What is deductible on a 1099?

Question

I just recently found out that I have to file a 1099 for my new job. And I am so confused on what I am going to have to pay and what would be considered as a deductible.

I read that I'll have to pay 15.3% or something in that range for SS/Medicare, I get that. But how do I know what I'll be paying in federal? And what about state and local?

Also, what kind of taxes would be considered a deductible? I get paid gas mileage, so how would I figure that? How many total miles I drive, or how much gas I put in my car? And would other stuff to maintain my vehicle be a deductible?

I'm just so confused. I've never had to manage my own faxes and pay them on my own. So if anyone knows of a good website that explains all of that, I'd appreciate it. I went to the IRS website but there's just so much there.

I get paid mileage already and that's the only mileage I would get paid for, so I wouldn't get reimbursed for anything with the miles.

Answer 1

The best thing, is to go to your local IRS office and ask them for a brochure or pamphlet which explains the 1099 deductions in detail. That's the best way to clearly understand things. The read through it , mark your doubts and go back to IRS office and ask them the questions you have.

Answer 2

It is hard to answer your question without more information about your job. It is possible that you were told that you would be receiving a Form 1099 Misc which is an end of year report to IRS of the amount of income paid to you but not paid as hourly earnings. If this is correct, no federal or state income taxes will be withheld from your checks and you will be responsible for determining how much federal and state income tax you owe, plus paying an estimated amount quarterly.

In that case, you will need to file a Schedule C as an independent business. The best place to get more information is by calling IRS and asking for the free Schedule C Instructions booklet.

Or purchase a copy of a tax manual at your local bookstore or K-Marf/Wal*Mart, etc. (I would recommend one like J. K. Lasser's "Your Income Tax. However, this will cost you about $15.00 or so.)

In the meantime, begin keeping a daily mileage log for your car, showing beginning and ending mileage each day, and for each business related trip the number of miles and purpose for the trip. Any mileage allowance the employer pays you will be a reduction of the mileage expense you can claim on Schedule C. If the reimbursement exceeds the deduction, the difference will be taxable income.

You will find more information in the Instructions but starting off, claiming the cents per mile deduction for car expenses will be the simplest for you to keep up with.

In order to get a more accurate answer to your question, you should probably ask it again, but with more details about the job, how you will be paid, and what expenses you will have to pay yourself.

Answer 3

you are an independent contractor and are considered self-employed. youd file your business income and expenses on Schedule C of your income tax return. the 1099 your employer gives you next month will show how they paid you in 2006. you claim this as income. as for expenses, you can deduct whatever you pay out of pocket that is for your job. for example, if youre a photographer and buy equipment, film, supplies, etc., these would all be deductible expenses. you can deduct expenses if you were not already reimbursed by your employer. so if you keep a record of your mileage and your employer pays you the federal reimbursement amount of 44.5 cents per mile, then you cant deduct this. this amount takes into consideration gas, insurance, depreciation, etc. you only deduct auto expenses if you are not already being reimbursed the mileage rate by your employer. you should submit some sort of "expense" report to your employer monthly to keep track of your out of pocket expenses. this report should show the mileage driven and what projects or what clients you were working for.

also, if you pay your own health insurance, this would be a deduction for you.

i forgot to mention that if you owe a significant amount of tax with your tax return when you file in april, not only can this be a financial burden to you, but you can get charged penalties by the IRS. your accountant should prepare quarterly estimates for you (if necessary) so that you can pay in your federal/state tax throughout the year instead of at the end.

Answer 4

I can not completely answer that because you have not revealed enough info. Take your total 1099 earnings and multiply by .153. This is the Self employment tax that you will have to pay. Next take the total 1099 earnings and subtract 1/2 of your Self employment tax. This is you adjusted gross income. The AGI is then multiplied by your tax rate ( I don't know your tax rate). This will give you the Income tax due. Finally add the income tax plus the self employment tax to arrive at the total tax. As a rule of thumb you can use 15% as the tax rate and 7.5% as the state tax rate.

Answer 5

When you receive a 1099 you are considered self employed. You file a Sched C and deduct all expenses related to the earning of your income. If you get paid mileage that doesn't work and I don't know what other, if any, expenses you have.

Answer 6

It is like you are working as an independent contractor. You can deduct anything related to your job. You only have to pay self-employment tax (the 15.3%) if you can't deduct enough to bring you below the standard deduction and exemption amount. I think it's 5,000 + 3,200 for singles...I usually take the standard rate for my car, instead of totaling up all of the maintenance and repairs.

You can go out to turbotax.com and they have a business solution which walks you through all of the forms...beats going to H&R Block let me tell you!