1099s Tell Story on DentistTax Planning
When Steven R. Olmos’s case came to trial, he resided in Niles, Ohio. His case was simple: Olmos did not file a tax return for the year he operated his dental practice in La Mesa, Calif.
The IRS used the 1099s issued to Olmos by insurance companies and some of the insurance company checks he cashed to identify $43,886 in taxes due, a $10,072 penalty for failure to file, and a $1,754 penalty for failure to pay estimated taxes.
This was pretty much an open-and-shut case. Olmos never appeared before the court, opting instead to send a lawyer (incurring another unneeded expense on top of the penalties).
The court looked at the facts of this case and ruled for the IRS.1 No surprise here.
You have to wonder, how did this case ever get to court?
Actually, you might start here: What made Olmos think the IRS would not notice his missing tax return? If he read any newspapers or even watched any television, he had to know that
- the 1099s report his income;
- the IRS matches the 1099s to tax returns; and
- missing 1099s get the attention of the IRS audit process.
When you don’t file a tax return, you increase your chances of an IRS audit.
Always file a tax return. In fact, file a tax return even when the tax law says that you are not required to file.
Making the IRS guess why your tax return is not present and accounted for is always a bad idea.