In January of each year a few, sometimes unsuspecting bowlers, will find out that they must report winnings from tournaments they enter. Like so many other organizations, Southern Nevada USBC must file Form 1099 Misc for anyone who earns $600 or more during the year. This is a cumulative amount that would include winnings from all of our tournaments.
So, what happens if we come to you and ask you for your social security number and you refurse to provide it? We will still fill out and timely file the 1099 information return(s). In the Tax Identification Number (TIN) box, the word “refused” would be used instead of the social security number.
If you do not report this, you could be subject to penalties. For example, failure to report the correct amount of income is regarded as an accuracy related penalty which is 20% of the difference between the tax paid and what should have been paid had the income been reported. A simple example of this would involve not reporting $1,000 in income. Had you reported it, your tax would have been $100 more than it was. The penalty would be $20 (100 x .20). Obviously, the amounts indicated are examples only and would differ from one individual to the next.
The second penalty is interest. In general, interest is charged on underpayments starting on the due date of the amount you owe and will continue to accrue until the balance is paid in full. Interest rates vary so I will not try using an example. Just remember that interest accumulates on a daily basis.
Finally, you should know that some penalties may be removed or reduced if you acted in good faith and can show reasonable cause for why you weren’t able to meet your tax obligations. By law the IRS cannot remove or reduce interest unless the penalty is removed or reduced. If you disagree with the amount you owe, you may dispute the penalty.