Having 1099 income indicates that you are an independent
contractor and not an employee. When you are an employee, you should receive a
W-2 from your employer at year's end. Earning 1099 income often indicates that
you may have associated expenses that may be tax deductible. Always use caution
in evaluating potential deductible expenses and get professional advice to
reinforce your position.
Keep records of all your expenses. Record them as they occur
or, at a minimum, put receipts in a large envelope for later review.
Determine if you have direct expenses related to earning
your 1099 income. For example, if you design websites or complete word
processing assignments in your home office, your computer, printer, Internet
connection and telephone may generate expenses directly related to your 1099
income.
Estimate any indirect expenses that may be associated with
producing your 1099 income. For instance, your home office desk, chair and
other business furnishings may have some deductibility, but if you only spend
an hour or two per day producing income, you may have trouble convincing the
IRS. Other more significant indirect expenses -- some of your rent or mortgage,
heat, other utilities, home insurance, and repairs or maintenance -- may be
deductible if your home office is your principal business location and is used
exclusively to produce income.
Consider deductions for the use of your vehicle. Some auto
expenses may be deductible if you need to use your car for directly related
business purposes. If you commute to and from your work site, these miles are
not deductible. If you visit clients, make deliveries or transport people or
products, you may generate write offs against your 1099 income.
Deduct the cost of any special clothing, using special tools
or instruments, or completing education necessary to maintain or improve your
ability to perform your current position.
Get a tax professional to review your work. A good adviser
will typically save rather than cost you money.
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