Tax Deductions and advice for 1099-Misc Independent Contractors

Can I Deduct Property Taxes - Tax Deductions and advice for 1099-Misc Independent Contractors

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A few coarse occupations that receive a 1099-Misc are sub contractors, real estate brokers and assurance agents. Independent contractors who have their earnings reported on a 1099-Misc are carefully self-employed by the Irs, and are responsible for paying their own taxes. To put it most simply, none of their taxes are withheld while the year.

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Can I Deduct Property Taxes

This can be a double-edged sword for many independent contractors. For those with enough tax knowledge, or entrance to a powerful tax professional, receiving a 1099 can honestly be a good thing. But for those who are new to an vocation that reports earnings via the 1099, or believe they are a turbo tax expert, receiving a 1099-Misc can be a disaster at tax time.

In most circumstances, an employee's (someone who receives a W2 by January 31) net wages have already had federal, state and payroll taxes withheld. Employee's are not totally responsible for their own taxes, but an independent undertaker of a package deal is. The first thing that the self-employed has to do is pay their taxes quarterly. The total estimate you have to pay regular is the smaller of these two numbers, whether 100 percent of last year's tax liability, or 90% of the current year's tax liability. Failure to pay in enough throughout the tax year will follow in an estimated tax penalty on your tax return.

The second and most crucial part of being an independent undertaker of a package deal is tracking your enterprise expenses while the year. Taxpayers who receive 1099's are allowed to deduct their expenses from enterprise activities just like a enterprise owner can, in fact, some small enterprise owners and independent contractors use the same form to article their income, a agenda C.

The most prominent expense for independent contractors to keep track of are their auto expenses-namely enterprise miles driven. The Irs allows taxpayers to deduct 50 cents for every enterprise mile driven while 2010, the proper mileage rate cannot be taken in increasing to actual vehicle expenses like gas, repairs, depreciation, and insurance. Independent contractors must conclude whether or not they want to use actual expenses, or the proper mileage rate.

Something else that an independent undertaker of a package deal must take in to observation in regards to mileage is the definition of enterprise miles, not all miles driven are carefully enterprise miles. Miles driven from home to your office are carefully commuting miles, not enterprise miles. Miles driven from the office to your work site or appointment are carefully enterprise miles. And obviously miles that your drive while not at work are carefully personal miles and cannot be deducted.
For those who conclude to use the actual expenses method, your deduction can be figured by totaling up your auto expenses and multiplying that estimate by the ratio of enterprise miles driven. For example, if you drove 30,000 miles for the year, and half of them were enterprise miles, then you could take half of your auto expense for the year as a deduction.

Other expenses that can be deducted from earnings for the self-employed include:

• Advertising expenses
• Office supplies
• Cost of uniforms/Equipment
• Utilities
• Insurance,
• Interest paid
• Legal/professional services
• Meals and Entertainment Expenses
• Lodging expenses

One last topic that independent contractors need to reconsider is the home office deduction. If you use a quantum of your home exclusively for enterprise purposes, you can take the deduction. This will enable you to not only deduct a quantum of your living expenses, together with rent/mortgage interest, insurance, taxes and utilities. The home office deduction will also allow you to turn some of your commuting miles in to enterprise miles.

You can include commuting miles as enterprise miles if you are a small enterprise owner or self-employed person, and you have two offices or work locations: one face the home, and one inside the home. You will need to fill out form 8832 in increasing to a agenda C to correctly file the home office deduction.

The best way for small enterprise owners and independent contractors to save money at tax time is to understand what they are allowed to deduct. An expense and deduction using an excel spreadsheet or QuickBooks is a good way to get started.

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