Quote Originally Posted by lorne View Post
If for no other reason than ... it has worked so often for so many people, obtaining refunds, myself included. As example let's take this wage earner with the following income for TY2018:
Not sure if this changes anything, but I'm not looking for a refund. No money is stolen from me in the first place for any of my private activity. I just need to account for all third-party reports.

Quote Originally Posted by lorne View Post
3) Received a cash gift from Dad of $1,000.
4) Sold iPhone for $300 worth of bitcoin.
I would contend that neither of these belong on the 1040. Sure, they "want" you to, but they "want" you to do a lot of highly-invasive things that have no legal basis. Having said that, in the case of BTC, I would include it if I were to meet the 1099-K threshold ($20K in transactions), as third-parties will be reporting that.

In any case:

Quote Originally Posted by lorne View Post
But you'd be on the hook for social security and medicare ("FICA") tax due on your "self-employment" earnings. The self employed pay FICA as "Self Employment Tax" (SET). SET is calculated on schedule (form) SE and is filed as part of an income return.

But what if you're redeeming lawful money and don't agree that $7k was "self-employment" or "Nonemployee compensation"? Filing a return is your chance to rebut that allegation.
This is the part I've been wanting to get more information on. Because I'm redeeming LM, and thus is not self-employment, I don't see how 1040 is the right form. Rebutting the 1099 directly seems more correct, but other than the anecdotal evidence that 1040 is the way to do it, haven't heard any opinions on why correcting the 1099 wouldn't be.

To add to that, you've mentioned including a "supporting statement" for why a 1099 is not part of a 1040 calculation, but haven't seen any examples here or elsewhere online that define what such a "statement" would look like - are you referring to David's Supporting Schedule? It wasn't clear if FICA/SET/SS was calculated for the 1099(s) referenced.

The goal is simply to prevent automated flags, while also not confirming any of the presumptions that the IRS has about the nature of my money and the ancillary hooks those presumptions have (that is, FICA/SS/SET).