Almost all the elements you need to do business can be amortized. Items such as a computer, camera, printer, or other office machines used at work are tax deductible (with special depreciation choices). Even the smallest objects like paper, pens and ink are a smoke closet. It is not common knowledge that books, magazines and newspapers related to your business are also deductible. Even greeting cards sent to customers can be a deduction. Supplies and materials definitely rank among our top depreciation for independent contractors. For more information on required and authorized expenditures, see the IRS guidelines for the form in Appendix C. The best bet is to find a tax advisor who specializes in self-employment tax to help you maximize all of these deductions and keep as much of your income as possible. Travel is another category that gets a lot of scrutiny, but it`s still a great way to keep more of your money next year. Hotels, airfares and 50% of meals can be amortized for business trips. You can even extend your trip for pure pleasure, as long as the number of days you spend on business is longer than the number spent just for pleasure. Local travel continues to be discussed under car costs.
Keep in mind that trips and deductions related to your vehicle are items that can be verified or verified by the IRS – so it may be helpful to track your trip on your calendar and use a mileage calculator app (and take a screenshot of the calculation for your records) to support tax deductions, Like what. Employees who believe they have been wrongly classified as independent contractors by an employer can use Medicare Form 8919, Unpaid Social Security and Payroll Tax PDF to determine and report the employee`s share of unpaid Social Security and Medicare taxes due on their compensation. In 2018, the standard tax rate for the self-employed is 15.3% (while a standard employee would pay 7.65% and their employer would also pay 7.65%). And an additional Medicare tax of 0.9% is applied to the following: For self-employed meal deductions, you can deduct 50% of all meals with customers specifically related to the company. For business lunches during the trip, you can either deduct the actual cost of your meals (again, 50% deduction) or use the standard meal allowance set by the General Services Administration. Salaries paid to independent contractors can be deducted from your taxable income. For tax purposes, you must provide these individuals with IRS Form 1099-MISC and the IRS with Form 1096 to indicate how much you paid them. Of course, you should consult with your tax and accounting experts to determine exactly which depreciation is legal and what procedures and forms to use. Even if you don`t take advantage of the home office deduction, you can deduct the cost of a phone you use for work, fax, and internet expenses. However, you want to make sure that you only claim expenses that are directly related to your 1099 contract work. So, if you only have one phone, you usually take the estimated percentage of time you spend using the phone for work.
However, if you have a second phone line that you use exclusively for business, you can deduct 100% of that phone bill. The same rule applies to your Internet bill. Do you have employees and offer them health insurance, liability, educational assistance or other benefits? The costs of providing these benefits are tax deductible. But be sure to deduct your own health insurance and medical expenses on your individual form 1040. Question: I retired in early 2016 and then worked part-time for my former company in an advisory capacity. I received a few thousand dollars as an independent contractor. What tax forms do I need to file and what can I deduct? Independent contractor status can apply regardless of the structure of your business. You may be considered an independent contractor if you operate as a sole proprietor, form a limited liability company or ONE LLC, or adopt a business structure.
As long as you are not classified as an employee, you can be considered an independent contractor. Over the years, lawmakers have written many lines in tax legislation to mitigate the shock of the additional costs that self-employed taxpayers have to bear in their business activities. The Tax Cuts and Jobs Act (TCJA), which came into effect starting with the 2018 tax year, made several changes to tax deductions for the self-employed. Many of these changes are temporary and are expected to expire in 2025, but others are permanent. The main characteristic of an independent contractor is to maintain control over how the work for which he is paid is performed. With this policy in mind, there are a variety of careers that offer the opportunity to work as an independent contractor, such as: If you have a reasonable basis for not treating an employee as an employee, you may be exempt from having to pay labor taxes for that employee. To obtain this relief, you must file all required federal information statements on a basis consistent with your employee`s salary. You (or your predecessor) must not have treated an employee who held a position substantially similar to that of an employee for periods beginning after 1977. See 1976, Section 530 Employment Tax Relief Requirements PDF for more information.
The good news for you as an independent contractor is that you can deduct many of your business expenses, such as the cost of a computer, printer, and other equipment you use in your work, as well as the cost of work-related phone calls and mailings, office supplies, duplication, advertising and business travel. .
