A few questions about 1099 Forms and how much I will actually be able to write-off? (Very detailed question!)

Question

Please help! Warning: Very detailed question. Thanx in advance anyone that can help me.

I live in Ohio, and I'm a sub-contracted Landscaper/construction guy. I receive a personal check weekly, drive my truck at work, hauling things and dealing with customers.

I had lots of personal time off this year so I brought home about 11,000. First off how much will I owe on that? 15% would be 1650, is that right?

I drove about 6,000 WORK miles of 6600 (90.09% work) on my new truck I bought in Sept. I've spent about $1300 total on gas.

Do I get to write off 36 cents (if thats what the rate is?) for all 6000 work miles? That right there would be like $2000 and would that mean a return for me? Before I even start on the 90ish% of the 1300 in gas receipts? Sounds too good to be true.

That's the way people have been explaining it to me, but It can't be can it?

And new truck was bought for personal use but 90% of it's use is at my job. Can I write a % of payments/insurance too?

Answer 1

To correct what Steve said, if you use actual expenses the first year of use you must continue to use that method every year thereafter. If you use the Standard Mileage Rate the first year, then you are free to use whichever method you wish thereafter.
I think I just read in some of our study materials that the rate wend down to $0.445/mi this year. Could be wrong on that

Answer 2

The flat rate for mileage is 48.5 cents this year, so 6000 work miles would be expenses of $2910. You have a choice of taking that or actual expenses. If you choose actual expenses, you have to depreciate the cost of the truck, not just deduct the payments. You could take a percent of insurance and repairs though, equal to the percent your business miles are of your total miles. You don't take actual expenses AND the flat rate, you take one or the other. Assuming you take the flat rate, that would bring your income subject to tax down to 11,000 - 2910 or $8090. You won't be likely to owe any federal income tax on that, but would owe around $1143 for self-employment tax for social security and medicare.

You'll also have to file an Ohio return, and will probably owe some state income tax.

Answer 3

What no one mentioned is that you can deduct mileage from home to your first work place ONLY if you have a qualified home office.

To be qualified, the space you use for your home office must be used exclusively and regularly for business. If you don't have a home office, but have an office away from your home, the mileage from your home to your office is not deductible.

You must keep a log of the business use of your truck even if you use actual expenses. This is because you will use the % of business miles to actual miles to determine the business % of actual expenses to deduct.

I agree that you should use the standard mileage the first year so that you are free to use what ever method that gives you the greater deduction in future years.

Answer 4

I'm going to assume you are single. Your bottom line may be different if you have another filing status.

I would recommend that you do mileage on your truck. I know it is tempting to use actual expenses, but as pointed out correctly in another answer, you are stuck with actual expenses as long as you use that truck for business.

Gross income: $11,000
mileage deduction: $2,910

A substantial deduction that was missed by the other answers is that you can deduct the finance charges on your vehicle. So I'm going to assume to illustrate your return that your finance charges are $3,000. Since your business usage is 90.09%, you get to deduct another $2,702.

Next, if you purchased supplies or small tools, you can deduct that. If you purchased large equipment, you can deduct all or part of that. I'm going to estimate that you purchased $300 of miscellaneous.

So we have a net income of about $5,000. Your taxes on this amounts to about $700. You may get an Earned Income Credit of about $200. So taxes would be $500 with the example figures I have provided.

Answer 5

1. You are independent contractor (or self employed) and you will file schedule C (Form 1040). On this you will record your income and expenses. You can deduct all your business related expenses. For mileage, either you can deduct actual expenses or at standard mileage rate.

2. On you income on schedule C (after deducting expenses), you will pay 15.3% SE tax. For this you will file schedule SE (Form 1040).

3. Then you will pay your regular federal tax and state tax. For this your income from schedule C minus 1/2 of SE tax will be added to your other income, if any.
If you income in 2007 is only $11,000, then your federal tax for Single status is around $140. But you will get some Earned Income Credit, so your tax may be zero or you may get a small refund.

Answer 6

Just to supplement what Judy stated. If you decide to take the flat rate or actual expenses, you must stick with that method for the life of the truck or until you sell it.