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07-27-2017 03:17 PM
This summer my husband participated in the Northern Pikeminnow Bounty program, for which he was paid a dollar amount per fish caught and turned in at an official program station. He incurred expenses - mileage to/from the authorized fishing area, RV and boat space rentals during the three+ months, boat gas and food. He will receive a form 1099 for the income. Are the expenses deductible, and how is the income and expense reflected on our tax return?
07-27-2017 04:58 PM
Welcome to the H&R Block community.
The way a 1099-MISC works is that the income is reported on a Schedule C and then the expenses are deductible against the income on the Schedule C. If there were more expenses than income then you have a loss, and a loss from a Schedule C carries to the 1040 where it subtracts from your taxable income.
A positive final amount on Schedule C adds to your taxable income on the 1040. If you have a positive net amount on the 1040 that is $400 or more then you will be looking at 15.3% FICA tax in addition to the federal income tax on that amount. However, any FICA tax that results from a 1099-MISC or a business can be reduced by any refundable credits that you take on your tax return as well as excess withholdings from other jobs.
Now let's look at the expenses themselves.
The boat fuel is certainly deductible as is the cost of renting the boat space as these expenses were direct expenses of the job.
Your husband's cost of getting to the area that he worked in, which is separate from the cost of operating his boat, is deductible if he had to travel outside of the city (your tax home) in which you normally live and work and if the trip(s) was/were solely for the purpose of the work. He can deduct either actual expenses (fuel, oil, repairs, etc.) or he can deduct miles driven at $0.535 per mile. The mileage deduction normally yields a better deduction unless you have a major repair. If you deduct actual expenses for the first year that the vehicle was in service then you cannot ever deduct mileage for that vehicle, but if you deduct mileage for the first year then you can switch back and forth as necessary.
Again, provided that he was traveling outside of your tax home for work purposes, the RV space rental on the nights that your husband was required to be in a given area for work and he spent the day primarily working can be deducted. In other words, if for instance he went off on a sightseeing trip over a weekend then your husband would not be able to deduct the RV space rental for those two nights because he was not there for work.
Generally 50% of meal costs while away for work purposes are deductible, and this will be your deduction. In some instances, such as for flight attendants & road workers, 80% of meal costs can be deducted. The rule here is the same as for the RV space rental. Meals are deductible only for days on which your husband was where he was for work purposes and had to buy food because he couldn't go home to eat.
If you add all of that up I think you'll have a pretty good amount of deductions, especially considering that this job lasted for about a quarter of the year. So the outcome on your tax return will be one where you might have a small amount of income from the 1099-MISC but you will not see much of an increase in your tax liability from it. Of course to give you a 100% accurate statement I would have to see the numbers, but based on the information provided I don't believe this 1099-MISC will affect you much in the way of an increase in your taxes.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)