You have embarked on the journey of self employment. The time flew by. You meant to keep track of all your income and deductions but you just did not know where to start. Now, it’s tax time and you are worried about the 1099’s that are starting to appear in your mailbox.
Stop worrying. It is not as hard as it looks.
With your Federal Income Tax Form 1040 you are going to need to file a Schedule C – Profit and Loss from a Business.
First, you will want to gather your bank statement, credit card statements and cash receipts that are related to the business. Using excel you can make lists of each of the categories I am about to discuss here. These totals will be places on the various sections on the tax form.
Next, gather all your 1099s and statement of accounts from clients/companies you received money from but did not receive a 1099 from. All income has to be reported.
The actual instructions on how to enter a 1099 will vary according to what tax program you are using. There will be a section, usually “Income” where you enter W-2’s. A 1099 will work in the same manner. The tax program should have a special section to enter the 1099. You will fill in all the information.
It will then take you to the Schedule C and it will go line by line. You will fill in these blanks from the totals you calculated on your excel sheet.
So what exactly can you deduct?
- Advertising expense, including business cards
- Auto expense if you use your car for your business
- Commissions and fees you pay to others for work
- Depreciation of office equipment
- Self employment medical insurance coverage
- Business insurance such as fire, theft, flood or other casualty.
- Legal and professional fees
- Office expense
- Rent or lease of office space
- Business related meals, entertainment and travel
Keeping good records will help you keep track of these deductible expenses. Making tax time much less stressful and who doesn’t like that idea?
Chrystal Mahan – Selfemployedwriter.com thetaxqueen.com