what deductions can you use under 1099?

Question

I have started as an independent contractor with a company. i wanted to check what all deductions will i be able to take off next year? i'm also making paymnets on my car but its against my line of credit issued by my bank. can i include those payments as deductions or is that not possible?
I am aware of mileage,office expenses,utilities percentage(as i'll be using one of my rooms as office space),meals deductions. If some one could let me what else i can deduct. will I be able to deduct all my car repairs and expenses as well?
Thanks :)

Answer 1

I'm thinking... construction work, but these will apply, no matter what line of work it is.

Advertising, including banners, signs, and business cards

Bank fees and service charges if you have a business account

If you accept credit card payments to your business, you can deduct the fees charged by the credit card companies for the service

Contract labor for sub-contractors (you'll need to issue Form 1099-MISC for each one that makes over $600/year)

Depreciation on equipment and tools (some of these you can expense off directly on the depreciation form) You'll need to have the date you placed each asset in service for the business and the amount you paid for it or it's value at the time you started using it for your business for every tangible asset you use in the business.

Repairs to tools or equipment

Licenses and fees

Legal and professional fees (anybody who you pay for services, like a private bookkeeper, lawyer, etc., for business)

Business taxes if you have them

Office equipment and supplies (computers used less than 100% for business require a log of time used for business and personal use and the depreciation is allocated by business percentage)

Supplies

Materials

Business percentage of cell phone bill

Rentals of tools, vehicles, scaffolding, machines, porta-potties or whatever else you need to rent through the year

Postage and Delivery

Travel expenses if you have to go out of town on business

Meals are limited deductions and are only if you are outside your regular metro area

Auto expenses are more detailed. First, you always want to use the standard mileage rate for the first year because if you go with actual expenses the first year you're locked into that every year thereafter for that vehicle.... but if you use the standard mileage rate for the first year, you can switch between actual expense and standard mileage for other years and go with whichever gives you the best deduction.

When you use the standard mileage rate, you can't take any of the actual expenses such as gas & oil, car tags and inspection, repairs, tires, depreciation, washing, etc. When you use actual expenses, you don't get any mileage deduction. For your records, you will need to keep track of the total miles put on the vehicle for the entire year, the amount of business miles -- which doesn't include commuting miles, and the amount of commuting miles for the year. You'll need written records of these miles. I used a calendar and jotted down every day's miles on that, then tallied them monthly and then yearly when I had my trash hauling business. The IRS considers the mileage from home to the first stop of the day and from the last stop of the day back home as commuting mileage. You'll need to have the date the vehicle was placed in service for the business, the amount you gave for it, and mileage records whether you're using the standard mileage deductions or actual expenses.

Keep your receipts for everything you pay out for the business. If it doesn't fit any of the above categories, that's okay because they can be listed under "Other expenses" on the Schedule C.

It's a wise choice if you "pinch off" about 10% of your profit and set it aside in a savings account for your self-employment taxes. You can let it sit through the year, and then at tax time next year, you'll have it to pay these taxes with. If you see that you're making enough profit that this 10% is over $1000, you may want to make some estimated tax payments through the year, in order to avoid any penalties from not having done so. I'm sorry but I don't remember the day each month, but I believe the months for these payments are April, June, September, and January. The 1040ES forms and instructions are available for download from the IRS web site: www.irs.gov.

Good luck with your contracting job!

Answer 2

You can deduct pretty much any expense that's reasonable and necessary for you to earn the income.

If you deduct mileage though, that covers your auto expenses, so you don't also get to take specific expenses associated with your vehicle or travel. Your other option is to take actual expenses INSTEAD OF taking mileage. You couldn't just deduct your car payments though, but you could depreciate your car. Usually mileage gives you a larger deduction than actual expenses for a vehicle used for both personal and business use - and it's certainly easier!

As to meals, you can only take them under particular allowable circumstances like if you're out of town overnight, or are entertaining customers, and even then can only take half of the amount paid.

Answer 3

Heres what you do:

Take your total business related miles from 2006 and multiply it by the IRS rate of .445. This is your mileage deduction which you can deduct. (Make sure you have a mileage log!)

Or,

Take your total miles put on your vehicle in 2006. Divide your total miles by your business miles to get your business use %.

Ok? Now,

You can not deduct your loan payments but you can deduct the depreciation on your vehicle. This gets tricky - you will need to fill out form 4562.

http://www.irs.gov/publications/p946/index.html

Then,

Itemize all repairs, gas, insurance, AAA, tires, misc., etc. vehicle expenses, depreciation and divide the total by your business percentage mentioned above. The greater of the 2 you can deduct. not both!!!

Time for a tax preparer - or good luck!

Answer 4

It depends what your business is. For example, as an actor I deduct video rentals, plays, books, etc.

Here's a list from the IRS:
http://www.irs.gov/taxtopics/tc500.html