I lost money on the deal. Do I have to report the gross earnings on my taxes?

Question

Okay this was a really frustrating experience for me. A few weeks ago, my friend talked me into doing a paid project. We were getting paid $200 for completing this one-day event project. We got paid with a check and were told that we would receive a 1099 form at the end of the year, claiming on it that we'd received $200, so that we would have to pay taxes on this amount.

Well the project ran past the time it was supposed to end, and as a result my car got towed. It costed $200 to get it out of the lot(not even speaking of the inconveniences stemming from that horrible experience). Plus, I had to leave work early to get my car, so I lost $90 in pay from doing that.

From my understanding, I worked as an independent contractor on that $200 project(hence the 1099), therefore I should be able to write off business-related expenses. In the end, the expenses(the car tow) costed MORE $ than the $200 I made. I do NOT want to pay taxes on money that I eseentially lost. Any tax advice?

By the way, my car was the necessary means of transportation to get remotely near the site of the project. So technically it is a business expense in the form of being "transportation to the job."

It wasn't towed by the police department or anything legal-related, but towed by a private company.

I figured that I wouldn't be able to deduct lost hours from work. But I do want to deduct the $200. It's bad enough that I did this stupid project, spent time away from my friends, was humiliated while at the project(part of it involved a skit where we had stupid embarrssing things done to us), and didn't make any money, but the LAST thing I'd want is to LOSE money by doing that stupid project, even if it's as little as $20-30. The point of the project was to be a much-needed $200. If it was volunteer, I woulda never signed up to do it. It's so angering.

Answer 1

You definitely will not be able to write off the $90 of unearned wages because you had to leave work early. As far as towing goes -- questionable, however you will be able to write off mileage expense, parking expense etc. for transportation to the job site. Having said all that, I think you will not need to do any of that, since most likely you will not get a 1099 form, most businesses will not generate a 1099 Misc if the amount paid is less than $600. The law only requires to generate the 1099 Misc form, if the amount exceeds $600. Also, considering the question you are asking and other input, I understand that your income is not that huge, so even if you pay any tax, we are talking about 20-30 dollars at most, if any. Just relax, and consider it cost of tuition, next time you consider a gig, think if it's worth it or watch where you park your car. I am not trying to be mean, I am actually saying be more careful.
Good luck.

Answer 2

Additional info to my answer to your other question on this - your car getting towed IS NOT deductible even though that's how you got to the jobsite. Other expenses of doing the job could be - but your car getting towed was a personal expense, not a reasonable and necessary expense of doing the job. Sorry - so yes, you will have to pay some tax on it. But you won't pay self-employment tax on it, just income tax, so at least it won't be much.

Answer 3

For this one, I'd use a professional tax preparer...You're going to have to report the income no matter what, but you may,possibly, maybe be able to write off some, but probably not all of the expenses.

Answer 4

Yes, you can write-off business related expenses.

But.......

1) The $90 in lost income from your job is not an expense. Lost Income is never deductible as you were never taxed on it.

2) Fines/fees from an illegal activity (such as parking or speeding) are not deductible.