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1099, taxes, and you (well me really).
Ryadic
Registered User regular
Registered User regular
So I just recently found a job where I will eventually be contracted as a 1099 employee. Which means I won't be paying taxes out of my check, but will need to come tax season. But I do know that I can avoid paying a lot of taxes if I write stuff off. Mainly gas. I'll be driving a lot for my job. Is there a really good website that I can use as a reference of things that I can write off as a business expense and how it works? This is completely new to me and I want to make sure I do it right and don't get fucked up my asshole come tax season.
If there's more information you need from me, feel free to ask. I don't really know what is pertinent, so I wasn't sure what to provide.
If there's more information you need from me, feel free to ask. I don't really know what is pertinent, so I wasn't sure what to provide.
Ryadic on
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In case you're not sure if your mileage is deductible, document the hell out of everything. There should be a journal in your vehicle indicating date and start and stop mileage of every trip related to work.
(I am not a tax professional)
One other thing to keep in mind is that once you start getting paid, make sure you're paying in estimated taxes every quarter. It's not as complicated as it looks; basically just project out how much you'll owe in tax by the end of the year, and pay in 1/4 of that.
FYI I say this to everyone that's getting a 1099, you might not be a contractor in the eyes of the IRS. Generally if you're not the one dictating your schedule, you're not a contractor (is what it really boils down to). I've been seeing this 1099 business a lot lately with a lot of friends. They're being told to set up an LLC and all that and turns out the company is just trying to avoid taxes and benefits and all that but still employes them like a normal worker. (IE telling them when and where to come in, IE, not a contractor)
Not to belabor the mileage question, but I think it would help to clarify since this is a common question. Mileage to and from work is not deductible, regardless of whether you are an employee or a contractor. There are a couple of exceptions, so without knowing more specifics about the nature of the work I can't say for sure that it's not deductible. But it's usually not.
Bowen, what you're thinking of refers to non-reimbursed expenses, which an employee can take on Schedule A, but only if it exceeds 2% of your gross income. Most employees don't drive enough (without getting reimbursed) to take advantage of it. And regardless, mileage to and from work is still not deductible.
Where's that PAer who's an accountant/tax reparer?
I'm going to be a licensed insurance agent. Monday and Thursdays I'll be driving into the office, here all day, and then home. Tuesday, Wednesday, Fridays, and the occasional Saturday I'll be driving to the homes of appointments that I set up on the office days. So from my house to their house and then to the next house etc.
Also, I was told I could claim things like laptop, GPS, cell phones, and clothing if they are used for business. True? Does it have to be solely or primarily? For instance, I buy a tie that I only wear to work, but a wedding comes up and I wear it to the wedding. Does this negate the fact that I can claim it? It's no longer solely for work.
So far, a lot of what you guys have given me is very good information and I'll review it all in full when I get more time.
If you're getting a 1099, I'd be willing to bet dollars to donuts that you're not really a contractor. Most people are just told they're contractors, given a 1099, and think that's how it works. And again, I think the IRS uses the distinction of "did you really supply your own schedule whilst under the contract?" as pretty much the defining objective there.
And there is a contract that I will sign between me and the business. I just legally cannot sign it until I get my insurance license, which should be hopefully beginning to middle of next week.
If you're using your laptop, and your cellphone plan, and your pants (to be suitably panted) for work then that's not going to be technically deductible. If company made you buy their uniform that would be deductible. I don't think a tie will be so, unless it is a tie you have to buy from the company.
I use my desktop at home for work sometimes (when interacting with clients in Europe and Asia for example) and while there may be a way to deduct something there it seems to be an incredible pain in the ass, to get a $50 deduction, that doesn't matter unless I already itemize.
Based on what you said, I would argue that the trips to and from the office Mon and Thu are commuting (not dedutible), and pretty much everything else is deductible.
The basic question is how much something is used for business purposes. Anything that's 100% business (laptop, cell phone, etc.) can be fully deducted. If you use something partially for business, you should be able to deduct based on the business percentage.
Clothes are a different story. Unless it's something that you couldn't wear on the street (clown costume, for example), it's not deductible. It make no difference whether or not it's something that you would normally wear, a tie/suit is not going to be deductible.
For what it's worth, I am a tax professional (enrolled agent).
Just to clarify a bit here, the phrase "1099 employee" is basically a contradiction. You can be an employee (i.e., you receive a W-2 at the end of the year) or a contractor (you get a 1099 at the end of the year). If you're an employee. the employer is required to withhold taxes from each paycheck (regular income tax as well as social security/medicare tax). If you're a contractor, they don't withhold anything (hence the need to pay in quarterly estimates).
You're certainly right that plenty of small businesses pay people as contractors, even though they should be employees (and they want to avoid payroll taxes). This is something that you should discuss with your employer, though. My gut feeling is that if this is not a small business (are there dozens/hundreds of other agents?), they're position on contractor/employee is well thought out. I think that in general, insurance agents and other similar commission-based jobs are usually considered contractors. But if it's something you wanted to contest, the first stop (after talking with your employer) would be a state unemployment office.
No, you're right that employers pull this all the time (from the quickfinder handbook that I use: "The IRS estimates that millions of workers are misclassified as independent contractors, costing the federal government huge sums of tax revenue..."). It kind of sucks, because assuming the employer has made up their mind, your only choice is really to complain to the state/IRS.
When you get down to the numbers, essentially what it costs you is 7.65% (which is the employer portion of ss/med that they would be paying on your behalf if you were an employer, and you have to pay yourself if you're a contractor). So if you make $50k, you're losing out on $3,825 (which is therefore how much the employer saves, which is obviously an incentive for them to do this). But on the other hand, you can also take your expenses right off the top on your Schedule C as a contractor (vs. Schedule A if you're an employee, and in that case you can only take what's above 2% of your AGI). Of course (back to the original hand), if you're a contractor you won't be eligible for unemployment if you're let go.
Food for thoughts for the OP, he might want to get in touch with the DoL/IRS and whistleblow.
My wife teaches, and part times at a vet. Clothes you buy to look presentable at work, not deductible. Ever. Clothes you buy because you have to, IE, scrubs for the vet, are deductible. At least, that's the conversation Mr. Tax Man has with my wife every year.