On April 15 last year (you know, that day the personal tax returns are due!), I received this email:
I need to be sure I don’t have any tax forms to file with IRS. This was our first year as a CC community, with only 2 tutors and 12 children.
-Name withheld to protect the guilty
Dear Name withheld,
As a Classical Conversations (CC) director, you are a small business owner. CC supplied you with some training materials about running your CC community as a business.
You should have given your tutors a Form 1099-MISC to report the income you paid them. The Form 1099-MISC is to be given to each tutor by January 31 each year for the income paid in the prior year. A copy is also sent to the IRS. It sounds like you missed that deadline.
By the way, you cannot simply print the Form 1099-MISC from the IRS website. You must order forms from the IRS, purchase them at an office supply store, or use an online filing program like Yearli.com (that’s the service I’ve used to file my 1099-MISC).
You should also have reported your income and expenses from your CC business on your personal income tax return, using Form 1040 Schedule C Profit or Loss from Business.
If you had a profit of more than $400 for the year, you will also owe Self-Employment Tax. It is calculated on Form 1040 Schedule SE.
I’m afraid you are very late in filing these forms! You may owe a penalty for late filing your 1099-MISC forms. You may need to file an amended federal income tax return (Form 1040X) if you failed to include your CC income and expenses. You may also need to amend your state income tax return.
I strongly recommend that you look over your CC training materials and then contact a local CPA to discuss amending your federal and state income tax returns.
Carol Topp, CPA