Hi there! I am currently kicking myself…I’ve REALLY made a mess of my finances and record-keeping. See, I’m over 18, and yet this is the first time I’ve ever tried doing my taxes myself. in the past it’s been 95% my father doing the work, 5% me running around, confused, trying to find forms he says I need and that I don’t remember getting but must have put…somewhere. Now, I highly doubt I’ll ever meet any of you in person, so your opinions really shouldn’t matter, but before I go into this next part I feel compelled to just add here that i am NOT an idiot…well…not usually. When it comes to finances, though, I’m finding that general rule of thumb just doesn’t apply.

So here’s the story. I’ve always been pretty entrepreneurial, doing some freelance writing, ebay selling, babysitting, event planning, stuff like that. For 2009, though, my primary income, in addition to waitressing, was 1) babysitting and 2) advertising/marketing writing–to be specific, working on commission to sell stuff for folks. I kept TERRIBLE records (i.e. none), not because I was trying to be dishonest or piss of the IRS, but because I just didn’t think about it. So you can imagine what a disaster my trying to file this year has been! The only good records were from the waitressing job–about k–which has been the majority of my income. Other tax form areas I saw and for which I REALLY wished I had better info: medical expenses and charity. If I’d kept better records for both, I think taxes could have been SIGNIFICANTLY less than they turned out to be (about k total (federal and state), but even more–about 00–before I fix the error i made when sending in the first return. I think this is called an amendment…will this increase my chances of an audit?)

I also found out I’m supposed to pay quarterly estimated taxes, which I will start doing as soon as i get the error straightened out.

So here’s my basic question. Starting now through the end of the year (and beyond, of course:)), I plan on keeping very good records. I’ll be keeping track of:

1) medical expenses
2) charity work/donations

For these I’m confused about several things. First, the standard deduction? I heard I should usually take this for medical and charity, and that medical has to be at least 7.5% of income to qualify (which mine always is).

Then there’s the ever-intimidating:
3) Business finances.

As I understand it, I am considered to "own" two different businesses. One is babysitting (which I do in the family’s home), the other, "advertising/marketing services."

For babysitting, the kids live a quarter mile from me, so I’m not planning on trying to figure out deductions related to driving. what I’m planning to do in for this is just record each time I get paid (day and amount), and my expenses (almost all of which are me buying stuff for the kids during the day–the parents reimburse me for those when I get paid, so I’ll just make a note of them.)

For the writing/advertising, though, it gets a bit more complicated. Sometimes I take on big projects for folks who are losing their homes and need everything out by a specific date. For instance, last month I did a 3 1/2-week job for a guy who owned a four-bedroom house, everything still inside. I coordinated estate sales, private sales, listed stuff on craigslist and in different forums, etc. The guy lived almost 30 miles away, and I was constantly driving back and forth to meet potential buyers. On several occasions I also had to hire folks to help with the sales when I couldn’t be there at a specific time. There were lots of miscellanious expenses, etc. and some people we even paid in "stuff."

What I’m planning to do for this second biz from now on is to record each time a sale is made, what my commission is (if it’s not something I bought to re-sell), and what my expenses are. I’ll also try to log mileage as it occurs.

As for other deductions, I think it might be a good idea to just leave those alone, because almost everything I use for my business (computer, car, etc.) is also for personal use. So that whole "home office" deduction would definitely not apply, because my "office" is the computer in my bedroom (and I don’t pay rent), and my "inventory," when I’m buying and re-selling rather than just working on commission, is just piles of whatever stuff it is I’m marketing.

When it comes time to file those 2010 taxes, is this going to be pretty much the majority of what I’ll need? Other than the w-2 from my waitressing job and the (miniscule) statement from my stock shares, have I covered everything I’ll need? and if not, what else should I be aware of? I want to make sure NOTHING like this EVER happens again!!!

Thank you so much for any input you can provide!

On June 6, 2003, Susan Stewart, one of Bernard’s stylists, left town to get away from a troublesome ex-husband. To help Susan establish a business elsewhere, Bernard loaned her ,000. Susan signed a note dated June 4, 2003, that was payable on demand and provided for 5% interest. On October 5, 2006, Bernard learned that Susan had just been declared bankrupt and was awaiting trial on felony assault charges. Bernard has never received any interest on the loan.

I think this is personal bad debt. Is it fully deductible in 2006 though? I also think it would be a short-term capital loss, so if it is fully deductible then only ,000 would be deducted in 2006. Is this right?

Lastly, where on the tax form is such a deduction reported?
Where in turbotax is this reported?
Bernard loaned Susan the money so she could start a business of her own.

I have had a very part-time photography business for the last six years. I’ve had a NOL every year because the income from the business is less than the amount I spend on equipment for the business. This year I’m having to reclassify my business as a hobby because it has not had a profit in five years. I’m not filing Schedule A Itemized deductions because my allowable deduction is limited to business income amount which was 0 which is much less than the standard deduction of 50. I’ve listed the type & amount of income from photography on line 21 of form 1040. Am I considered self-employed, do I need to fill out Schedule SE self-employment tax form?
Charles, Thanks, you answered a previous question of mine too.
Robyn, it’s comforting to have the advice of an expert. Thank you!
Bob, I have no mortgage or property taxes & I made less than K in 2008. I filled out a Schedule A & my total itemized deduction is 6 because of the 2% limit. In previous years I filed Schedule C & Form 4562. I would usually Section 179 anything that cost less than 0 & depreciate anything that cost over 0. I purchased over K worth of equipment in 2008. Now that I have most of the equipment that a professional photographer needs, I must classify my business as a hobby. It’s disappointing but now I know I need to work harder at making a profit if I’m gonna say I have a Photography Business. Thanks for your answer.

I am single, claiming 0, no business expenses or deductions, nothing but a very basic tax form is needed for me to file. Every single year prior to this year I’ve received a full refund of the amount withheld of both federal and state income tax (CA–so much for that one this year I guess) .. In 2007 I only worked about half the year, made a little over k, and received my full refund of around 0. In 2008, I worked the entire year, made a little over k, and federal income tax withheld almost 00. But when I tried to e-file (using turbo tax free edition) it showed a refund amount of only . What circumstances have caused such a drastic drop in my refund? If I am not entitled to a full amount refunded, I understand I guess, but why such a tiny fraction? I haven’t actually filed yet because I’m hoping I missed something on my return and will at least get more than back. My status hasn’t changed from 2007 to 2008–same company, same W4, no changes–why this drastic decrease? Can anyone explain?

http://articles.moneycentral.msn.com/Common/Taxes/2007TaxBrackets.aspx

I’m still in the same tax bracket according to this (???)

Ok I have had this lady do my taxes for me for the past 2 years. She has always done them at no charge since I qualified under her Free or Reduced program. The way we’ve always done this process is since she lives in another state now, she mails me an envelope with some helpful tax info. for me such as deductions etc. and also included is a tax organizer for me to fill in so that she can do my taxes easier. Well I received that envelope from her in my mail early February 2008. I filled it out and mailed it back to her with my tax form, documents and other receipts. After several days of not getting any response from her as to receipt of the items I mailed to her, I then emailed her to both her personal email and her business email. She never replied to either so I called both her business and home phone. Her business number turned out to be bogus and her home phone a machine always picked up. I left her a message and waited. She never called back so now it’s April 14, 2008…..
one day, as you all know before the tax deadline. I called the IRS and informed them of the situation and the lady I spoke with advised me to try and contact her a few more times today and if I received no response then to get them done somewhere else this year. Thankfully I had made a copy of my tax form (my 1099) I always make copies of my 1099 or W-2s just in case they get lost. Well since it was so close to tax deadline, I went to Tax ACT since some of my co-workers say they use that tax software to file their own taxes quickly and easily. I was able to file both my Federal and State taxes thru Tax ACT. I emailed the lady I had wanted to do my taxes one last time to inform her that I didn’t know why she wasn’t replying to my phone calls or emails but that since it was 1 day away from the tax deadline I went ahead and had my taxes done elsewhere. I also asked her to send back my tax documents to me (there’s a more but I’m fixing to run out of room so I’ll continue below)
sorry ran outta room. I wanted to mention that after I sent the email informing her that i had gotten my taxes done elsewhere already and that all I needed from her now was for her to mail back all the tax documents I sent her. Well not even 5 minutes after I sent that email my phone rang and it was her. She told me that the reason that I had never gotten the taxes she prepared for me was because she had accidentally placed the wrong zipcode on the envelope she put them in which she mailed off to me. She said she had just gotten them back from being lost in the mail because of the incorrect zipcode. Ok well I told her that I went ahead and already had my taxes prepared by someone else this year and that they were already taken care of. I asked her to please just send back all my tax documents to me. I even offered to pay postage so she could mail them back to me ASAP. She told me not to worry about postage and that she would get them in the mail right away. Still haven’t got them.

So this is the first year we are doing a Scedule C. We have an operating loss, plus about 6,500 worth of equipment we want to depriciate and we are considering the section 179 deduction.

On line 11 of Form 4562, it tells you to enter the smaller of business income or line 5 (the 108,000 annual limit). When you go into the instructions for line 11, they tell you to start with business income and add wages earned as an employee from line 7 of the 1040.

So I have come to the conclusion that our w2 income from our employers can be used to determine the limit on line 11 of 4562. But I wanted to see if any other tax people out there agree. Can you claim the Sec 179 expense deduction even if you have no business income as long as you have enough W-2 earned income?

Thanks
I said 108,000 above, but just noticed I was looking at the 06 tax form. I realize that the 07 limit is 125,000.

We have been trying to get a loan for a new vehicle and every time we do, we have the problem of proving our income, because we are self-employed. Our tax returns are very misleading, because we get to deduct things that most people don’t, Like a % of utilities, property tax, house interest, car interest, business supplies, ect….. So after all the deductions it shows we make far less than we really do. And the lenders don’t take that into consideration. What do we do??????
MR Jack C. We DO NOT cheat on our taxes. WE DO have to pay our fair share!!!!!!!!!! If you don’t know what your talking about and can’t help, then SHUT UP!!!!!!!!!!!!!!!!!!
Thank you to everyone, I should give you a few more details. Another problem is We don’t deposit every check into our checking and savings account, We pay alot of bills by money order and cash since most offices are here in town. So our bank statements don’t even give a good source of income. We were approved for a loan for 23,000 based on what we told them we make, when we faxed our tax forms to them they said they would have to drop the amount because it showed far less was made. We even sent them the 1099 to show what he actually made, But they said by law they had to use the amount on the tax form after all deductions. We have been making the same amount payment on the car we are trading in, so we can make the payment, It is just proving that we make more than our taxes show.

This past year I decided I wanted to start a business (photography). I’ve only purchased a few things and haven’t made any money yet. Can I claim what I purchased as a deduction? Do you have to have a Tax Id number before you can do this? Do I have to file a seperate form (from my standard tax form)? – Thanks for the help!!!