EIC and SE income

[Super Mom]

I had a new client call me. They have business income from cleaning a church but no 1099. My first thought, I have business income and no 1099--no problem. But then I am thinking EIC may be a problem because she probably has no expenses. I am positive this person is telling the truth about the income, I got married in the church she cleans. However, she can obtain a 1099 now, but that would result in a penalty for the 1099 issuer and may look suspicious to the IRS. What should I tell this lady?

Also, she has pell grant income, and used leftover from school for living expenses. Is that taxable?

Thanks for all your help. This lady did get an extension, just could not file in time.

[Super Mom]

ok, I see where the scholarship not used for educational expenses is taxable.

I looked at the requirements on the EIC. I guess my question is, should we go the route of a late 1099 with penalty or should I just show the income and verify with a Deacon or the Pastor or something for my due diligence?

I have no doubts that this lady is telling the truth, I just know there is probably little or no expenses associated, and the taxbook says the IRS looks at those closely. What should I do?

[Burke]

You did not say whether it exceeded $600 or not. If not, no 1099 required. Have her get a statement from the church bookkeeper of the amount paid. Will give you an opportunity to educate the church administration of 1099 requirements.

[Jiggers]

You don't need a 1099. Suppose she cleans houses also. She won't get a 1099 from them.

The main issue is reporting the total gross receipts, 1099's or not.

[Burke]

True, but in the case of EIC I usually try to document from the source if possible the amount of self-employment income received. Whether it is a 1099 or letter/email, etc.