Now that I work from home, I need to file my taxes differently and have the discipline to set aside that 36% of my weekly checks for quarterly payments. So a month or so ago, I went to HRBlock to seek some free advice on how to do my taxes. For me, this man told me I needed to file my normal 1040 PLUS a Schedule C for my “work from home” income and that was it. He neglected to tell me I needed to also file a 1040SE, which is the self employment tax form. Since I already finished and filed my taxes myself, I now have to file the 1040X. Just returning the overpayment in the refund from the IRS. No biggie.
I also get to deduct the following expenses from my tax bill. You may know many of these already, but there are TWO things that I don’t deduct, which I’ll share with you below.
Expenses that you can deduct:
* Gas and oil
* Parking and garage fees
* Depreciation and repairs
* License and registration fees
* Leasing payments and insurance
* Tolls
* Hotel bills
* Food
* Taxicab fares
* Phone calls
* Dry cleaning
* Medical
* Motor vehicle (mileage)
* Credit (in case of bad debts)
* Disaster
* Theft
* Office supplies and equipment purchases
* Office rent, property taxes
* and much more depending on your business
Two expenses that I don’t deduct:
I do not deduct my home office, even though I am legally allowed to. Here’s why. While I do work out of my home, I’ve heard that it’s been one of the biggest red flags on the rise over the years. So even though I use about 2% of my total house space, and can write off about that much from my mortgage payment.
I also don’t deduct my broadband internet expense either. My reason is simple… again, while I am entitled to do so legally, I prefer not to because of how I would have to justify the use. I mean, did I really use the Internet for business 100%, or 50%, or whatever.
How can you measure something that is always a variable, and always a point of question? In my opinion, you can’t, not on a practical level. I don’t write off my home office because there’s a bunch of things inside my home office that are personal items, so I guess I would have to deduct that as well. And if push came to shove about how much space I was actually using, I would be made to look like a fool in the end for trying to “deceive” the alphabet agency.
So you see, it’s not worth it to me. But the rest of the expenses are worth deducting. Working as an independent contractor -
These are the forms that I file for my taxes:
- 1040
- 540
- Schedule C
- Schedule SE
- Form 8829
- 1040ES < For the quarterly payments
Good thing that I went back to HRBlock to ask a few more questions about my quarterly payments, (actually this great lady went ahead and figured my payments for me), she caught that blunder I made by neglecting that schedule SE form.
If anyone has any questions about this, just ask and hopefully I can help you out or steer you in the right direction.
26. March 2009 at 3:52 pm
Hi, what happens if, as an independent contractor, i tried to get work but didn’t get any…business was slow last year….but I still have all these expenses for work related business. Can I carry them over? And what about SEP IRA — does that mean I can’t make any contribution for the 2008 year?
I do have income but it’s all dividends, etc. so I am sure I can’t offset expenses against those.
Any advice/thoughts?
28. March 2009 at 8:56 am
You report your 2008 self-employment expenses on your 2008 Schedule C – they cannot be carried over to a future year. Since you had no net profit from your self-employment in 2008, you cannot make any deductible contributions to your SEP in 2008. Any 2008 contributions that you did make need to be withdrawn before the due date of your 2008 tax return or they will be subject to a six percent excess contribution tax. Please know that I am no tax expert, this is just based on what I have learned… Remember that your taxes are your sole responsibility, I do not guarantee the accuracy of my response. (just my little disclaimer)
6. April 2009 at 4:27 pm
many thanks…i figured as much but i am no expert either…and my accountant is not very responsive so i thought i’d investigate. oh, well, no SEP contribution this year i guess!