You are definitely a freelancer, a contractor, or own your own business when you are asked to file a 1099 form. A 1099 form is a form assigned by the IRS to keep track of the earnings of someone like you who gets paid in full without any deductions on the paycheck. You are an employee yet without the benefits of a full time employee, thus the need for you to personally file this form once a year. You are a business owner who reports to no one and instead hires people to work for you.
The question is this. Once you have the 1099 form, how then can you determine how much tax you should pay and how much should be considered write offs?
Here are ways to find write offs for this particular form:
- Make sure you are really working on a freelance basis. Aside from receiving a regular pay check for an ongoing project, do you have a contract that says you are a freelance agent or a contractor on retainer? If it says so in black and white, keep this contract for presentation when you apply for write offs using a 1099 form.
- Organize your expenses in a file. Every single receipt that you have with you should be kept as proof to support your overhead as a freelance agent or a contractor on retainer. This is the single most important act that you must do so come filing time, you have proof to back up your claims. In addition, your receipts should also be recorded chronology for easy reference. Make notes if you have to explain what the expense was for.
- Make sure your expenses have weight in terms of directly impacting your freelance work. For example, if you provide work as a carpenter and you regularly upgrade your tools. You can use consider this expense as a tax write off because you need your tools to perform your job. Another example would be designing websites where you need your computer and other equipment and utilities like Internet connection, telephone, and electricity to support the performance of your job. These could be written off in your 1099 form.
- Don’t neglect your indirect expenses as well. Repair, maintenance, office equipment like your computer table and chair, table lamp, and anything else that prompted you to shell out money so that your home office can run smoothly enabling you to perform your job should also be included in the 1099 form under indirect expenses.
- Review the nature of your work in terms of leaving the house to meet your clients or make deliveries. Do you use your car and purchase gas to regularly meet with clients as required by your job and contract? Do you take the bus or can and spend for fare? Do you make deliveries because of the very nature of your freelance work or your business? The car that you use could be include in the tax write off but you might be a little hard pressed to defend taking a bus or cab to meet with clients as a possible tax write off.
- Work the number of hours required so you can file the 1099 form with minimal hassle. If you work only a couple of hours a day, you might find it a tad hard to convince the IRS that you are worth the tax write offs. This is why you have to work the hours required as stipulated on the 1099 form.
Before you do this type of filing, you might want to get legal help to sift through the clauses provided in a 1099 form. It’s in your best interest to know what you need to know which only legal help can provide.