Common 1099 mistakes?

I’m a direct seller working out of my home for a company that has me on a 1099. What are some common mistakes you see in terms of taxes?

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    You will receive a Form 1099 if your earned wages exceed $600.  Common 1099 mistakes are the following

    • Complete a Form 1040 individual income tax form used for employees and independent contractors.
    • Not writing off all business expenses which will reduce your taxes owed annually.
      • Includes:
        • home office,
        • commuting costs,
        • Actual car expenses like gas, insurance, registration, repairs and maintenance,
        • Depreciation of business equipment with a useful life more than one year
          • Computers, furniture and machinery
        • Writing off personal expenses
          • Cell phone for dual personal and business use. Calculate fractional percentage for business use only
        • Writing off mileage and car expenses. (Keep good records of miles driven)
          • Actual vehicle expense method: add up vehicle operating expenses (loan interest, or cost to lease a vehicle, insurance, gas, repairs, maintenance, etc.) divide miles driven for business ONLY by the total miles driven for the year. The percentage is your allowable deduction.
          • Simplified method: IRS mandated mileage rate (58 cents) is multiplied to the number of miles driven for business use.
        • Keep adequate records of all allowable business expenses just in case if your tax return is reviewed. You can justify your submitted write-offs and avoid tax penalties.
        • Paying quarterly taxes (an option to annual taxes)
          • Pay taxes April 15th, June 17, September 16th and January 15th

    Avoid an audit by NOT making any tax preparation mistakes. This usually happens with egregious misstatement of earnings and other errors on your tax form.

    1. Make sure reported income on the Form 1040 matches your Form 1099 or W-2.
    2. Document commonly audited expenses such as car expenses, home office expenses and meal expenses
    3. Don’t claim a hobby as a business!
    4. Vast changes in income reported. If your current year is drastically higher or lower than previous years reported income in relation to your zip code, its likely IRS will audit you.

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