 paid to an individual.

You may not have received 1099-K statements even if you received more than $600 in payments. But you should report this income anyway. This means you may need to manually search through transaction records for each marketplace and payment vendor to track down these payments.

Undocumented income

There may be situations where there is no paper trail for self-employed income. For example, if you’re a wedding photographer who gets paid in cash or you sell your pottery at crafts fairs, you won’t get tax statements from anyone.

In that case, it’s your job to keep track of all of this “under-the-table” income and report it.

Reporting this income

If you’re self-employed or earn money from a side gig, you’ll want to report this income on IRS Schedule C, which you’ll file with your annual tax returns. This schedule is used to report profits or losses from your business. You can reduce your overall profits by deducting qualified business expenses.

You’ll also need to fill out IRS Schedule SE, which helps you figure out how much self-employment tax (i.e., Medicare and Social Security taxes) you may owe on your profits (calculated on Schedule C).

If you've just dipped your toes into side-gigging or starting your own business, you might want to read another recent News & Insights article that covers additional tax-planning issues for self-employed individuals. 

If you have questions about these and other tax-related issues, consider meeting with a qualified tax professional.

This material has been provided for general informational purposes only and does not constitute tax, legal or investment advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a qualified tax professional and/or financial advisor regarding your situation.



This article was authored by Joelle Spear and Jeffrey Briskin. Joelle is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 508.598.1082 or jspear@canbyfinancial.com  Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.

 

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