Advice 101

Well its my fault to the point that my neighbors hate my stuff that I work on . sure its a turn over, but all they see is the ugly stuff that looks all the same to them,so its really harassment due to my free expression. Hence they made a bogus call to some body.

I know someone that works for the IRS and he told me about some of the systems they have in place that triggers anyone’s tax return for further inspection.

First, Every self employed person should file a profit/loss statement, because every business incurs expenses that need to be itemized (cost of goods sold, supplies, rent, etc.). Claiming the standard deduction instead of itemizing your business expenses probably triggered your tax filing for further attention.

Second, You earned zero income as a self employed painter, then you should have filed zero income as a painter, and claimed your scrapping income as ‘scrap metal recycling’ in the Other Income category. This way, you can claim the standard deduction without arising any questions.

Third, The IRS can easily audit all banking records that are associated to your social security number or taxpayer ID. Most income has a paper trail (1099 or W-2) that can be verified. Claimed income that’s unverified will be compared to your total banking deposits for the year. If both amounts aren’t within a certain allowable percentage; it’ll trigger a flag for further inspection.

For example:
You claim $50,000 of unverified income, but your total bank deposits for the year are $80,000, and you don’t have a 1099 or w-2 to back up the difference; this should trigger an audit.

You should have your tax person file an amended 1040 & 540 to reflect your occupation as ‘unemployed’, and claim your income as ‘scrap metal recycling’ in the Other Income category.

Also, make sure your bank deposits don’t exceed your claimed income.

Hand written receipts are acceptable as long as it has the business info printed or rubber stamped.

Just remember that the IRS usually shows no mercy for poor record keeping.

Originally Posted by KC-SF

You should have your tax person file an amended 1040 & 540 to reflect your occupation as unemployed, and claim your income as scrap metal recycling in the Other Income category.
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Sounds like a good start for 2010 / 2011 I'll just let accountant know i made money as a scraper I am still self employed

Since I can see it both ways I feel the deductions are more or less same
scrapers
Use fuel
tools
work gloves
and often have to buy metals to sell at a profit
at a set price of sale.
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Painting has same
but you try to match job price with material cost (compared to metals set selling price)
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certainly state to state have many other rules like - insurance - licensing - etc