Pains in the "Off" Season...

[Possi]

1) Remember my first ever IRS audit that happened about a month ago? Well, the IRS is auditing ANOTHER client of mine... same kind of home based business, too. I think they are picking on ME. Oh well.... I'll deal with it...

2) I have a painful client who had a 1099 issued to his SS# instead of the partnership's EIN#.
This was for 1998 and the STATE, NOT THE IRS, is coming after him.
He didn't file a personal return at all in 1998...
or 1997
or 1996
or 1995
etc...............
In 1997 he broke his back, so in 1998 he didn't work except to do the books for the partnership. He was on disability.
I told him I need to have the partnership return and that if we can't prove the income was included in the partnership return, there was nothing I could do but claim it as income on his personal return and he'd have to pay it.
I have done one return in the past that was like this. I did a sch C claiming the income and took it out as fiduciary income with the EIN number of the company the 1099$$ actually went to. I worked for an accountant at that time and was instructed to do it that way.
I'm on my own now and am looking to you "Big Dogs" to lead me!
THANKS!
~possi

[Kram BergGold]

Questions

When was this 1998 return filed and what % of the total income did the 1099 constitute.

[Bees Knees]

I'm not sure what your question is. If he hasn't filed a return, he needs to file a return. If the 1099 should have been issued to his partnership instead of him, then you have two choices...argue with the state why they should go after the other partner for his or her share...which they won't believe him at this late date, or just enter the income on a Schedule C and don't bother with the partnership issue.

Frankly, I have little tolerance or sympathy for people that wait this long to clear up matters, then make excuses like it should have been issued to the partnership EIN instead of his SSN number. How long has it been? He couldn’t get it straightened out in all that time?

After this many years, I don't care any more. He got the 1099. He can pay the tax on it.

[Bees Knees]

I have done one return in the past that was like this. I did a sch C claiming the income and took it out as fiduciary income with the EIN number of the company the 1099$$ actually went to. I worked for an accountant at that time and was instructed to do it that way.

The problem is, the 1099 was issued to his social security number. To allocate the income to the partnership, he needs to issue a 1099 to the partnership. You can't just take a deduction on the Schedule C for the amount that should go to the partnership, without ALSO issuing the partnership a 1099 for the income.

And will the State accept this 1099 issued to the partnership that is now over 8 years late? I doubt it.

[Possi]

I'm with YOU, BeesKnees

I have little patience with this client as well. I will not argue on his behalf. I'll stick to my guns and he'll have to claim the income and pay it.
He never filed in 1998 and I'm beginning to wonder if the partnership return was even done. I haven't heard from him since my initial posting and have been busy with others since.
I don't think he likes my business of honest tax returns. Oh well...
Hope you are doing well, and thank you.
~possi