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RedhairMac
Level 2

Write-offs

Will I be able to write off expenses against the income reported on 1099-K?

4 Replies
johnw1000
Employee Tax Expert

Write-offs

Hello

I hope your day is going well.   I see you are wondering if you can write off expenses against the income reported on your 1099-K.  The short answer is yes assuming they meet the IRS definition of ordinary and necessary costs incurred to operate your business.   While there may be others, here are some potential 1099-K deductions:

  • Web hosting fees: If you have to pay an annual web hosting fee for your online shop on the web, you can deduct this.
  • Credit card or merchant processing fees: If you pay the credit card company processing fees, these can be deducted.
  • Internet access: Internet access for your established business entity can be deducted.
  • Advertising costs: If there’s a cost associated with marketing your business, you can deduct this to reduce your taxable income.
  • Home office: The small business home office deduction applies to small business owners who use part of their home exclusively and regularly for trade or business purposes. Learn more about the home office deduction.

Here is a link that may be useful for future reference. 

https://turbotax.intuit.com/tax-tips/irs-tax-forms/form-1099-k-decoded-for-the-self-employed/L6xHSTX... - this explains the basics of the 1099-k.  

Hope you have a great day and let us know if you have any other questions.

 

John 

 

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RedhairMac
Level 2

Write-offs

I’m not a business….I paint portraits and sell them.  My expenses would be art supplies.  

VolvoGirl
Level 15

Write-offs

Yes you are the owner of your own self employment business.  You are in business for yourself.  Use your own info.  The people or company that pays you is your customer or client.  You need to fill out schedule C for self employment business income.  You are considered to have your own business for it.  YOU are the business.

 

Unless you set it up as a corporation or partnership or LLC S corp you file it as self employment.

 

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  Here's a Schedule C  https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

 

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version or use any of the Desktop CD/Download programs.

 

How to enter self employment income

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

 

For the future, you should use a program like Quicken or QuickBooks to track your income and expenses.  There is a QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed  return....

http://quickbooks.intuit.com/self-employed

 

You will need to keep good records.  You may get a 1099NEC at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small and if you don't get the 1099NEC.

 

You use your own records.  You are considered self employed and have to fill out a schedule C for business income.   You use your own name, address and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all income is At Risk.   

 

After it asks if you received any 1099Misc or 1099NEC it will ask if you had any income not reported on a 1099Misc. You should be keeping your own records.  Just go through the interview and answer the questions.   Then you will enter your expenses.

 

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% 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.  

 

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  The SE tax is in addition to your regular income tax on the net profit.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 15 which flows to 1040 line 10.  Turbo Tax automatically calculates the SE Tax and Adjustment.

 

Here is some IRS reading material……

 

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

 

Pulication 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

johnw1000
Employee Tax Expert

Write-offs

Hello again,

Yes they would be considered business expenses but you would only be able to claim the portion of the supplies that are directly used for the portraits that you sell and receive income from.  Any supplies used for other paintings, such as ones for family and friends as gifts, would be considered personal and you could not claim those supplies.  For example, say you used those supplies for 10 portraits.  7 portraits you sold and 3 you did for friends and gave to them as gifts.  You could claim 70% of the supply cost as expenses.  

Hope this helps.

John

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