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post #1 of 28 (permalink) Old 02-03-2009, 06:10 PM Thread Starter
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Quick tax question, need a pro.

I just finished doing my taxes and I think Turbotax got something wrong.

Here's my situation: I work 3 jobs, two of them give me a W-2 and one a 1099-MISC. I have legitimate business deductions for the job with the 1099MISC (about 22% of the income), but Turbotax says that since the deductions are lower than 2% of my OVERALL (all 3 jobs combined and wife's income) income I don't get to deduct the expenses.

Is this right? I should be able to deduct the expenses from the money I made on the 1099-MISC, not from my overall income. That's my opinion, but what is the Federal Law?

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post #2 of 28 (permalink) Old 02-03-2009, 06:32 PM
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Sounds right.

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post #3 of 28 (permalink) Old 02-03-2009, 07:00 PM
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My opinion only:

In your situation, your income 'pools'. THEN your deductions apply... If your business was its own separate entity (and you filed it as such) and not tied to your personal income, legally, then you'd be right.

edit: I could have misunderstood the original situation w/ the 1099 (your own business versus just a contractor for someone else), but the fact that your income all pools together, THEN deductions come off still stands...

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post #4 of 28 (permalink) Old 02-03-2009, 07:15 PM
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turbo tax has never done me wrong. I had an issue where I thought I was confused last year, went to H&R Block and spent $300 to lean over the desk to tell the lady what to put in what box, I paid $300 to tell someone what keys to hit, really pissed me off, never again am I doing that.

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post #5 of 28 (permalink) Old 02-03-2009, 10:25 PM
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Not an expert but I agree with Arch. They want 2% of gross income, as in everything, not just the one job.

Try doing your taxes by hand some time. No joke—it even works if you do them through TurboTax and then print the forms out and try to get the same results by going through on your own. It's not a bad way to get a feel for what is going on.

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post #6 of 28 (permalink) Old 02-04-2009, 12:03 AM
 
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I concur. sorry, as your situation stands, if all the income stays combined and you're under 2% you're sol.
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post #7 of 28 (permalink) Old 02-04-2009, 12:33 AM
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You could always try to re-figure your taxes by you each filing separately... and see if it makes any overall dollar difference versus filing married-jointly.

You are allowed to file either way, so pick the one most advantageous to you... just don't both claim the same single things as deductions if you both file separate returns. ie: Both claiming the same deduction to GoodWill, for example.

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post #8 of 28 (permalink) Old 02-04-2009, 02:24 AM
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If you're receiving a 1099, chances are you can make the easy/fair/legal/correct argument that this activity rises to the level of a business; no seperate returns or entities impact the substance of what's going on here. It all depends on your specific fact pattern but chances are the 1099 income and all the corresponding expenses should be going on schedule C. I'm guessing you have your 1099 income coming through as other income on page 1 and your expenses coming through as tier 2 itemized deudctions subject to the 2% floor on schedule A...this would be wrong in most cases.

I'm feeling generous....send me a PM with a phone number you want me to call you at and I'll give you a call. I'm a CPA, have an MST, and I'm a tax manager at a public accounting firm......FWIW.

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post #9 of 28 (permalink) Old 02-04-2009, 07:32 AM Thread Starter
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Quote:
Originally Posted by DefyInertia View Post
If you're receiving a 1099, chances are you can make the easy/fair/legal/correct argument that this activity rises to the level of a business; no seperate returns or entities impact the substance of what's going on here. It all depends on your specific fact pattern but chances are the 1099 income and all the corresponding expenses should be going on schedule C. I'm guessing you have your 1099 income coming through as other income on page 1 and your expenses coming through as tier 2 itemized deudctions subject to the 2% floor on schedule A...this would be wrong in most cases.

I'm feeling generous....send me a PM with a phone number you want me to call you at and I'll give you a call. I'm a CPA, have an MST, and I'm a tax manager at a public accounting firm......FWIW.


Yes, you are correct. Turbotax has my 1099 as income on page 1 and then sets up a schedule C to itemize my deductions. So this may be wrong?

PM sent.

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post #10 of 28 (permalink) Old 02-04-2009, 07:37 AM Thread Starter
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Arch and others, thanks for the advice. We'll see what DF has to say.

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post #11 of 28 (permalink) Old 02-04-2009, 07:50 AM
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The major difference here is whether your 1099 is considered a "business" or not by the IRS definition. If it is not then you will pool your income and expenses together. If it is then you will need Schedule C as DI said to itemize your "business" profit or loss separately then transfer that to personal income or loss.

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post #12 of 28 (permalink) Old 02-04-2009, 07:55 AM Thread Starter
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Interesting. Why wouldn't it be considered a business? The 1099 is from the work I did as an assistant DJ. I have legitimate expenses from it.

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post #13 of 28 (permalink) Old 02-04-2009, 08:01 AM
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Quote:
Originally Posted by Chills View Post
Interesting. Why wouldn't it be considered a business? The 1099 is from the work I did as an assistant DJ. I have legitimate expenses from it.
Not saying it wouldn't. Just make sure. Sort of like when people claim their racing as a "business" and write off thousands of dollars off on active personal income having no business plan and intent of success. Imagine someone like Uncle Sam sitting in a chair and trying to believe you are attempting to make an honest business out of this. If it is believable you should have no problem, which it sounds like a DJ could. They have guidelines and stuff to give you an idea, like yellow page ads, business cards, normal hours, reasonable expectation of success, etc.

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post #14 of 28 (permalink) Old 02-04-2009, 08:10 AM
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Keep in mind that a normal person does not normally file separate returns for each job they work in the tax year... they pool their income and file 1 return...

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post #15 of 28 (permalink) Old 02-04-2009, 08:37 AM Thread Starter
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Quote:
Originally Posted by Chicago Performance View Post
Not saying it wouldn't. Just make sure. Sort of like when people claim their racing as a "business" and write off thousands of dollars off on active personal income having no business plan and intent of success. Imagine someone like Uncle Sam sitting in a chair and trying to believe you are attempting to make an honest business out of this. If it is believable you should have no problem, which it sounds like a DJ could. They have guidelines and stuff to give you an idea, like yellow page ads, business cards, normal hours, reasonable expectation of success, etc.
It is the real deal. I'm not trying to claim some wacked-out deductions either. Just the fuel cost for driving to and from the gigs and the clothes I had to buy to work them.

Quote:
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Keep in mind that a normal person does not normally file separate returns for each job they work in the tax year... they pool their income and file 1 return...
Chills was not aware of this rule when he started working gigs last year. I'm going to take it into consideration this year, though.

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post #16 of 28 (permalink) Old 02-04-2009, 09:00 AM
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...just be aware that you're upping your chances for an audit when you do...

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post #17 of 28 (permalink) Old 02-04-2009, 09:30 AM Thread Starter
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Quote:
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...just be aware that you're upping your chances for an audit when you do...
When I do what? Everything I'm doing is perfectly legal. I'm just saying that if I make purchases solely for the DJ thing this year I'll keep in mind that the deductions may come off my total income and not just from the 1099 income.

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post #18 of 28 (permalink) Old 02-04-2009, 09:35 AM
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Quote:
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When I do what? Everything I'm doing is perfectly legal. I'm just saying that if I make purchases solely for the DJ thing this year I'll keep in mind that the deductions may come off my total income and not just from the 1099 income.
Oh.. I thought you were going to incorporate yourself for each job you work... and file separately for each one...

my misunderstanding...

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post #19 of 28 (permalink) Old 02-04-2009, 09:42 AM Thread Starter
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Quote:
Originally Posted by Arch View Post
Oh.. I thought you were going to incorporate yourself for each job you work... and file separately for each one...

my misunderstanding...
LOL, nope. Too much work.

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post #20 of 28 (permalink) Old 02-04-2009, 09:50 AM
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Hmmmmm....Im no tax expert but I can see where it makes sense. If it were allowed at that level, it could be severely abused.
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post #21 of 28 (permalink) Old 02-04-2009, 10:06 AM
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http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

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post #22 of 28 (permalink) Old 02-04-2009, 10:17 AM Thread Starter
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Nate, I tried scrolling through that PDF and now my head hurts.

I'm guessing it says that I can't deduct the expenses from just the 1099 income, that it has to come out of my entire income.

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post #23 of 28 (permalink) Old 02-04-2009, 10:18 AM
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Though I'm not an accountant, I do play one on TV and I did stay at a Holiday Inn Express last night. From what I vaguely remember from 7 years of accounting school and a 4 year degree, there is a difference between a "business" and a "hobby". Hobby income allows you to deduct expenses up to your income, and can't offset active income. A bonafied business can deduct losses for up to 5 years as a general rule. Seek a pro if the numbers add up to something worthwhile. Don't screw it up either, the penalties and interest from a $1000 mistake will be about $1.7 million dollars after they audit you for the last 7 years of tax returns. Jokers.

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post #24 of 28 (permalink) Old 02-04-2009, 12:19 PM
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Quote:
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Nate, I tried scrolling through that PDF and now my head hurts.

I'm guessing it says that I can't deduct the expenses from just the 1099 income, that it has to come out of my entire income.
it says just the opposite. if you're going to do your own taxes and continue on with this business you should read every word of the schedule C instructions (ok, you can skip certain parts). Otherwise, pay a professional for god's sake. There are lot of reasonably priced well qualified single CPA shops in Chicagoland.

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post #25 of 28 (permalink) Old 02-04-2009, 12:43 PM
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post #26 of 28 (permalink) Old 02-04-2009, 12:49 PM Thread Starter
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Quote:
Originally Posted by DefyInertia View Post
it says just the opposite. if you're going to do your own taxes and continue on with this business you should read every word of the schedule C instructions (ok, you can skip certain parts). Otherwise, pay a professional for god's sake. There are lot of reasonably priced well qualified single CPA shops in Chicagoland.

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No kidding? Cool, thanks Nate!

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post #27 of 28 (permalink) Old 02-04-2009, 12:50 PM Thread Starter
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Quote:
Originally Posted by Arch View Post
If you want one in Naperville, PM me...
PM sent.

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post #28 of 28 (permalink) Old 02-04-2009, 12:57 PM
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