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CGCPA
CGCPA, CPA
Category: Tax
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Experience:  over 40 years experience in tax matters
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Ill receive a 1099 for my contracting services for 2013. Are

Customer Question

I'll receive a 1099 for my contracting services for 2013. Are training expenses deductible and what percentage is deductible?
Submitted: 10 months ago.
Category: Tax
Expert:  CGCPA replied 10 months ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

Your 1099 will be included in the income section of Schedule C of form 1040. There you will also be able to deduct the expenses associated with producing that income. Most items are deductible in full. However, two items are limited. The first is meals. This is limited to 50% of actual cost. The second is education costs. Education costs incurred to gain a new job skill are not deductible while education (training) to maintain and improve those skills are deductible against the income. You can decide which education costs fall into which category but remember that if you are questioned, a tax auditor may disagree with your reasoning. The odds of being audited are rather small but you should document how you made your determination for future reference "just in case".

Customer: replied 10 months ago.

Dear CGCPA,

 

Thank you for your clear explanation. My case is definitively one in that I need to take the training to keep my current consulting job; the company that I'm currently working for under the 1099 arrangement, HP, is expecting that I become very proficient in the use of a software tool. I'm already proficient in the use of another similar tool; however, this tool doesn't meet HP's requirements for the job at hand.

 

Having said that; please tell me if in your judgement this case fits the criteria. To be sure I understood; the the tuition, that is $3000 is 100% deductible; isn't it?. What % is deductible for airfare and hotel?

 

I have a related question: What % of the payments I'm currently receiving under this 1099 arrangement would you recommend that I should be saving toward taxes?

 

My very best regards,

 

XXXXXXXXXXXXXXX

Expert:  CGCPA replied 10 months ago.

The tuition, airfare and hotel are 100% deductible on Schedule C. That is they serve to reduce your Schedule C net profit and your Self Employment tax (Schedule SE). Additionally, if the Schedule C shows a loss, that loss can be used to offset other income on the 1040 form.

 

As to estimating taxes: You will need to first estimate your net income from the activity. Then set aside 15% for Federal income tax, 15% for self employment tax, and 7% for state taxes. This is all based on the net business income shown at the end of Schedule C rather than the 1099. Estimated tax payments are made using form 1040ES which is available at the IRS web site www.irs.gov I know it seems like a lot to set aside but it is better to have too much set aside than not enough. That is where many individuals get into a mess.

 

The Self Employment tax, in case you were not aware of this is for Social Security and Medicare taxes. These would normally be withheld by an employer. The employer would then match the amount withheld in sending in employment tax returns to the IRS. Since you are your own employer the government lets you do both.

 

If I can assist you further, please feel free to ask.

CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience: over 40 years experience in tax matters
CGCPA and 5 other Tax Specialists are ready to help you
Customer: replied 10 months ago.

Excellent and timely information!

 

I updated your tip to $15.00 make sure you receive it!Smile

 

Best regards,

 

XXXXXXXXXXXXXXXX

Expert:  CGCPA replied 10 months ago.
You are always welcome. Thank you for the bonus. Please feel free to return anytime I can assist you. If you want to speak to me personally start your question with FOR CGCPA only. Otherwise another expert will assist you.

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