The 1099-MISC blues...
 

Upside: Money. Lots of it.

Downside: Itemization of business-related expenses.


I'm on day 2, and still grinding through last year's spreadsheets.

and now I know what a 1099-MISC is

Yeah those things are no fun at all. At least you're doing your own taxes, and seem to have grasped the concept of what's going on. It's a real joy when someone comes in to have their taxes done, hands you is a single 1099 for 30k, and want to know how much they're getting back... I still haven't figured out a good way to explain that one.

I think this year I finally need to raise my exemptions to 8 or 9.

My wife had to file a 1099 MISC the last 2 years...it really hurt. Especially last year, since we didn't know it was coming (stupid employer filed her overtime pay on a 1099 MISC and I didn't realize they weren't withholding). But no 1099's this year, and the homebuyer incentive make for a nice big check.

Heh. This year will easily be the largest check I've ever written in my life, to the IRS or anybody else for that matter. And I'm guessing that claiming roughly a quarter of my income as deductible expenses is going to trigger an automatic audit.

Stuff like hotels, airfare, cab rides, train and subway fare, etc. are pretty easy. Time consuming, but easy. There are a couple of things that I'm still not fully clear on, however.

Partway through last year, I switched from actual accounting for meal and incidental expenses to per-diem at the GSA rate, mostly because it was easier and netted me some additional profit (I'm a cheap eater.) I have conflicting information on whether this per-diem income is 100% deductible, 50% deductible, or not deductible at all because I didn't use that accounting method consistently for the whole year.

Can I deduct the per-diem rate for the whole year, rather than itemized expenses for the first half and per-diem for the second half, even though this isn't how I billed my clients? That would really be ideal. (Most of my work in '09 was in Manhattan, so the M&IE rate was $64 a day, which is not an inconsequential amount when you consider I spent > 100 days there.)

Personal auto mileage is another. For the whole of 2009, I billed this (again at GSA rate) for things like traveling between my home (which was also my office) and the airport, which is quite some distance away. Haven't quite figured out yet where I can account for that.

Fun and joy...

Just say you're a waitress and you only make minimum wage and only report 10% of your tips.

I work for a company called "Pro-diem" and input data to create aircraft flight crew travel reports. It hurts my noggin.

Wow wtf are you doing to write off so much of your income?

No you will not be automatically audited. Audits are largely triggered by algorithm e.g. certain categories of professions, # of years you have marked a loss etc. You can write off 100% of your 1099 income without being audited. Consider your work as if it were a real business. If you were starting a car shop, you could easily spend way more than your earnings during your first year in business. If that were the case, you could carry over your deductions to the next year.

I'm not sure about the meals expense.

For auto mileage, you can either put the mileage in an "other expenses" category.

What are you using for tax prep?

I recommend taxact.com Great cheap software that runs locally. No slow webapp.

mortgage interest!

Interest only loan? :|

That is a lot of interest or very high loan-income ratio. Then again, if you live in Arlington, the prices of places are $$$$$$.

Joe and other 1099'ers, you can actually save a lot on your taxes if you are working 1099. Do not be afraid of writing off everything that you use for your job-- computers, internet, etc. Keep your receipts, and remember or keep records on how you arrived at your numbers. Remember that stuff like customer meals can also be expensed. Do not be afraid to deduct home office expenses but know that will increase the likelyhood of getting audited. Being audited is not that bad though. I've been audited before-- I messed up and didn't pay SE (self employment) tax.

1099/Schedule C is a legitimate tax shelter. Just think of yourself as a small business. That is a legitimate attitude and the federal government will reward you for your initiative.

God how I dont miss contract consulting.

I still own those mothers 3700 dollars.

Dont even bother filing state. it's not like they are going to pay you back anytime soon.

no not interest only, just small down payment and co-borrower is not (yet) my spouse. so I take all the deductions with my larger salary.

I'm using H&R, as its the package I've used for years.

Gotta figure out what (if anything) I can do with the Per Diem.

A visit to my local office is probably warranted.

This reminds me I need to get working on my 1040EZ.


:giggle:

You know, when I get tax stumpers, I actually just call up the IRS. The individual/small business tax line is actually really helpful. If you want a second opinion, you can always call back and don't be afraid to take down the name/representative ID for who helped you.