Anyone missing 1099s?

[LostDollar]

Here's the reason I've taken some of the time I have with this:

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 this post, and some others along the same line, have gotten hoosier concerned he may be missing something taxwise. That is not the case, daytimer is the one that is not seeing things correctly.

I started out talking about cash and accrual. That also was incorrect for this situation.

I believe there are three things coming into play. Two of them are the cutoff and timing issues which I already mentioned. The other one is the way in which transactions are recorded. Instead of being able to see well defined separate transactions for the income of commission on production and the expense of chargebacks, the activities are merged into a "result". The insurance companies account for the "result" on the 1099s. I don't think daytimer is seeing this clearly and it is affecting his view of the results. I just haven't got to the point where I can explain that in a way he will understand and which will reassure hoosier that he is not "missing out" on something.

 

[NSRH]

Here's the reason I've taken some of the time I have with this:



I think this post, and some others along the same line, have gotten hoosier concerned he may be missing something taxwise. That is not the case, daytimer is the one that is not seeing things correctly.

I started out talking about cash and accrual. That also was incorrect for this situation.

I believe there are three things coming into play. Two of them are the cutoff and timing issues which I already mentioned. The other one is the way in which transactions are recorded. Instead of being able to see well defined separate transactions for the income of commission on production and the expense of chargebacks, the activities are merged into a "result". The insurance companies account for the "result" on the 1099s. I don't think daytimer is seeing this clearly and it is affecting his view of the results. I just haven't got to the point where I can explain that in a way he will understand and which will reassure hoosier that he is not "missing out" on something.

The larger issue is that every carrier computes the "result" differently. Our compensation begins as a loan, and we begin to satisfy that loan, when our customers make payments.

For the life of me, will never understand why anyone would want to pay taxes on loaned money.

 

[LostDollar]

The larger issue is that every carrier computes the "result" differently. Our compensation begins as a loan, and we begin to satisfy that loan, when our customers make payments.

For the life of me, will never understand why anyone would want to pay taxes on loaned money.

In the long run, agents using the p&l (cash) method of recording their income in their financial records are computing an income similar to what they would get using 1099's. When you use 1099's you are also recording as income what you are calling borrowed money, it is just a different amount.

Your concerns are the volume of income which will be taxed in a given year and the tax rates for a given year. That's a timing issue. When you are dealing with a flow of business transactions, there are lots of timing issues. If we are talking about an experienced agent with a relatively steady flow of business, the timing issues in relation to earnings volume will average out over a period of time. Income tax rates in any accounting period are always something of an unknown.

 

[JimmyCrappedCorn]

The number one reason the IRS comes down on insurance agents is because they are on the Schedule C form deducting everything but the dogs new flea collar. These insurance agents have 200,000 dollars worth of 1099's and after business deductions on the Schedule C they claim they're actual income is only 20,000 dollars. Mr IRS agent gets handed the case kicked out and flagged by the computer and the first thing he does is find out how nice a house this poor insurance agent who is only making 20,000 a year is living in. The IRS agent looks it up and finds out this poor insurance agent making only 20,000 a year is living in a 250,000 dollar house. The IRS agent says to himself damn I make 60,000 a year and this guy only makes 20,000 a year and his house is twice as nice as mine. Now the insurance agent has got trouble like he never dreamed!

 

[HoosierLife]

At the end of the day, my deposits equal my 1099s with most of my carriers. This way is just easier.

 

[LostDollar]

I agree 100%.

With a little better understanding of what's going on, if one was trying to reconcile 1099's with cash receipts when they didn't match, the first place I'd look would be December - January transactions. (timing differences)

If Acme insurance writes you a check on December 28, 2016 and you do not receive and deposit it until January 4, 2017, Acme will have it on your 2016 1099 but you will have it on your 2017 books and tax return. You are not putting an "incorrect" amount in your records. You are just following, in a consistent manner, an IRS approved method of recording your business income.

If Acme's check includes "loaned" money, you are adding precisely the same amount of "loaned" money to your gross business income, regardless of whether it is recorded from a 1099 in 2016 or cash receipts in 2017.

 

[HoosierLife]

I agree 100%.

With a little better understanding of what's going on, if one was trying to reconcile 1099's with cash receipts when they didn't match, the first place I'd look would be December - January transactions. (timing differences)

If Acme insurance writes you a check on December 28, 2016 and you do not receive and deposit it until January 4, 2017, Acme will have it on your 2016 1099 but you will have it on your 2017 books and tax return. You are not putting an "incorrect" amount in your records. You are just following, in a consistent manner, an IRS approved method of recording your business income.

If Acme's check includes "loaned" money, you are adding precisely the same amount of "loaned" money to your gross business income, regardless of whether it is recorded from a 1099 in 2016 or cash receipts in 2017.

Right, that's why some of my 1099s are a couple hundred dollars to a few thousand dollars off.

Speaking of what we gross and what we actually pay taxes on, what is a good %. Obviously grossing $200k and paying income taxes on $20k with a $250k house is bad. Is there a happy medium?

I mean I dont want to get audited, but I can prove where every penny went and came from. The tricky part is what I pay myself in wages from my LLC.

 

[LostDollar]

That is not something I can comment on.

I can talk about the mechanics of recording transactions in accounting records. For me to say anything about income taxes would be to create a disaster of proportions worse than the sinking of the Titanic. I'm sorry I can't help with that.

 

[LostDollar]

( and to be proved or disproved by other facts, for all I know you were your grandmother's favorite grandchild and you inherited the house from her.)

 

[Baseball7]

Sure would be nice if we didn't have to pay taxes unearned(advance) Comission