Anyone missing 1099s?

[LostDollar]

income that you never have and never will receive due to charge backs.

But, wouldn't that happen every year? and if you're selling $80K to $150K (or whatever the "right" number is) every year, doesn't it pretty well come out with the same result over a 20 or 30 year period?

 

[DayTimer]

But, wouldn't that happen every year? and if you're selling $80K to $150K (or whatever the "right" number is) every year, doesn't it pretty well come out with the same result over a 20 or 30 year period?

No. Because each year's chargebacks are independednt of the prior and the proceeding year. If you were advanced 100K in 2017, but your 1099's total 65K, then 35K of your total advance has yet to be earned. If you pay income tax on that 35K now, and 12K is charged back in the coming months, you will have paid tax on 12K that you never had as earned income. Yes, that 12k will also not show up in your 2018 1099's. But YOU ALREADY PAID INCOME TAX ON IT. The only way for you to get that over payment back will be to file an amended 2017 return. Now you have put yourself in a position where you have to prove you never received income that you chad already claimed to have earned and you willingly paid income tax on.

Your 1099's, assuming the insurance companies have calculated correctly, will be the most accurate reporting of your actual EARNED income, and it will be the most fair way for both you and the Unite States Treasury to calculate you income tax liability.

If you or anyone wants to go ahead and habitually over report your income, more power to you. I am not a CPA, but I don't think I am going out on a limb by recommending that accurately reporting actual earned income is better than either over- or under reporting said income. Of course, if you want to stay out of prison, then over reporting is preferable to under reporting.

 

[goillini52]

Seriously?

Most years my agency has a loss or small profit, but I can assure you I do not qualify for Medicaid or food stamps.

Most agents would do well to operate on a cash basis vs accrual. Much easier to follow.

If you are ever audited they will look at cash flow. If you run commissions through a corp (not Sub-S) or LLC you better know how to segregate business expenses from personal. And the auditor will probably look at your business returns as well as personal.

A paper trail will be very helpful.

I see what you did there Monkey Man . . . .

Seriously?

Most years my agency has a loss or small profit, but I can assure you I do not qualify for Medicaid or food stamps.

Most agents would do well to operate on a cash basis vs accrual. Much easier to follow.

If you are ever audited they will look at cash flow. If you run commissions through a corp (not Sub-S) or LLC you better know how to segregate business expenses from personal. And the auditor will probably look at your business returns as well as personal.

A paper trail will be very helpful.

I see what you did there Monkey Man . . . .

Is there a Dr. in the house?

 

[DayTimer]

Is there a Dr. in the house?

If so that changes everything ...

 

[somarco]

You can't say that unless you've applied and been turned down

I believe you need to go back and read my full post. You are not picking up what I am putting down.

 

[JimmyCrappedCorn]

Is there a Dr. in the house?

There is not going to be a Dr in the house for long. Her husband was unable to provide her with health insurance so she went to Uncle Sam for it. That is a sure fire recipe for divorce in most guys homes. It never ceases to amaze me in this business when I run across these guys that are making their wives go without health insurance because it cost too much. Some of these guys have been making their wives go without insurance for years. How do they pull this off I ask myself. Where do these guys find these women. In most of our worlds women do not tolerate going without health insurance for one second.

 

[goillini52]

There is not going to be a Dr in the house for long. Her husband was unable to provide her with health insurance so she went to Uncle Sam for it. That is a sure fire recipe for divorce in most guys homes. It never ceases to amaze me in this business when I run across these guys that are making their wives go without health insurance because it cost too much. Some of these guys have been making their wives go without insurance for years. How do they pull this off I ask myself. Where do these guys find these women. In most of our worlds women do not tolerate going without health insurance for one second.

I must have some corn stuck in my ear Jimmy, because I'm not sure that I heard you correctly, so as a result.....I don't have a clue what you're getting at.

 

[FinalExpenseDojo.com]

Anyone who receives a 1099 ought to go off of the 1099 amount. The unearned advances will flow to the following year's 1099, with the added benefit that any charge backs against those unearned advances will be factored in to the next year 1099 total. If you go off of your bank account, you will pay taxes on unearned advances, a portion of which will be charged back during the following tax period. In other words, if you go off your bank deposits rather than the 1099's you WILL pay taxes on income that you never have and never will receive due to charge backs. I am not a CPA, and all y'all should check with your own one. But I am pretty sure that I am right. Not being a CPA, I will allow for the possibility that a CPA comes along and proves me wrong.

You are exactly right! Advances are basically loans. Some carriers like Transamerica will even charge you interest on your advances.

 

[LostDollar]

No. Because each year's chargebacks are independednt of the prior and the proceeding year. If you were advanced 100K in 2017, but your 1099's total 65K, then 35K of your total advance has yet to be earned. If you pay income tax on that 35K now, and 12K is charged back in the coming months, you will have paid tax on 12K that you never had as earned income. Yes, that 12k will also not show up in your 2018 1099's. But YOU ALREADY PAID INCOME TAX ON IT. The only way for you to get that over payment back will be to file an amended 2017 return. Now you have put yourself in a position where you have to prove you never received income that you chad already claimed to have earned and you willingly paid income tax on.

Your 1099's, assuming the insurance companies have calculated correctly, will be the most accurate reporting of your actual EARNED income, and it will be the most fair way for both you and the Unite States Treasury to calculate you income tax liability.

If you or anyone wants to go ahead and habitually over report your income, more power to you. I am not a CPA, but I don't think I am going out on a limb by recommending that accurately reporting actual earned income is better than either over- or under reporting said income. Of course, if you want to stay out of prison, then over reporting is preferable to under reporting.

I think you are missing something called a net operating loss. I am not a tax expert, but I think that addresses the issue you are concerned with.

The first thing you should keep in mind is that not everyone's income tax situation is the same. What works best for one may not be best for another.

Second, this thread was started over the issue of agents not receiving all their 1099's, and included comments from those who don't particularly want to have to track all their 1099's.

Third, do all insurance carriers compute their 1099s in precisely the same way? I know, for example, that not all financial institutions will correctly compute the RMD for an IRA on the little white form they send. If that kind of thing happens with insurance carrier 1099s, you have to recompute them all by hand to be sure they are correct.

Fourth, if you have 20 years of 100K +/- with $35K +/- of chargebacks, the results are going to be pretty much the same except in the beginning and ending years. To reduce the tax liability in the early year(s) and transfer it to the ending year, you have to engage in 20 years of otherwise unnecessary special recordkeeping. Some may prefer not to do that.

 

[NSRH]

Bottom line. Hire a good CPA. Don't do it yourself. My CPA has paid for herself 10 times over, with what she's saved me.

She works for BDO, those of you looking might want to check them out.