If I'd known I'd be paying taxes on the whiskey I would have drunk less of it.
July 14, 2010 7:40 AM Subscribe
I just recieved a form CP2000 from the IRS showing about five thousand dollars of income from a couple years ago that I didn't claim. I inted to pay what I owe, but I think that the amount is about twice what it should be.
A couple years ago I was working as a DJ at a bar where I also worked as a bartender. I did one night a week, made a hundred bucks cash, and got a hundred dollar drink tab. I did this for six months or so.
I got a 1099 from them for $5000 of income. When I asked why it was so high they told me that the drink tab was considered taxable income. I thought that was bullshit and threw the 1099 out.
Probably not the best idea, I know.
Now the time has come to pay the piper and I'd like to, but I still don't think that free drinks are taxable income (my shift drinks and employee meals when I bartended didn't seem to be taxable income, so why is this?) I had also been told that the drink tab was to be used for promotions, buying drinks for patrons and the like, which in truth I rarely did.
I know the answer I'm likely to get is to talk to a tax lawyer, but being totally broke I'd prefer to avoid that if this is a simple issue.
So, in short, are free drinks taxable income? And if not, what documentation do I need to contest the amount with the IRS?
I filed online and don't have a copy of my return from that year or the 1099 and don't have any receipts or anything to show the amount paid. I do have access to the bar and the management from that time. This is in Washington state, if that matters.
Thanks for any advice!
A couple years ago I was working as a DJ at a bar where I also worked as a bartender. I did one night a week, made a hundred bucks cash, and got a hundred dollar drink tab. I did this for six months or so.
I got a 1099 from them for $5000 of income. When I asked why it was so high they told me that the drink tab was considered taxable income. I thought that was bullshit and threw the 1099 out.
Probably not the best idea, I know.
Now the time has come to pay the piper and I'd like to, but I still don't think that free drinks are taxable income (my shift drinks and employee meals when I bartended didn't seem to be taxable income, so why is this?) I had also been told that the drink tab was to be used for promotions, buying drinks for patrons and the like, which in truth I rarely did.
I know the answer I'm likely to get is to talk to a tax lawyer, but being totally broke I'd prefer to avoid that if this is a simple issue.
So, in short, are free drinks taxable income? And if not, what documentation do I need to contest the amount with the IRS?
I filed online and don't have a copy of my return from that year or the 1099 and don't have any receipts or anything to show the amount paid. I do have access to the bar and the management from that time. This is in Washington state, if that matters.
Thanks for any advice!
The IRS has an 18-page document that discusses the tax treatment of employee meals. It would seem that $100 in credit for free drinks given to an independent contractor acting as a performer is not the same as a free meal given to an employee who is involved in providing food to customers for the convenience of the employer.
posted by grouse at 8:12 AM on July 14, 2010
posted by grouse at 8:12 AM on July 14, 2010
This is not tax or legal advice and I am not your lawyer. You should look at this page from the IRS website and click through the links to get some orientation here. The phrase you are looking for is "non-taxable fringe benefits." These include the company car, meals or vouchers for meals, and housing (and other items) that the employer provides to you to enable you to do your job (i.e., if you're working late, the company buys your dinner to eat at your desk so you can finish your work).
I have no idea what the authorities say about giving booze to DJs. The rationale behind non-taxable fringe is that it isn't comp because it is for the employer's benefit, not the employee's benefit (i.e., dinner at your desk). Whether that rationale extends to DJ's drinks is not for me to say. The case would be worse if you got the drinks only after your shift ended, because presumably that would not be benefiting the bar (since you were "off duty").
Again, this is not tax or legal advice, and I am not your lawyer. You should consult a tax attorney in your jurisdiction to discuss your options here.
posted by Admiral Haddock at 8:15 AM on July 14, 2010
I have no idea what the authorities say about giving booze to DJs. The rationale behind non-taxable fringe is that it isn't comp because it is for the employer's benefit, not the employee's benefit (i.e., dinner at your desk). Whether that rationale extends to DJ's drinks is not for me to say. The case would be worse if you got the drinks only after your shift ended, because presumably that would not be benefiting the bar (since you were "off duty").
Again, this is not tax or legal advice, and I am not your lawyer. You should consult a tax attorney in your jurisdiction to discuss your options here.
posted by Admiral Haddock at 8:15 AM on July 14, 2010
Discussing this with an accountant might be a good idea. Since you were acting as a business (hence the 1099) rather than an employee there might be some other expenses you haven't deducted. The only thing you shouldn't do is ignore this. If you are too broke to pay the full amount due today, then work out a payment plan with the IRS.
posted by grouse at 8:15 AM on July 14, 2010
posted by grouse at 8:15 AM on July 14, 2010
I filed online and don't have a copy of my return from that year or the 1099 and don't have any receipts or anything to show the amount paid.
Well, it doesn't really matter since the IRS got a copy of the 1099 which caused the CP2000 in the first place (because you didn't include that 1099 income on your return).
You should also take a look at this page. Did you use the drink tab on the days you weren't working? That would make it taxable, if I read that right.
posted by smackfu at 8:36 AM on July 14, 2010
Well, it doesn't really matter since the IRS got a copy of the 1099 which caused the CP2000 in the first place (because you didn't include that 1099 income on your return).
You should also take a look at this page. Did you use the drink tab on the days you weren't working? That would make it taxable, if I read that right.
posted by smackfu at 8:36 AM on July 14, 2010
Based on the information given:
You were an independent contractor for purposes of this income, not an employee (e.g. you received a 1099MISC not a W2). The tab is taxable unless explicitly exempted, which it likely is not.
Get a lawyer or at the very least talk to an accountant.
The IRS notice should have come with instructions as to how to contest the IRS's determination. Here are the FAQs for the form.
In the end though, you will likely end up owing the taxes.
posted by melissasaurus at 12:40 PM on July 14, 2010
You were an independent contractor for purposes of this income, not an employee (e.g. you received a 1099MISC not a W2). The tab is taxable unless explicitly exempted, which it likely is not.
Get a lawyer or at the very least talk to an accountant.
The IRS notice should have come with instructions as to how to contest the IRS's determination. Here are the FAQs for the form.
In the end though, you will likely end up owing the taxes.
posted by melissasaurus at 12:40 PM on July 14, 2010
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Don't mess around with this shit, though, and don't drag your feet. My husband's been working over a year to resolve a tax issue in which the IRS is totally in the wrong--but because he misplaced letters from them/was slow to respond, the issue went into collections. You do not want a tax lien. Trust me on this!
posted by PhoBWanKenobi at 7:52 AM on July 14, 2010