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I am a financial advisor. I receive a w2 for most of my income and a 1099 for about 10%. Do I allocate my business expenses pro-rata or put all under the w2 or 1099?

Forum|Forum|7 years ago
June 1, 2019
2 replies
32 views

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Best answer by AnnaB

If the business expenses are for the same job, you should allocate them in accordance with how your income is reported. The income on the Form 1099-MISC would allow the expenses to be business expenses which would lower your self-employment tax and your income on an above-the-line basis. The Form W-2 expenses should be considered job-related expenses which will be reduced by 2% of your adjusted gross income (along with other miscellaneous expenses). Job-related expenses only benefit your tax return if your total itemized deductions exceed the standard deduction.

AnnaBAnswer

Level 7

If the business expenses are for the same job, you should allocate them in accordance with how your income is reported. The income on the Form 1099-MISC would allow the expenses to be business expenses which would lower your self-employment tax and your income on an above-the-line basis. The Form W-2 expenses should be considered job-related expenses which will be reduced by 2% of your adjusted gross income (along with other miscellaneous expenses). Job-related expenses only benefit your tax return if your total itemized deductions exceed the standard deduction.

Level 15

You report your expenses based on which activity the expenses were for. If used for both, e.g. home office, you allocate by time. If allocation by time is not possible, then it would be OK to allocate by % of gross income.

Starting in 2018, job expenses for W-2 income are no longer deductible.