Alright shoppers here's my dilemma.
I took my taxes to HR Block to be done for the first time because of shopping income. I made mostly reimbursements of a few thousand dollars, with a few hundred dollars in fees.
The tax professionals have no idea how to handle this so they we're calling it a hobby, so no expenses are deductible.
This doesn't seem right and I'm on my third trip with 5 hours invested. I went to a pro to avoid a headache but it seems like more of one. If I wanted to spend 5 hours on my taxes I'd have done them myself.
Any tips? I know this has sort of been covered, but I've never really found clarity.

Edited 1 time(s). Last edit at 02/06/2019 07:33PM by nolimitem.

Fill out schedule C-EZ, schedule SE, and form 1040 on your own.

I always use TurboTax. I do it myself and file electronically. It's very fast and very easy. The Turbo Tax program prompts you by asking you questions and you answer. Based on your answers, the program prompts you for the right info.

FIVE HOURS? You could have done it yourself and filed electronically in far less than that. I hope you didn't pay them. If it were me, I would be suspicious that if I left them file my taxes I couldn't trust that they would do it right as they don't sound like they know what they are doing. I would write off the 5 hours as a loss, walk away, and buy Turbo Tax (or any tax program, this is not an advertisement for Turbo Tax, that's just what I use).

Ask for you tax prep fee back. They clearly have no idea what they are doing. Filing as a hobby is just plain wrong !

Ignore your reimbursements. File your fees and non-reimbursed expenses on Schedule C. The EZ version will almost certainly work for you.



Edited 1 time(s). Last edit at 02/07/2019 01:31PM by walesmaven.

It may be that tax "pros" are a very mixed bag. Do your own taxes. Nobody, however well-intentioned, cares about your money like you do.

I prefer to utilize tax pros. The pros that have helped me know more than I do, give excellent advice, and commune with me before beginning my tax job.

Turbo Tax Questions:
1. I just did my taxes and I see where they show a self employment tax of 465. Do I have to send a check to the government or will that be deducted from the refund I am getting.
It seems to me that in other years Ttax would print out forms that were needed to pay additional taxes.

2. My grandson is filing first time as an IC and he knows he will have to pay both self employment and federal/state taxes. When he has completed his form, will Ttax generate the forms he needs to pay the SE, Fed and State taxes?

First, you either buy TT with a state return included, but have to download that separately while inside of TT (it will prompt you to do so as I recall.) or you buy it without.

For SE tax, open up TT and go to the forms menu. There should be a separate form that shows the calculation for SE tax, and you will need that. That should, in turn, carry the SE tax amount forward to your Form 1040, where it will compute a total owed (or due back) based on any fed tax over/underpayment plus the SE due to the Govt.

I will be doing my Turbo Tax work tomorrow, during our next winter storm. The FIRST chore is always to download for any updates before proceeding, every time that you open it. Some state forms may not have been ready until very recently. AND everyone and thier Aunty Mae is still finding glitches in updates because of both federal changes and states' attempts to "conform" their forms and requirements to the ones the feds now use (as, I think, the majority of states do.)

Your refund is NET; you do not have to send a check.

As for OP, you ARE self-employed. I use "small business consultant".

This is NOT a hobby; it's a real business.

PS -- I did my taxes myself this year, and it took way, way over 5 hours! Mostly because the forms are a MESS. I finished one schedule, and it said "Enter this amount on line 21 of Form 1040" -- and line 21 of 1040 is "Amount of refund you wish applied to tax liability for 2019" (paraphrased). Believe me, the schedule I had just completed had absolutely NOTHING to do with "Line 21"!!! I have 50 years of experience with taxes, and I have NEVER seen such a mess. I seriously doubt that Liberty Tax, Jackson Hewitt, or H & R Block would have known what to do, either.

Edited 1 time(s). Last edit at 02/19/2019 08:51PM by ceasesmith.

When you use TurboTax (as I do), the final number includes all required payments. It includes payments that you may have to make for self-employment Social Security. IF TT says that you are getting a refund, that is inclusive of everything you owe.

Your grandson will generate a single income tax form to file. It will include (in a single number) payments for income tax and Social Security. He will need to file separately for each State, but that is also done through Turbo Tax. Some versions of TT include on State return for free, others require that you pay even for the first state return.

@plmccut wrote:

Turbo Tax Questions:
1. I just did my taxes and I see where they show a self employment tax of 465. Do I have to send a check to the government or will that be deducted from the refund I am getting.
It seems to me that in other years Ttax would print out forms that were needed to pay additional taxes.

2. My grandson is filing first time as an IC and he knows he will have to pay both self employment and federal/state taxes. When he has completed his form, will Ttax generate the forms he needs to pay the SE, Fed and State taxes?

By the way, if you go directly to IRS.gov and click on "free file", you'll find more than one program for e-filing your taxes.

I had two states, W-2 income, 1099 income, and several different types of 1099s and several additional schedules to file.

It was all completely FREE. They do not charge by the complexity of your return, but totally on income limits. If your AGI is less than a certain amount, the filing is free (including BOTH state returns).

Don't get stuck on the word, "Hobby." If you made that little in fees, the tax professionals are correct - the IRS classifies what you do as a HOBBY. A few hundred dollars in fees, minus more than a few hundred dollars in expenses = HOBBY.

Do your expenses exceed your "few hundred dollars?" If so, the professionals are correct.

Not necessarily. There are many parameters the IRS uses to determine whether it's a hobby or a business. If you are profit-driven you are a business. If you are in it as a "tax loss", they may determine it's a hobby.

In any event, OP needs to find tax guys that know what they are doing.

I have to admit I am math challenged even though I spent 45 years working in a math based environment. Will someone please clarify something for me please? I've done some Jack shops in 2018. So the fee is $15 and it cost $5 for everything. This is an example. So when I get paid I get the $15. So when I try to figure out what I report as income on my taxes do I include the entire $15 or do I subtract the $5 and just report the $10? Thank you.

You can do it either way, as long as you have supporting details. The $10 is your taxable income, the $5 is reimbursement of required expenses, and is not taxable. Be aware that in this case, your 1099 will reflect only the total payments, so you must have supporting documents or details or records in order to subtract the expenses.

My 1099 from Marketforce, for example, had only the fees I earned; it didn't show reimbursed expenses at all. But 1099's I got from other companies lumped them both together under just "payments". And yet others showed fees, and reimbursed expenses separately. All are allowed and are correct.

I hope that's clear.

Thank you Ceasesmith. I have never received a 1099 from a Mystery Shopping company. I'm just afraid that if I don't report what I have earned the IRS will somehow find out and I will get fined and have to pay interest and penalties on what I earned. Even though I tell myself that I want to get into mystery shopping on a larger level I always seem to have so much other things going on that I only do this on a small scale compared to some of you other shoppers.

Thank you, Myst4au. I have been doing mine and numerous family member's taxes for years. Even took an H & R Block course way back more years than I can remember and when we did it the hard way - manually. I've been using TTax for quite some time but just was not sure if the SE would automatically be taken off my refund. It seemed to me that the one year I had to pay, TTax generated a receipt/form to use when sending the payment to IRS or State and that they also generated forms for paying estimated tax. The Gson knew he would have to pay and has been setting aside money for that purpose.

For Turbotax, do we need to buy the small business version?

The Home and Business Version has all of the stuff that ICs need.

I've been mulling this one over and wanted to see what some of you might think.

My Gson works as an IC and he works both at the business' location and then also does work at home in the evenings for the same business. If he enters his income (12000) as a small business and takes the home office deductions he ends up owing both Fed/St taxes along with SE taxes. If he enters it just as straight income and uses the standard deduction he will get a refund from both the Fed/St.

My thinking is to tell him to just enter as straight income and pass on the home office deduction. If he does this he will not be contributing to Social Security. But he could open an IRA and start contributing to that.

Any thoughts from anyone?

He cannot claim that is W-2 (straight income) since no one has paid any Social Security taxes on it, either as employer or employee. That could open a very nasty can of worms, IMHO.

Obviously, he needs to start making quarterly estimated tax payments for 2019 to avoid penalties in future.

I agree with Walesmaven. Since your Gson is an IC, he will not receive a W2 form. As an IC, he did not pay any SS tax or Medicare tax, and of course since he does not have an employer, that side of those taxes did not get paid either. I will defer to Walesmaven if she thinks otherwise on this point, but I don't understand why he would not be entitled to claim the standard deduction as an IC. IC income is reported on Schedule C. The profit then moves onto the 1040 form, and then the standard deduction would be taken. He is also eligible for the 20% pass-through deduction. Since he grossed (i appears from your post) $10,000, I think that he will end up owing SS and Medicare taxes on he $10,000 (not likely to actually be $10,000 if that is the gross since their would be business deductions, and that is all. This simple view may get more complicated if he is claimed as a dependent on someone's tax return.

I called the Gson and told him to try putting his taxes in as an IC but to just not claim home office or other business expenses. He knows he owes and definitely wants to get the SE taxes paid. Since he only earned 12k, it may not make much difference. Years ago when I was doing my daughter's taxes I used to try to squeeze every dollar for them as they needed the money for sure at that time. I remember (just for curiosity) checking to see what a difference an extra 100 medical expenses would do for them. According to Ttax figures every extra 100 spent in medical only saved them about 1 in taxes. I think if Carson does what you and I are suggesting, it may not be much more than a few dollars saved in which case I would definitely recommend that he skip the business deductions.

Your grandson needs to get a tax professional, not (and I beg your pardon) his grandma giving him tax advice.

I'm a grandma, too.

I don't see how he can get a refund from federal and state if he has not paid taxes.

Edited to add: Tell him to go to IRS.gov, choose "free filing", and they'll walk him right through it. He should have his 1099s (or W-2s) and all his expense figures -- the people at the other end of "free filing" will ask all the right questions, and his taxes will be complete and it's FREE. If he owes money, it will be a valuable lesson to him.

Edited 2 time(s). Last edit at 02/22/2019 05:01PM by ceasesmith.

I don't think that she ever claimed that he was going to get a refund, but it is possible to get a refund that is bigger than what was withheld. Those who qualify (I doubt that her grandson would) for the Earned Income Credit can get a refund even if they do not owe any taxes. The various tax programs would do this automatically. If you want to read the details, here they are: [www.irs.gov]

@ceasesmith wrote:

I don't see how he can get a refund from federal and state if he has not paid taxes.

Edited to add: Tell him to go to IRS.gov, choose "free filing", and they'll walk him right through it. He should have his 1099s (or W-2s) and all his expense figures -- the people at the other end of "free filing" will ask all the right questions, and his taxes will be complete and it's FREE. If he owes money, it will be a valuable lesson to him.

@plmccut wrote:

I've been mulling this one over and wanted to see what some of you might think.

My Gson works as an IC and he works both at the business' location and then also does work at home in the evenings for the same business. If he enters his income (12000) as a small business and takes the home office deductions he ends up owing both Fed/St taxes along with SE taxes. If he enters it just as straight income and uses the standard deduction he will get a refund from both the Fed/St.

My thinking is to tell him to just enter as straight income and pass on the home office deduction. If he does this he will not be contributing to Social Security. But he could open an IRA and start contributing to that.

Any thoughts from anyone?

"Straight income"? What is that? Income earned from wages/salaries will have taxes withheld. As an IC, he should have received a 1099. There is an appropriate schedule to report all 1099 income. He can't just "choose" to report it as "straight income". The 1099 income is reported to the IRS. So reporting it only as "income" MAY result in a letter from the IRS (several months down the road) stating that he did not file on his 1099 income, and assessing appropriate penalties, interest, etc. If you're saying he's reporting $12,000 in 1099 income as "hobby" income, he'd still have to pay social security and FICA taxes on it (at approximately 17%).

Cease - I don't think you are understanding what we are doing here. He does have 1099 and WILL be reporting it and I sincerely doubt that the IRS will be sending us a letter. I just think it's iffy on the home office deduction. He works in the film industry and at times will do editing at home on his home computer. So my feeling is that he should just enter the 1099 (what I called straight income), skip the home office deduction and pay what pops up.
Myst - He's already getting free, walk through because I purchased Ttax Home & Business and he is using that to do his taxes. I even gave him the free state tax efile since I am getting nice refunds on my income.
BUT I have to tell you it always ticks me off to have to pay tax on my Social Security and Pension income!!!!

If he uses a home office (a space devoted 100% to business related activities), then he's entitled to take the deduction. But if he lives with someone else (and hard to live on your own with $12,000 in income), and they pay the rent or mortgage, he would not be entitled to the deduction. You can only deduct expenses -- which means if having a home office costs him nothing, he has nothing to deduct.

He'll put the 1099 income total on a schedule C for self-employed. If there's no expenses, there's no expenses, and his social security/self employment tax will be imposed on the full $12,000.

I think you're not understanding what I'm saying, either.

There's no way around him paying self-employment taxes. No way at all. It's due on all net income from self employment. (With a small exception, I think for the first $400 of self-employment income.

If he is truly self-employed, his record of mileage would be important, as he could deduct that expense, which would lower his self-employment taxes, as it would reduce his net income.

Self-employment and FICA taxes are NOT related to income tax. They basically are just paid to the same entity, the federal government. I suppose they are on the same form for the sake of convenience.

I will reiterate my earlier advice, which is actually the ONLY advice anyone should ever take on a public forum: HE NEEDS A TAX PROFESSIONAL.

edited to add: And don't have him bother calling IRS with his questions. If you call 5 times and ask the exact same question each time, you may get 5 wildly varying answers. None of which may be correct, and none of which are binding. The only thing binding from the IRS is if they will put it in writing and mail it to you. And I've only succeeded in getting one written ruling in over 50 years. And THAT was a battle.

Edited 1 time(s). Last edit at 02/22/2019 08:07PM by ceasesmith.

I understand exactly what you are saying and we already know all that you are saying. OK?

I'm so glad.