Monday 17 March 2014

How to Find Write Offs for a 1099

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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