I installed and fine-tuned a sophisticated computer system for my friend and got some and got some money. I accepted payment in checks, I got no 1099-MISC (my friend was too lazy). I got about 11000, out of which about 6000 was the equipment I installed in his basement, about 4000 I retained as a profit. I was filing a tax return by myself, so I filed this amount as a self-employed income (schedule C and schedule SE).
following factors from the pub 535 apply:
1. I did not depend on income from this activity
2. This is one-time activity, never before, never after
3. This activity is way outside what I normally do, my primary motivations were:
- to spend time with my friend
- learn something new by doing it.
I wonder, today, can I reclassify this income as misc income, report deductions on 1040A and claim back the SE tax?
How likely is it to trigger the audit?
How likely is it to trigger the audit if I reduce the amount of the deductions taken?
Will it still trigger the audit if I reduce the amount of the deductions claimed to a point where I will owe more tax and pay the said tax? (Just to avoid reporting any SS subject payments for this period of time).
No 1099-MISC was ever filed. Please, share your thoughts.