AZDuffman
AZDuffman
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January 9th, 2014 at 3:58:16 PM permalink
In years past this did not matter much to me but this year it may matter quite a bit. It is about taxes and write-offs.

Up until last year I was a fairly normal wage earner, having a "job" and a "side hustle." Well, a few side hustles but only one mattered. I would keep track of my miles driven and choose a business type on whatever form you fill out for the IRS. Expenses were very minor except for the driving. That was big and allowed me to deduct nearly half my earnings from said side hustle.

This year I am a 1099er for the foreseeable future, and to be honest I barely care if I ever get picked up to W-2 status. But I am afraid of raising red flags all over the place in spring 2015 when I file. I will not have one and only one SIC Code to pick from. And I mix my daily use for my needs. For example, tomorrow by day I am a courthouse landman, by evening I am a casino party dealer. Mi driving is home-courthouse-hotel-home. It is all "business miles" but more than one business. I expect to mix-and-match this way 25-40 days or more next year.

Barring a major change it will break down this way:

Landman, day job, 80 miles a day and maybe $500-1,000 of legit business expenses mostly computer
Dealer, main side-hustle, 3-5,000 miles and maybe $100 of legit expenses, mostly laundry and uniform
Notary, mini-side hustle but can heat up. $500-1,000 in insurance and office supplies plus mileage each trip
Secret-shopping, very minor hustle with mileage each trip and minor office supplies. Mostly do this if laid off from Landman or just bored and want to "earn a dinner out."

So my concern is what if anything should I do to avoid red flags with the IRS? There is a little relationship with landman/notary but other than that to an agent I may look like some kind of nut. Any suggestions on how to prep now to avoid the audit-flags?
Tolerance is the virtue of believing in nothing
sodawater
sodawater
Joined: May 14, 2012
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January 9th, 2014 at 4:08:30 PM permalink
I have heard from my accountant friend that if you file a home-office deduction, it vastly increases the odds of getting audited.
midwestgb
midwestgb
Joined: Dec 8, 2009
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January 9th, 2014 at 4:10:42 PM permalink
Simplest question in the world.

Be sure that your return is prepared and signed by a tax professional, i.e. a CPA, and not an entity such as H & R Block, etc. Been self-employed for 20 years, done it this way every single year, with no problems whatsoever. I believe that IRS generally views the CPA's involvement as a gold standard of sorts, inasmuch as that professional's own license is on the line if the returns he/she prepares and signs are found wanting.
Wizard
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Wizard
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January 9th, 2014 at 6:07:18 PM permalink
I've heard the home office deduction sets off a red flag. For this reason, I don't claim mine, even though I would rightly qualify for it.
It's not whether you win or lose; it's whether or not you had a good bet.
teddys
teddys
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January 9th, 2014 at 7:37:16 PM permalink
I don't have much advice, but I'm interested in what you can deduct for the landman gig since I am starting one. I didn't think of computer; my firm suggests a non-Apple product. Thankfully, I have a PC so I won't buy a new one. So I don't think I can deduct the cost. I may buy the new Microsoft Office Suite and deduct that, save a few bucks on my taxes.
"Dice, verily, are armed with goads and driving-hooks, deceiving and tormenting, causing grievous woe." -Rig Veda 10.34.4
AlanMendelson
AlanMendelson
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January 9th, 2014 at 9:02:44 PM permalink
Yes, home office deductions can raise a red flag... but more importantly if you own your home it could make your sale more complicated down the road when you do decide to sell.

The problem with home office deductions is that they are usually exaggerated. When people can legally deduct the space for their desk they deduct the whole room plus half the kitchen and two closets and half the garage.

I've been audited several times. If you are on the up-and-up you won't have a problem. Be square, be fair, and take your deductions.
Wizard
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Wizard
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January 9th, 2014 at 9:14:44 PM permalink
Quote: AlanMendelson

I've been audited several times. If you are on the up-and-up you won't have a problem. Be square, be fair, and take your deductions.



If you're on the up-and-up, why do you get audited so much?
It's not whether you win or lose; it's whether or not you had a good bet.
AZDuffman
AZDuffman
Joined: Nov 2, 2009
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January 10th, 2014 at 3:29:55 AM permalink
Quote: teddys

I don't have much advice, but I'm interested in what you can deduct for the landman gig since I am starting one. I didn't think of computer; my firm suggests a non-Apple product. Thankfully, I have a PC so I won't buy a new one. So I don't think I can deduct the cost. I may buy the new Microsoft Office Suite and deduct that, save a few bucks on my taxes.



It depends. Some landmen are direct-hire and can deduct little as they are just a normal employee. But if you are contract you can deduct your computer an associated software. I just had to buy MS Office because OpenOffice was causing formatfting errors. If you have to rent your desk you can deduct that if you actually pay them for it, mine seems to be netted out. Mileage/auto use is a legit expense. Possibly health insurance depending on if you set up as an LLC. At least part of your cell phone as most landmen use scanning and other apps in addition to the calls. If you are not reimbursed for copies keep track of that as it is a huge cost. Home Office has been discusses but I will not even bother. Finally any other software or supplies you have to buy, the biggest being plotting software though IIRC you are in Ohio which is a Section/Town/Range state and not metes-and-bounds as we are over here so you may use that little if at all.
Tolerance is the virtue of believing in nothing
CrystalMath
CrystalMath
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January 10th, 2014 at 7:23:08 AM permalink
I don't see anything you should be worried about. For those of you with home offices, you can opt to deduct $5 per square foot this year up to 300 sq ft in lieu of actual expenses. In the past, I've done side work that involved high miles that reduced that income by 50%, and I never had an issue.
I heart Crystal Math.
Wizard
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Wizard
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April 27th, 2018 at 11:13:27 AM permalink
Quote: sodawater

I have heard from my accountant friend that if you file a home-office deduction, it vastly increases the odds of getting audited.



Quote: Summit Portfolio Management

Claiming a home office must meet the requirement and qualifications of the IRS tax code. Many taxpayers, especially with the onset of remote employees and virtual work attendance, the IRS places added scrutiny on those who claim deductions for home office use.



Source: 10 Big Tax Mistakes That Can Lead to an Audit
It's not whether you win or lose; it's whether or not you had a good bet.

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