Thursday, April 1, 2010

Lorenzo Landscaper's Business


June --

I'm from Woodbridge, VA. I am a full time fireman who does side work cutting lawns. I've been doing lawns for 3 years. My brother and I who is also a fireman cut lawns together and split things 50/50. We don't have a business license or TAX EIN because we have never made enough money to claim until this year.

This year we will receive our first 1099MISC form ever and will be claiming our side income as well. When we get paid the check comes to me in my name as will the 1099 for the full amount we were paid. Is there anyway for me to claim half that total on my income taxes as other income and somehow let the IRS know my brother is claiming the other half?

I tried calling the IRS and got no where, but was told I could send my brother a 1099 from myself to make it happen is that true?

If so what are the logistics? Would we be better off filing for a tax# and doing a completely separate business return although we don't have records for any deductions?

Thanks for you time.
Herb The Fireman



Hello Herb,

First, let's go over a few things.

You said "we have never made enough money to claim." Know that no matter how much you make, you must claim it all.

The feds do not require you to have a business license nor a tax ID #. Although your town or county might.

The income that you and you brother earn is not "other income" it is self-employed income.

You each must claim the income on Schedule C: Profit or Loss From Business which is part of your personal/individual tax return.

Since the income comes to you then you should send your brother a 1099MISC for his 1/2 of the income. If you don't send him a 1099 it is not a big deal. You could be fined $50 for not filing that form. In 30 years I've yet to see that happen. You should give him his 1/2 via a check from you so that you have a record of payment. Since this is after the fact -- i.e. after 12.31.09 -- at least have some paperwork, such as an invoice from your brother marked paid, attesting to the transaction.

I do not give specific, line-by-line tax return instruction so I can't give you more "logistics."

One of the characters in my book Self-employed Tax Solutions is Lorenzo Landscaper. You might want to check out the book to see if Lorenzo's deductions give you any ideas on what yours might be.

Best,
June

2 comments:

Riles said...

If the business is going to continue to grow, it might be a better answer to treat it as a partnership and file Form 1065.

June Walker said...

Thanks, Riles.

Yes, you are correct. If the two brothers were going to continue the business as a 50/50 split then a partnership would work well.

If Herb were the "boss" he might, instead, hire his brother as an employee. That means payroll forms to file but no partnership returns to do.

Thanks for you input.
June