This year I earned approximately $20K from independent contracting (1099) while working my main W2 job earning about $35K. I don’t have any business expenses for my 1099 work, so when I file my Schedule C, is it okay to list no deductions? I’m fine paying the taxes owed; I just don’t want to get in trouble.
Yes, it’s legal not to claim any business expenses. If your friend reimbursed you for expenses and included those reimbursements on the 1099, you’d need to claim the income and then deduct the associated expenses.
@Blake
I’m nervous about being audited. I’ve never been through one and don’t want the hassle. Would not claiming deductions raise any red flags? I mainly helped manage smaller accounts remotely using my personal phone and laptop, but I have no specific expenses.
@Arlo
You could deduct a portion of your phone/laptop costs if they were used for business. Even a fraction of those expenses might be worth including.
@Arlo
Personal phone bills, laptop costs, and even a small percentage of your home (if you worked in a dedicated space) can be deducted. Also consider mileage for any in-person meetings. Claiming zero deductions means paying self-employment (SE) tax on 100% of your 1099 income.
@Fern
I’m not familiar with self-employment tax. What does that mean? Also, I don’t have receipts for these expenses—would bank statements work?
Arlo said:
@Fern
I’m not familiar with self-employment tax. What does that mean? Also, I don’t have receipts for these expenses—would bank statements work?
SE tax is the combined employer and employee portion of Social Security and Medicare taxes, totaling 15.3% of 92.35% of your net self-employment income. Bank statements are fine for supporting expenses.
Arlo said:
@Fern
I’m not familiar with self-employment tax. What does that mean? Also, I don’t have receipts for these expenses—would bank statements work?
A CPA will guide you. Be ready to provide phone bill amounts, square footage of a home office (if applicable), laptop value, and any mileage. Even conservative estimates help lower your tax burden while staying compliant.
Estimate around $7K for federal taxes on your combined income. Subtract the federal income tax withheld from your W2 job to determine what you still owe.
Milo said:
Estimate around $7K for federal taxes on your combined income. Subtract the federal income tax withheld from your W2 job to determine what you still owe.
So $7K minus only the federal portion of W2 withholding?
@Arlo
Yes, just the federal withholding. State taxes would be separate.