Taxes, Taxes

[Kyung]

My yearly (annual?) tax post.  It is the season.  Get all your papers in a row.

You can use Turbo Tax or go to someone. 

Some deadlines. 

1/17/12 - your last quarterly payment needs to be mailed in.  (If you pay quartely, you won't owe a ton of money in April)

1/31/12 - you should have all 1099 forms from all the agencies you work from.  And you should send out 1099s to people who you paid for services throughout the year, for instance scopists and proofreaders.  The minimum is $600.  So if you were paid at least $600 by an agency, they need to send you a 1099.  If you paid a scopist or proofer more than $600, you need to send them a 1099.  I've used filetaxes.com for several years now.  It's easy and cheap.  They handle everything.

About those 1099s. When you're figuring your gross, don't forget to subtract out the parking unless the agency already does it for you.  Remember parking is not compensation or income, it is reimbursement for an expense and you should not be taxed on it, which you will be if you don't deduct it out of the gross amount that the agency puts on the 1099.  Unless, of course, the agency pulls it out for you.  Most agencies don't. 

Oh, and  if the agency says they don't owe you a 1099 because the amount they show they paidyou less than $600, and you're sure it's more than $600, I would go ahead and report that income on your tax return. 

Even for the small amounts, you've gotta report it.  If you have 4 agencies that paid you $300 each over the course of the year, that's $1200 and it adds up.  Uncle Sam will not be happy if you do not report that money.

Deductions - Such a huge topic.  The most obvious is mileage, cell phone/telephone (only a portion), wear and tear on car,

Clothes - don't try it.

Dry Cleaning - nope.  I ask my tax person every year.

Buying a new car, equipment - yes

Software support - yes

Licensing fees/NCRA fees - yes.

Home office - if you've got a dedicated space.  If you're using your kitchen table, no go.  But you've got a space set aside solely for that purpose and you're not using it for anything else, go for it.

There's a tons more and I'm sure other reporters can list some obvious and not so obvious.

[Kelli Combs (admin)]

I write off my "home office" but it also raises a red flag with the IRS.  I've been audited five times.  Still do it, though.

[Susan Stevenson]

Hi Kyung, thank you for the helpful reminder.  I believe you can also deduct a portion of auto repairs as well as Bart/shuttle/train services, whatever you may use to get to jobs.  You can never get too many helpful hints, when it comes to taxes!  Thank you.

[Kyung]

Yes.  Everything related to cars be written off, but only a portion as most people do not use their cars solely for business.  If you did, then, yes, you could write off 100%.  But since most people don't, you have to figure out the percentage.  But here's  list

DMV fees- license & registration

car repairs

gas

mileage

AAA fees

car washes

[Deborah M.]

Interesting about the parking.  I've been doing all the rest all these years, but I never thought of deducting the parking from the 1099s.  I'm not sure it matters.  If I get paid $130 and $30 of it is parking, I list $130 as income and $30 as an expense, which comes right off the top before paying taxes.  You pay taxes on your net income after expenses.  I do keep track of my parking, but if you deduct it from what you report as income if you're reimbursed for it, I don't think you can then claim it as an expense. 

My sister has always done my taxes (CPA), but she hates doing taxes (mostly does bookkeeping) and always does mine at the last possible minute -- like the end of September!  So I think this year I'm going the TurboTax route.

Also, I think you can get the 1099 forms and 1096 form (for summarizing them and sending in) off the IRS.GOV site.  (Make sure you do .GOV and not .COM!)  They are super easy to fill out and do not need to be typed, although it's nice if you can.  I wouldn't pay anyone to do them.

Kelli, I have always declared my home office and have never been audited. (Knock wood!)

[Martha R]

I thought you could either deduct your gas and repairs OR your mileage at whatever the rate is, 50 cents a mile or whatever.  I don't think you can deduct both.

Also deducting 1/2 of your Social Security tax is A LOT!!!  Of course, you should all do SEP IRA's or self-employed 401(K).   I know on SEPs what you put in comes right off your income, so you pay less tax.