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.

Handy’s Corner of the Gig Economy Is a Mess. Doesn’t Bother Startup Investors!
Companies, Health Care, Industry Research, Ondemand Platform, Services, The American Dream, Uber

Home Services need to be Cleaned Up

Originally Published in Slate

The startup world is full of ironies and poetic justices. The bubbly race to wash your clothes. The club of billion-dollar “unicorns” that boasts more than 100 members. And the undeniably messy market for on-demand cleanings and home services.

In recent months, the home-services market has repeatedly proven one of the riskiest and most muddled in the burgeoning “gig” economy. The clearest evidence of this came in mid-July, when Uber-but-for-cleaning platform Homejoy announced it was shutting down. At the time, the company attributed its exit to problems with raising money and to a lawsuit over its employment practices;other reports since have traced the collapse to substantial losses, poor customer retention, costly expansion, and Homejoy’s inability to keep its best workers on the platform.

Similar problems have plagued Handy, another Uber-but-for of the home-services sector, and Homejoy’s main competitor before it went under. Like Homejoy, Handy poured money into scaling up its operation, spending tens of thousands of dollars a week—if not more—to onboard cleaners. Like Homejoy, Handy struggled to retain those cleaners, with 20 to 40 percent becoming inactive after two to three months. Like Homejoy, Handy is in litigation over its independent contractor-based business model. On top of that, Handy has faced tough criticism about its customer service—in particular, a signup system that automatically enrolled users in repeat bookings and made it extremely difficult to cancel them.

And yet the gig economy keeps chugging. Handy said Monday that it had raised $50 million in a Series C funding round led by Fidelity Management and several of its current investors. That brings the company’s total funding to $110 million, for an unofficial valuation of around $500 million.

In its press release, Handy points to its 1 million-plus bookings (a milestone it celebrated over the summer), and that 80 percent of them come from “loyal, repeat customers.” Presumably a good deal of the company’s valuation and new funding is tied up in this claim—repeat customers are much more likely to actually pay off than one-time users—though the fact starts to sound less compelling when you wonder how many of the 80 percent were repeatedly using Handy of their own volition, and not because they couldn’t cancel those automatic recurring bookings.

“Handy has demonstrated to consumers that it is the company to trust when it comes to finding professionals to take care of their homes,” Handy co-founder Umang Dua says in the release. “Professionals love the flexibility, high-paying jobs and high demand for their services, while consumers enjoy the convenience and high quality.” It’s nice PR boilerplate that becomes less convincing once you consider the cleaners who have filed lawsuits against Handy, the customers stuck with followup bookings they didn’t want, and the customer-experience employees at Handy’s headquarters who had their jobs outsourced and were fired en masse between late 2014 and early 2015. For more on most of that, see my Slate story from this summer.

On the other hand, it’s possible that Handy, in the spirit of its sector, has started cleaning up its act. In late August, a former Handy employee notified me that the company had finally reviewed its compensation and payroll practices and issued back-pay to some customer-experience employees for their rest periods. As part of that, back-wage recipients were asked to “stipulate and agree that my accepting this payment does not constitute, for any purpose whatsoever, either directly or indirectly, an admission of any violation of law or contract or any other legal obligation whatsoever by Handy,” according to a copy of one agreement provided to Slate. They also released Handy from “any and all individual and/or class claims under the New York Labor Law and, to the extent allowable, any other federal, state or local law, related to the payment of wages, benefits or other compensation related to my employment with Handy,” so you have to assume that’s something the company was nervous about.

Could such changes, plus the Homejoy exit, be enough to pave Handy’s way toward establishing a profitable, sustainable business?Or is the market for home-cleaning and other household services fundamentally too tough? Those are questions that as of yet don’t seem to have clear answers. For now, though, Handy doesn’t need to convince the world one way or another. It just needs metrics that are aspirational enough to attract a few investors—to keep the cash flowing in from one end to be burnt up on the other. Fifty million dollars might not feel like much compared to the $1 billion rounds that Uber raises with casual regularity. But for a company in a space as murky and fraught as Handy’s, it’s an equally big vote of confidence.