1099, Being Freelancer, Self-Employed

Deductions & Tax Tips for Professional Services

There are many great things about self-employment, including the flexibility of setting your own hours and the opportunity to be your own boss. On the other hand, one of the more frustrating aspect figuring out our deductions and taxes. Self-employed individuals have to manage their taxes differently, including figuring out estimate quarterly payments

While doing taxes, one of the things many independent contractors forget about are write-offs. Otherwise known as expenses or deductibles, a write-off can be deducted from your total taxable income. Corporations, small businesses, and self-employed individuals can write-off expenses from their income taxes.

Keep in mind that write-offs have to be legitimate expenses. Acceptable write-offs vary from job to job. In this guide, we’ll focus on professional services.

What are common write-offs?

The IRS defines acceptable write-offs as expenses that are ordinary and necessary for your business. Some common write-offs for self-employed individuals in services include:

  • Supplies: If your in the professional cleaning services, one of your biggest expenses is mostly likely cleaning supplies. Any supplies you use for your business and for your clients can be written off.
  • Cell Phone: Your cell phone is probably a crucial part of your business since you need to communicate with clients. You can write off this expense on your schedule C. You just need to calculate the portion of your bill that is directly related to your business, if you use your cell phone for both personal and business purposes.
  • Car & Transportation: You can write off any expenses related to getting to and from your clients. If you use mass transportation, you can write off the costs of your fare. If you drive, you can write-off mileage and parking expenses. Since there are so many expenses related to your car, calculating this expense can get a little tricky. Here is a guide to help you figure it out.

When it comes to write-offs, use your own discretion. While ‘ordinary and necessary’ can relate to a wide variety of expenses, keep in mind that they have to directly relate to your business operations.

How do you report write-offs?

As an independent contractor or self-employed individual, you’ll need to attach a Schedule C or Schedule C-EZ to your 1040 tax return. On your schedule C, you can report your write-offs.

Most self-employed individuals can use the Schedule C-EZ, which as it’s name implies is simpler to fill out. Typically, if your business expenses were less than $5,000 and you did not have any employees, you can utilize this form. To learn more about the Schedule C-EZ and if it’s the right form for you, click here.

What else do you need to know?

Aside from figuring out your write-offs and completing a Schedule C, you also have to look out for your 1099s. You should receive a 1099 from any client you earned $600 or more from by January 31st. Your client will be sending both you and the IRS a copy. Even if you earned less than $600 or did not receive a 1099, you should still report this income on your tax return.

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