Agent and taxes

[Crabcake Johnny]

As 1099 statements will start hitting I'd like to go over taxes and being either independent or a 1099'd independent contractor.

As someone who's gotten themselves jammed with taxes in the past due to horrible advice I'm on a lovely monthly payment program with the IRS and have spent oh......about 15 total hours with them on the phone. Although I'm not a CPA I can guarantee you I'm correct about what I post.

PLEASE save money out of your checks for taxes. 30% is a good figure. If you're not saving you'll be jammed up pretty hard come April.

What will you owe? Everything's based on your 1099's. I was told once that if, for example, I got an advance of $8,000 in the month of December that since the money hasn't been earned yet I don't have to claim it. 100% false. If your 1099 says $85,000 then you'll owe taxes on $85,000. If crap ends up falling off the books that will be adjusted in your next year's 1099.

You also MUST file quarterly taxes - not yearly. This is the single biggest mistake I see people making: http://www.allbusiness.com/business-planning/business-structures-sole-proprietorships/1028-1.html

http://www.irs.gov/businesses/small/article/0,,id=110413,00.html

*But I was told I don't have to file quarterly - yes you do
*My CPA told me I don't need to file quarterly - fire him
*My brother-in-law is a tax expert and he says I don't have to file quarter- he's wrong yes you do.
*I've been filing yearly for years and no one's said a word - fine, but you can still get caught. I go 10 miles over the speed limit on the beltway but if I get pulled over I'll get a ticket.


Forms you'll need:

1040
Schedule C - where you deduct expenses
Schedule SE - your self-employment tax

Unfortunately, if you're woking from home you don't have a lot of expenses. Lead costs, office supplies and that's about it unless you drive to see clients and take a gas deduction.

 

[J.R.]

Great links my friend.

 

[STIBROKER]

Unfortunately, if you're woking from home you don't have a lot of expenses. Lead costs, office supplies and that's about it unless you drive to see clients and take a gas deduction.

You are missing a biggie.....you can write off a portion of your monthly morgage depending on the sq. ft. of the area's of the house that you use for your business....

http://www.toolkit.cch.com/text/P07_2700.asp

The Home Office Deduction

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If you use a part of your home for business, perhaps to perform paperwork, to store records, inventory, or samples, or even to meet customers, you may be able to claim a tax deduction for some of your expenses of maintaining the home.

Now, you may have heard that the home office deduction is either one of the greatest money-savers available to American small business, or that it is major red flag that will make you audit bait for the IRS.

As a general rule, you should never shy away from taking a deduction you are legally entitled to. The same holds true when it comes to the home office deduction. Nevertheless, we recommend that you keep meticulous records of all your expenses and be prepared to back them up.

There are also those who have dangerous misconceptions about the way the deduction works. Perhaps you have heard about folks who furnish their entire home in rare antiques and write them off as a "business expense." Or people who think the deduction entitles them to pass on the cost of a new stove, billiard table, or hot tub to the government.

Clearing through misconceptions, and providing you with a special calculator to estimate your potential home office tax deduction, is what this discussion is all about. However, there are also a number of non-tax aspects you may want to consider.

Not one deduction, but many. In reality, when we speak of the home office deduction, we're really talking about a group of smaller deductions. These deductions - which may include such items as a portion of utility bills, mortgage interest, repairs, and depreciation - are totaled up to get an overall deduction that is reported on IRS Form 8829, Expenses for Business Use of Your Home. In addition, if you qualify for the home office deduction, you also qualify for some special, more liberal rules for deducting auto expenses. The common denominator among these deductions is that the IRS has devised a single test to determine whether you qualify for all of them.

Some deductions are available even if you don't qualify for the home office deduction. A commonly held misconception is that you need to qualify for the deduction in order to claim any expenses associated with a home or a home-based business. This is simply not true.

For example, home mortgage interest and real estate taxes would be allowed as an itemized deduction on Schedule A of your tax return in any case, even if you can't take a home office deduction. Office supplies, postage, and the cost of bringing a second telephone line into your home for business use may also be deductible. Moreover, you may be able to depreciate the cost of computers and office furniture you buy to use at home, even if you're not allowed to deduct the cost of the office itself.

 

[Crabcake Johnny]

Just make sure you qualify - most of us do:

http://www.quicken.com/cms/viewers/article/taxes/54902/

 

[Crabcake Johnny]

Other advice: Watch out for the difference between a tax preparer and CPA. I'd avoid those walk-in services like H&R Block and Jackon Hewitt. They employ seasonal workers who simply take a short course and test - then like magic they can now prepare taxes. In many cases these workers have never seen a tax return before they answered the ad in the paper for seasonal workers.

If you really want to legitimately maximize your deductions see a real CPA.

 

[Guest]

Yes, I never have a problem when I keep that 30% separate. This year I slipped a bit and for the past 3 months have had to go about 50%. It should be automatic to take that 30% and put it in a no-risk interest-earning account.

There are lots of deductions we could take, but the biggest one I took last year that people do not know about is a section 179 deduction for automobile. I bought a truck for work purposes only that was >6000lbs and got a $25,000 deduction.

I believe there were some changes to that this year, but a good deduction is still available for some trucks and SUVs

My second largest deduction was charitable donations. Don't overlook this valuable deduction either, besides its other benefits.

 

[Send4linda]

I'm a tax preparer. I am not a CPA. You need to ask whoever does your taxes if they know how to do taxes for a business. If they hesitate, hire someone else who does. If you need advice, I'll do my best to answer any questions.

 

[Crabcake Johnny]

Bingo. Those seasonal workers might be ok for standard W-2 returns but I absolutely would not use them for business returns.

 

[Guest]

Do not go to someone that can fit you right in anytime you want. Make sure you have to make an appointment well in advance.

 

[Send4linda]

So you're saying not to have me do your taxes cause I can sit down with you tomorrow evening and do them. None of my customers have to make appointments weeks in advance. I have a small tax preparer business and I happen to specialize in business taxes.

Do not go to someone that can fit you right in anytime you want. Make sure you have to make an appointment well in advance.

What happened for you to give that advice?