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1099-MISC qustions

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rikmar67

Junior Member
I am an employee for a software development company. I receive a regular salary and a W2 at the end of the year. The company is located about 150 miles from my home, so I have a home office set up exclusively for my work.

Our company has a client that has special needs which require my attention. Rather than my employer charge the client and give me a raise, we worked it out where the client would pay me directly and I would receive a 1099-MISC at the end of the year. However, this is then treated as self-employment and I have to pay self-employment tax.

Being that I work from home, I have questions regarding deductions for both my regular job and the extra income from this client:

1. The attention I give to this client requires advice, usually phone or email support. I generally communicate with them every day, but I wouldn't say it took more than 100-150 hours of my time over the year. This support is primarily performed from my home office. The rest of my time is spent performing my regular employment duties, again from my home office. Can/should I still enter my home office expenses to reduce my net income from the client, thus reducing the self-employment tax? Doing so will reduce my taxes approximately $500, but is this justified and will this flag me for an audit?

2. On occassion I have to drive to the client's office which is approximately 320 miles roundtrip. Can/should I write off my mileage in order to reduce my net income?

3. Since I work from home for my regular job I am still entitled to the home office deduction. However, entering this information gives me a minimal deduction which doesn't reduce my tax liability at all. Should I still show the information in my return? Also, does it matter if I deduct the home office from my "self-employment" income yet I do not include it as a deduction from my regular employment?

Thank you for your assistance. I'm pretty clear how to enter everything. I just need some guidance as to what exactly I can legitimately claim for both my regular employment and the extra income from the client in order to reduce my tax liability as much as possible without triggering myself for an audit. Thanks again.
 


xylene

Senior Member
rikmar67 said:
I am an employee for a software development company. I receive a regular salary and a W2 at the end of the year. The company is located about 150 miles from my home, so I have a home office set up exclusively for my work.

Our company has a client that has special needs which require my attention. Rather than my employer charge the client and give me a raise, we worked it out where the client would pay me directly and I would receive a 1099-MISC at the end of the year. However, this is then treated as self-employment and I have to pay self-employment tax.
This could be a problem for your company but not you. What they (your company) did was a little shady

Being that I work from home, I have questions regarding deductions for both my regular job and the extra income from this client:

1. The attention I give to this client requires advice, usually phone or email support. I generally communicate with them every day, but I wouldn't say it took more than 100-150 hours of my time over the year. This support is primarily performed from my home office. The rest of my time is spent performing my regular employment duties, again from my home office. Can/should I still enter my home office expenses to reduce my net income from the client, thus reducing the self-employment tax? Doing so will reduce my taxes approximately $500, but is this justified and will this flag me for an audit?
You can deduct the home office expenses related to the client for which you were not reimbursed. Not the home office expense related to your job. Use your good judgement and it will be no problems.

2. On occassion I have to drive to the client's office which is approximately 320 miles roundtrip. Can/should I write off my mileage in order to reduce my net income?
You can write of the mileage if you were not reimbursed. Be sure to use the correct rate (it changed)

3. Since I work from home for my regular job I am still entitled to the home office deduction. However, entering this information gives me a minimal deduction which doesn't reduce my tax liability at all. Should I still show the information in my return? Also, does it matter if I deduct the home office from my "self-employment" income yet I do not include it as a deduction from my regular employment?
You want to deduct it from your self employment income, on schedule C, not your total income.

Thank you for your assistance. I'm pretty clear how to enter everything. I just need some guidance as to what exactly I can legitimately claim for both my regular employment and the extra income from the client in order to reduce my tax liability as much as possible without triggering myself for an audit. Thanks again.
I suggest you use a tax software, like TurboTax or speak to an accountant better still.

If you did not pay estimated taxes you could owe a small penalty.
 

rikmar67

Junior Member
Thank you for the reply. The income on my 1099 makes up only about 6% of my total income. Would it be legitimate to take the full deduction amount on my schedule C, or should I base the deduction on 6% of my home office expenses (i.e. 6% of my mortgage interest, property taxes, utilities, insurance)?
 

rikmar67

Junior Member
Oh, and I am using TurboTax which is working out just fine. I just need a little guidance on how much I can enter for the amounts without raising too many eyebrows.
 

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