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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
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Experience:  I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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1099 vs. W-2 business expense allowances

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I am a professional musician and, as such, I have always used Schedule C to claim business income and to offset that amount by claiming deductions related to my expenses (supplies, repairs, mileage, stage clothing etc.)
This past tax year I worked solely on a cruise line, and was W-2? ed instead of 1099?ed. I guess this makes me (for tax purposes) an employee. I receive no reimbursement from the line for the identical expenses I would have incurred had I worked, for example, as a private contractor in a hotel/casino somewhere. Effectively, I am performing the identical service on a ship which I would elsewhere, but because of the wage/tax form I am supplied at year?s end I can no longer use Scedule C (as I had no "Business Income" from any source other that the cruise line).
Is there any way for me to use my expenses to offset my W-2 income in this case? I know that Schedule A could be used, but I think only if I chose NOT to take the standard deduction and, instead itemized everything. That isn?t an option, as my true business expenses do not reach the level of the Standard Deduction allowed (but are still enough to make quite a difference in my AGI, if allowed).
I?ve already filed my taxes, but would ammend the return if it meant that my tax bill would be lessened by any expense offsets. Any help/advice is appreciated. Thank you.
You have accurately assessed the situation and, unfortunately, it is a situation that many people are in. There is no deduction from AGI for expenses incurred as an employee - the sole method is through Employee Business Expense deductions which are reflected on Schedule A andlost if not in excess of the standard deduction (when combined with other itemized deductions).

Advice would be to try to get your employer to give you an expense reimbursement possibly instead of some portion of your wages. For example, if your wages for 2003 were $30,000 and your expenses were $3,000, see if they will reimburse the expenses for 2004 and reduce your wages by that amount. This effectively makes the expenses theirs instead of yours and reduces your taxable income by the same amount.

Depending on the actual numbers, that may be more trouble than it is worth - you just have to check it for your particular situation.
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Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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