Can computer cost be deducted from 1099-Misc Income? Doing my daughter's taxes. She received 1099-Misc income, 3K total for summer job where she used her own computer.

[WorshipsTaxGods]

Her job was doing coding.  1099-Misc received rather than customary W-2 that I'm familiar with.  Company did have her sign paperwork that set her up in contractor status, thus their avoidance of tax.  No comment from me on my feeling/opinion on this.  Seems tax will be owed unless avenues for offsetting income with expenses.

Separate question: What limitations are in play with my Turbo Tax Deluxe version given that Schedule C likely required.

[VolvoGirl · Accepted solution]

But if they have the CD/Download Desktop program they can use any version to enter self employment expenses.  All the Desktop programs have the same forms.  You just get more help in the higher versions.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax.  You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.

Enter it under…..
Federal Taxes Tab
Wages & Income
Choose Jump to Full List -or  I'll choose what I work on
Then scroll way down to Business Items
Business Income and Expenses - Click the Start or Update button

You need to report all your income even if you don't get a 1099Misc. 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 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.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 27.   The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 4 line 57.  The SE tax is in addition to your regular income tax on the net profit.

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

[KarenJ]

You can use the Deluxe version but only to claim Schedule C income.  If there are expenses you wish to claim against this income, you will need the self-employment version of TurboTax.

From the IRS

"To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary."

If audited, it would be your responsibility to show that this expense is both ordinary and necessary for your particular type of business.