Tax Advice

Discussion in 'Off-Topic' started by Brownout, Apr 13, 2014.

  1. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    First of all, I am aware of tax forums where I can get answers to these kinds of questions. But I also know there are business owners on here, and can probably nail my simple question. Last year I became an independent contractor, and I purchased some items explicitly for my work. One is a little trailer I use for out of town work. I already know I can take depreciation, but my question is more directed towards how I do that. Here is what I've figured out so far.

    I fill out form 4562 which describes the property and depreciation amounts. After that, I claim any deductions on schedule A under employee business expenses. I'm filing as an individual, not as a business ( sole proprietor, etc )

    If this sounds right, I can figure out how to fill out the forms. Just want to check the general approach.
     
  2. JoeJester

    AAC Fanatic!

    Apr 26, 2005
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    First off.... if you received a 1099 misc with box 7 (non employee compensation) you will be filing a scheule c likre all independent contractors.

    Lookimg for answers this late in the game is crazy.
     
  3. spinnaker

    AAC Fanatic!

    Oct 29, 2009
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    Wow you are a procrastinator! :)
    My advice, if you have your own business, is to seek the advice of a CPA but it is a little late for that now. ;)
     
  4. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Not sure how your opinion of my mental state is relevant. I simple need to know where to take the deduction. It's OK, I have 3 full days, I'll figure it out. I'm pretty sure I already know, just wanted a little validation.
     
  5. #12

    Expert

    Nov 30, 2010
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    You missed the first rule?
    How much did you make? Send it in. :D
     
  6. JoeJester

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    The f2106 is for employees expenses not reimbursed by the employer. Besides, if you use the 2106, your expenses would have to exceed 2.5 pct of your adjusted gross before it counts and then the schedule a must exceed the standard deduction.

    Irs pub 535 explains small business records.

    Every expense that is ordinary and necessary for your line of work is deductable. You can also fully depreciate some equipments under the section 179 rules.

    I'll be back after 6 pm central time to answer questions.

    Independent contractors are not employees.

    Registered Tax Return Preparer sends.

    ps. Everyone needs a hobby.
     
  7. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Sch A exceeds std ded

    I already depreciate property for my side-business using f4562 (unrelated to my question as a contractor, but I am familiar with depreciating assets used in business)

    From 4562 can by used to depreciate property used for business other than vehicles. From 2106 may be used to depreciate vehicles used for business, not sure about property other than vehicles.

    Total amounts from 4562, other than real estate, are entered as "Other Expenses" in sch A, and not Employee expenses, as I first thought. This per form4562 instructions.

    In other words, there are at least 3 ways to do this. Using f4562 seems most appropriate, since these are non-vehicle properties used for business, and I receive a W-2. Not going to argue if that make me an independent contractor or employee. It is just what it is.

    Think I got it. Let me know if something isn't right. I'll be working on this all day.
     
  8. Brownout

    Thread Starter Well-Known Member

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    I read many tax forums on the subject, but they don't tell you anything useful. That's because the contributors get paid to prepare taxes, and they don't want to help anyone not paying.
     
  9. JoeJester

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    Stay away from 2106 unless you are claiming expenses your employer didn't reimburse.

    As far as depreciation, especially with the new items, I'm assuming your doing the MACRS method.

    Even a "side" business is on Schedule C. In the IRS' eyes, business is business, whether vertical, horizontal, or at any angle. You should take every legal deduction associated with that "pursuit of income".

    Pub 334 is the guide for small business. You are a small business by federal standards ... gross receipts less than a few million.

    Of course, if you are claiming "hobby", then the expenses are on Schedule A ... up to the extent of the gross income.

    If you were sitting across from me, I'd have to know a lot about your business, to assist you getting the maximum refund to which you are legally entitled.

    I had a woman ask me last week if a boob job was deductible. I told her if she were a dancer, they could be classified as a stage prop. But then, they'd have to pass a test to ensure they weren't for self-gratification.
     
  10. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Done.

    Indeed, I am.

    My side business is rental property, which has its own form (sch. E)

    I'll take a look at it.

    Basically, I'm an engineering contractor. I work through an agency, which gives me a choice between W2 and 1098. So far, I've chosen W2, but I see certain advantages to being a 1098 contractor. This is why I do my own taxes, to make better decisions in the future.

    My deduction is for a 40' trailer that I use when working out of my tax zone. I've filled out the paperwork for depreciate it IAW MACRS rules. Spent the last two days reading about it.



    Thanks a lot for your input!
     
  11. JoeJester

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    If you go to 1099 ... and make a lot of money ... don't forget to file a 1040 ES, and pay estimated taxes quarterly.

    I've seen many who get the 1099 MISC and are shocked they owe their share of medicare and social security, as well as tax on the profits. I've also seen some who met the definition of employee, as opposed to independent contractor. There is a form they could have filed to have the IRS make a ruling in that matter.

    If you are unsure, I know that H&R does "second looks" to see if you did everything correctly ... and you'd get their standard guarantee if you did. If you didn't, they would advise you to file an amendment to set the record straight.
     
    loosewire likes this.
  12. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Great idea. I'll check into that.
     
  13. bance

    Member

    Aug 11, 2012
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    Avoid it at all costs.....:D
     
  14. loosewire

    AAC Fanatic!

    Apr 25, 2008
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    Good Info Joe ,I will keep this thread in mind as I try to do a Independent contractor

    deal. The first offer was repair 6-plasma T.V. a day ,they supply the parts and code

    to Samsung service diagrams. Do the repairs off site. I would like to find a South

    Florida member wanting to make some extra money. Ask #12, doing 6-repairs a day

    don't sound like much...until they start coming every day ,a tall order for two people.

    The same size screen ,but the models vary as production lines change. I put my tools

    in a roller cart went to town , a good first Impression. About the deductions ,they

    have a rule that smokers will at some point pay 50% more for Insurance.
     
  15. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Joe's advice was indeed good. I'm thinking he must be a tax professional. Each time I have a question, someone will say, "Ask your tax preparer..." Heck, you're talking to my tax preparer! Maybe next year, I'll turn them over to a professional. I just hate it that something personal is too complicated for an individual to complete on his own.
     
  16. JoeJester

    AAC Fanatic!

    Apr 26, 2005
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    Brownout,

    From Jan - Apr 15th I prepare taxes for HR Block. I started doing it to keep my one brain cell in proper orbit and kill some cabin fever when I was in Michigan.

    Of course I have training hours prior to Oct, and I typically take about twice what I'm required to do. The IRS, till Loving-v-IRS, wanted paid tax preparers to have a minimum of 12 hours on tax topics, 3 hours on ethics, every year. They also wanted all paid preparers to take a test ... Loving -v- IRS stopped that, which I find was humorous because ... VITA (Volunteer Income Tax Assistance) preparers are required to pass a test in order to volunteer to prepare taxes for low income and elderly. Loving, a paid tax preparer, didn't want to be burdened by taking a test, and have continuing education units on taxes.



    Since I took this "cabin fever" job, I have about 386 hours of tax continuing education.

    As far as the complication ... it's guided by politicians with an agenda ... enforced by bureaucrats. And like the rest of humanity, some are helpful, some aren't.
     
  17. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Some of it does make sense. For example, I read about allowable tax deductions for "passive" and "non-passive" activities ( I read for about 3 days straight ) It is complicated, but the purpose for these categories ( I surmised ) is to limit deductions for activities that are undertaken only to lower an individual's taxes ( tax shelters ). Sort'a makes sense, but it's the lawyer language that makes it hard to unwind.

    I stopped reading what I got to limits on non-passive activities. I just couldn't take it anymore. Hope I didn't miss something important.

    Thanks again, Joe, for the help.
     
  18. loosewire

    AAC Fanatic!

    Apr 25, 2008
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    How much has turbo tax on internet changed the business.
     
  19. JoeJester

    AAC Fanatic!

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    TurboTax reported recently that their product is up 6.5% over last year.

    Software has changed the business. There are some who "like" having someone else's signature on their tax return. Both methods are susceptible to fraudulent activities.

    I've recently reviewed a return where the preparer, who charged $1600, didn't take a legitimate deduction, but took two deductions the taxpayer wasn't suppose to take, without the taxpayer's knowledge. Doing that type of return, I would have charged about $500. The other thing I noticed was the paid preparer section on the 1040 wasn't filled out. Ghost Writers, they are called. I recommended to them to set the record straight, but they declined.

    When people state they want to do taxes, I recommend to them to take the course and they could be sitting in my office doing them.

    Turbo Tax isn't the only tax preparation software out there.

    You can visit the IRS site and see all the competing efile software vendors.

    One thing I would recommend to some is the "Best of Both" an inexpensive way to file your taxes and have your work reviewed prior to submission.

    Of course the reviewer will ask you for documentation to confirm you put the square peg in the square hole, hypothetically speaking.

    Every year the taxpayer advocate reports to congress. Every year there are unclaimed tax refunds.
     
  20. Brownout

    Thread Starter Well-Known Member

    Jan 10, 2012
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    Yea Joe!

    Looks like we got it right. I got my refund, and didn't go to jail :)
     
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