Complaint charges as an independent contractor

[Ictmike]

I have a paper route as a side job and when a customer complains about the occasional missed delivery I get $3 deducted from my pay. Is there a way to write these complaint charges off as they can add up over the duration of a year.

[VolvoGirl]

Depends.  Do you report the full amount as income to start?  Is it included as income on your 1099Misc?

You can't deduct income you never received.  You will just have less income to be taxed on.  You take the loss by still deducting all your expenses but not your time or labor.  Unless you entered the full amount before the discount as income, then you can deduct the discount under Advertising or Misc Expense.

[Ictmike]

I started doing this back in February so I don't have a year end form yet. I get paid per successful paper delivery so my recent pay statement has me initially getting a credit  of $580.77 then they take out adjustments for access to the software for managing routes ($4.00), Bond ($4.04), and non-vehicle insurance ($2.89) at that point they make an adjustment for complaint charges. This most recent statement I did not dispute 5 complains to there is a ($15.00) adjustment which brings down my direct deposit to $554.84.

I need to go back and look at my past statements but I think I may currently have @$150 in complaint charges so far. At the end of the year it will only probably make a minor difference in taxes but I don't want to pay more than what I have to, especially since I don't get to see any of the money from complaint charges. I will probably classify it as Misc. Expense and if I find out that I can't do that just unclassify it. Thanks for your input!

[Critter]

You have 2 options on how to report this and depending on what is listed on the 1099 you get will determine which way you go ...

IF the 1099 has the GROSS listed then you will also report the GROSS amount and then deduct the expenses they withdraw on the Sch C to get you to the same NET they have on the statements.

BUT IF the 1099 has the net of fees ( most likely the case ) then you will only report the NET amount on your Sch C ... then you can also deduct any other expenses like vehicle costs. 

If you are new to being self employed and  acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button