1099-MISC and Small Business Returns

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What you need

• Download: http://www.irs.gov/pub/irs-pdf/p4012.pdf• Email for hard copy: kandrews@enterprisecommunity.org

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What to Expect• Working part-time for an employer outside the

home.o 1099-MISC, line 7

• Working Part-time for an employer in your own home.o 1099-MISC, line 7

• Small business owner: In-home daycare, Service person, Home delivery newspaper carrier, etc.o Cash receipts and/or1099-MISC, line7

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1099-MISC• Box 3 and 7• Expenses

o Mileage• Commuting vs. business travel

o Necessary tools or supplies

• Link to Schedules C and C-EZ• Self employment tax

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Out of Scope for VITA• Expenses exceeding $10,000• Business use of home• Vehicle expenses reported as actual expenses• Depreciation• Net losses• See Publication 4012 for full listing

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Small Business Scenario 1

Advanced Topic• Anna is employed as an editor, she works from

home and was paid on a 1099-MISC• She kept a record of all expenses:

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Expense Item Cost

Printer Paper $ 525.00

Printer Ink $ 1,200.00

Business Cell Phone $ 350.00

Printer $ 300.00

Computer $ 1,500.00

Total Dollars $ 3,875.00

Miles while making deliveries

234 Miles

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TaxWise

Tax Preparation Software

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Linking to a Scratch Pad

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Everything Transfers to the 1040

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Ohio Self-employment Tax Credit

• 50% self-employment tax credit on the Ohio tax return.

• Line 41 on page 3 of IT-1040• 1099-MISC qualifies• Complete Ohio IT SBD form by hand• Enter the credit amount as a deduction to income

and on line 41 of page 3 OH IR-1040.• Keep the IT SBD for your records

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8,869

8,869

627

627

Ohio SBD Continued

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8,242

8,2421 0

8,242250,000

4,121

Entering the Deduction into

TaxWise

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Scenario 2• Raoul is a plumber who has his own small business and

occasionally works for a plumber friend who bills the client all charges and pays Raoul on a 1099-MISC.

• In his own business he bills the customer for the service call, labor and all the parts he uses to do the job.

• He keeps good records on his mileage to and from the customer, as well as all of his expenses.

• In general Raoul charges all his expenses for tools and supplies to his business. However, if the part time job requires a special tool he will charge it to the 1099-MISC job.

• Raoul earned $27,500 in his business, and received a1099-MISC from his plumber friend for $6,800.

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Income and Expenses• Raoul earned $27,500 in his business, and received a1099-MISC from his

plumber friend for $6,800.

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Billing Software $ 147

Paper, ink, other office supplies $ 222

Expendable supplies: sealer, solder, tape, etc.

$ 207

Pipe threader $ 500

Pipe cutter $ 325

New socket set $ 175

Soldering equipment set $ 130

Heavy duty pipe wrench – 1099-MISC job $ 137

Miles to the business 7,500

Miles working with his friend 980

Publication 17Figure 26-B

When are transportation expenses deductible?

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Small Business Scenario 3

• LaDonna is an unlicensed at home daycare provider. She earned $8,900 last year.

• She opens her entire house and backyard to the daycare children.

• Every Monday, she takes the children to the zoo and has tracked her mileage and other expenses.

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Food $ 1,200

Games, Toys, Crafts $ 650

Cleaning Supplies $ 240

Tennis Shoes (Only worn while working)

$ 90

Total Dollars $ 2,180

Mileage 320 Miles