I NEED HELP ON SCHEDULE C FOR INCOME TAXES. MY HUSBAND WORKED AS GENERAL LABOR FOR A SMALL CO. THIS YEAR. HE GOT A 1099 MISC FOR STATING HIS INCOE, IN THE NONEMPLOYEE COMPENSATION BOX. MY ACCOUNTANT TELLS ME THAT BECAUSE OF THIS WE HAVE TO FILE A SCHEDULE C. I HAVE ROUNDED UP ALL THE DEDUCTIONS THAT I CAN POSSIBLY THINK OF. MAYBE SOMEONE MIGHT JOG MY BRAIN AS TO SOMETHING I'VE LEFT OFF. ANY HELP IS WELCOME. ALL WORD OF WISDOM WILL BE ACCEPTED.

-- loretta in iowa park,tx (johnray@wf.net), March 27, 2002

Answers

I've been a self-employed computer consultant for about 5 years now. Started off as a 1099 MISC, had a corp (Huge mistake for a one-man show!) and now am part owner of an LLC. Of course, let me qualify all of this by saying you should check with your accountant first. These are things my accountant has pointed out to me over the past 5 years... Don't forget mileage to and from job sites, tools, special equipment and uniforms (boots, overshoes, etc.) that needed to be purchased for this job, magazines or books that hubby used to gain any knowledge about his job. You could get some of your cell phone bills back by determining what percentage was business and what was personal (if you have one). Don't worry too much about nailing down every phone call and determining a charge. Just be fair and give your best estimate. If you spent allot of time on your home phone for business, that might be something as well. My accountant once told me to put down ALL mileage. If I went to the grocery and looked at a computer magazine, it counted as a business trip. Same for food. If I went somewhere and had lunch at Taco Bell and talked business with somebody there, keep the receipt, write down who I was with and the reason for the discussion. My personal opinion is that if I don't have a receipt for something, it wasn't purchased. Just keeps me out of trouble. Some people are gutsy enough to just throw down deductions without the receipts. I would think that would spell trouble if you were audited. Hope this helped!

-- Campfool - So. IN (campfool@yahoo.com), March 27, 2002.

Loretta,

First question. Was your husband really self-employed or is the firm he worked for just not wanting to pay half of his social security tax and file quarterly reports of his witholding taxes with the IRS??? If he was doing general labor he probably was an employee, not self employed, unless he gave bids etc. on his labor and did the work when HE wanted to, not when the company told him to do it. (Just check the rules for 1099, they really don't cover too many things)

I prepared taxes for 5 years and this sort of thing really used to bother me. Some of the people were told that they were being paid in cash, but at the end of the year a 1099 misc. would show up. (I realize that it is not legal to pay someone in cash). Paying both halves of the social security tax is a bear to say the least when you are not expecting it.

Ask your accountant to explain the rules of self employment to you, and if you are not really self-employed ask him what to do. (It will involve reporting the company he worked for to the IRS, but will probably save you money) You will have to make the choice. Good luck.

-- Bob in WI (bjwick@hotmail.com), March 27, 2002.

Loretta, at the IRS website (and your accountant should have this too) there is a list of like 20 questions that help determine whether or not your husband is an independent contractor.

Have him look at those questions--he might actually be an employee.

-- GT (nospam@nospam.com), March 27, 2002.

Bob, you can always pay someone in cash (it says "legal tender for all debts, public and private" on the bills), it's not reporting the income that is illegal....;)

-- GT (nospam@nospam.com), March 27, 2002.

i think if the person who paid your husband told him what time he had to be at work then he was not self employed, he was hired by the person to do the job and should have been on the company payroll

-- js (schlicker54@aol.com), March 27, 2002.

GT,

If you think our money is LEGAL (or worth anything) I have something that I would like to sell you. It's this bridge in New York. Anyway that is a different argument and I don't want to touch that today.

Technically, paying in cash is a conspiracy to defraud the federal government, a federal (as in Leavenworth) crime.

Loretta,

I would be amazed if your husband was legally self-employed. Most people who receive 1099 misc are surprised when they receive them. Make sure your accountant really checks this out well for you. If your husband was an employee it will save half of the social security tax plus the cost of filing the Schedule C. Make sure he is not just trying to up his fees by having you do another form, rather than finding the solution to your problem. There is a solution, but no one will do it for you. You must get the ball rolling. Contact the IRS yourself and ask them what to do about it if nothing else.

If you want more information feel free to e-mail me personally. My e- mail address here is real.

-- Bob in WI (bjwick@hotmail.com), March 27, 2002.

Turbo Tax .com www.turbotax.com all you need to do is answer the questions and they fill it out for you, I think I paid 20 dollars for it. saved me alot of time trying to figure it all out. They even got me money back on my state tax and fed too, that hasnt hapend in a long time. You only pay if you print it, I just copied the info first then decided to pay and let them do the rest. GOOD LUCK

-- Sue in PA (suelpn30@hotmail.com), March 27, 2002.

Bob, what I was trying to say is that as long as you have a receipt that the money was paid and received, whether you give them a check or cash does not matter.

The problem is that the company was showing the payments as a cost of doing business (hence the receipt), and the person getting paid did not want to report the cash as income. Tips are often cash, for example.

That's what I meant.

-- GT (nospam@nospam.com), March 27, 2002.

Deductions will depend on what kind of company and what kind of labor he did. If a plumber, deductions will be different from a brick layer or mechanic. E-mail me for more info.

-- Robin in East Texas (Southpawrobin1@aol.com), March 28, 2002.

Cchances are your husband was not a self employed contractor but was in fact an employee. To be a self employed contractor, the employer can not name the hours that are worked, can only give general outlines of the projects they want worked on, and your husband would not have to clock in or give them a weekly record of his time. They are entitled to a list of the time he worked at the end of the project he's working on or when he submits a bill for partial completion of the project. If this wasn't the way your husband worked, contact the state department of labor and have an investigation done to the employer. They will owe their half of the SSI and any workers compensation they may not have paid. In my 35 years in the Human Resource field, I've never seen someone who worked as a general laborer who qualified as an independent contractor.

-- Paul (treewizard@buffalo.com), March 28, 2002.

I don't understand GT's replies - normally a person with good advise around here.

Otherwise, as people are telling you, there probably was an effort to make taxes/ record keeping easier for the company here. You need to decide if the company was good to your family, offers you future employment, or offered your husband a better pay for accepting more taxes at the end of the year....

While there is a good chance your husband wasn't really 'self-employed' in this case, as long as all income gets reported, you pay all the taxes owed, and your family is happy with the wages recieved, there is no big foul here, no horrible fraud. The goal is often to avoid some massive paperwork, and shift social security taxes, from the company onto the employee by using the 1099 & claiming the worker is a contractor.

You need to decide if that was understood in the begining, and what kind of waves you want to make about it now, and what the future relationship between this company & your husband will be.

It sounds from your message as if this is fine with you, and you are just looking for deductions to logically claim. So, all the folks wanting to hold the company over the flames can calm down...

Your accountant should be suggesting deductions, mine does! Find a new accountant next year... Anyhow, some travel expenses, any tools your husband owns that were used in his job, any trade journals or publications relating to the job, and work clothes, possibly meals altho not likely any more, any educational courses that would apply. If he needed a special vehicle part of it's costs, if he kept records of his work on computer part of the computer costs, if he did real research on the internet your ISP fees can be deducted, a cell phone if it was needed for the job - and so on. Naturally any raw materials he bought that were used on the job. Basically anything that your husband purchased or used in completing the task he was paid to do can be deducted as a business expense.

If your husband has very little to deduct here, it would mean that he really wasn't self employeed. And I am not in any way suggesting that you defraud the IRS - you asked what deductions could apply for a general contractor deduction. I gave a list of general deductions, but clearly only those that your husband actually purchased for use on the job will apply. This is where your accountand comes in, he should be suggesting that list to you without any prompting from you. I would look for a better one if your husband continues to get contract jobs.

--->Paul

-- paul (ramblerplm@hotmail.com), March 28, 2002.

Paul, I was originally responding to Bob's comment that paying in cash is illegal. I think the misunderstanding might have come from some people's definition that "paying cash" always means "paying under the table" (the person receiving not reporting the money received as income).

"Paying cash" to me (and other people), means simply paying a person in cash as opposed to paying by check or a credit card. Check or credit card automatically gives the person paying a receipt, with cash, you need to get from the person you paid the cash to, for your records so you can deduct it as a business expense.

Does this help?

-- GT (nospam@nospam.com), March 28, 2002.

Meant to say that you need to get a receipt from the person you're paying the cash to, so you have it for your records as the employer even if you only hired them for a one-time thing.

-- GT (nospam@nospam.com), March 28, 2002.