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more tax questions
Hello. I am trying to file my own taxes using Turbo Tax and have a couple of questions. I receive a 1099 misc. form from my club as well as a statement of house fees paid. On the 1099, my wages are reported as nonemployee compensation (box 7). I am wondering if this means te club is telling the IRS that THEY are paying me these wages (implying I am an employee? rather than independent contractor?) I do file as a business, right? Instead of an empoyee?
Also, do you think I can deduct meals I buy at work for when I buy my own meal and sit at a customer's table? It looks like the requirement is that if you are conducting business during the meal, you can? Am I able to deduct this if I sit and visit while eating which leads to getting dances?
Thanks, Anais
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Re: more tax questions
Yes, you file as a business. A 1099 is issued to an independant contractor. If you were an employee you would recieve a W-2. If you recieve a 1099 you did NOT earn Wages.
Business Meals are a unique situation. The IRS considers that you HAVE to eat regardless of whether it's business related or not soooooo ....... The actual allowance for a true business meal is that portion ABOVE the normal cost an individual meal rather than the entire cost of the meal. Difficult to prove in an audit and I would avoid this one unless YOU are paying for the Clients meal as well.
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Re: more tax questions
DJ is correct. You file the amount of the 1099 compensation as "receipts" on your Schedule C. You file the amount of house fees you paid as "expenses" on your Schedule C. Because the IRS will assume that 1099 workers in your classification (entertainer) will also be receiving tips, their computer will expect to see some tip compensation also reported as "receipts" on your Schedule C in addition to the 1099 amount (exception if you receive tips from customers in "funny money" and the club pays cash back to you for it which is already included in the club's 1099 amount).
I also agree that there's no way you should risk trying to write off the cost of YOUR OWN meal at work. The only way you can do this without risking a red flag is if, as Wulf said, you bought both your own meal and also bought the meal for a "prospective client", and you would also have to record the "prospective client's" name and the business purpose the dinner meeting was held for.
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Re: more tax questions
Thanks for the advice. Yes, that seems logical. Another question though: Turbo Tax says I owe a penalty for underwithholding. How can that be when I don't even have the option of having money withheld? It is not much, $27, but I don't understand and wonder if there is some mistake and if I should be paying money in throughout the year. Thanks, Anais
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Re: more tax questions
An Independant contractor or anyone who does not recieve a normal paycheck (and therefore is not subject to W-2 based witholding) must determine if it is necessary to file Quarterly estimated tax payments (Due Apr 15th, July 15th, Oct 15th, Jan 15th). Turbo Tax will calculate this for you (and print the necesarry forms) for NEXT Year but for THIS year (2002 Tax year) if you didn't make Quarterly estimated payments, $27 is a SMALL amount to pay as penalty. Pay it and chalk it up to money that Turbo Tax will SAVE you next year.