Are you receiving 1099 forms from employers? For those working in the gig economy as freelance entertainment technicians the most often received form during tax time is the infamous 1099. It is simply a way for a company to report to both you and, unfortunately, the IRS how 

much they paid you in a given year. The special thing about a 1099 is that it reports the full amount the company has paid without taking any taxes. When we say “taking any taxes” we mean they have not paid any taxes to the government on your behalf. Therefore, it all lands in your lap and unless you’ve been wisely paying quarterly taxes to the IRS, you may owe them a boatload of change.

As opposed to an employee who would receive a W-2 form that lists how much taxes they taken out and how

 much you’ve taken home, the 1099 indicates and recognizes that you are working as a freelancer or independent contractor. Most often on a job to job bases without being beholden to a single employer for a continuous span of time.

Because you are operating independently, there are various self-employment taxes that you are now responsible for. No one else is taking out money on your behalf to pay for Social Security nor Medicare. You’re on the hook for these and other federal taxes. You’re also solely responsible for dealing with state and local taxes and these 1099 forms will all become part of your tax return.

 There are other versions of 1099 forms. The Form 1099-DIV reports dividends and/or other income dealing with the stock market. A Form 1099-INT might be received from a bank that is paying interest. These are all forms of income that are not derived from working for a specific employer.

Writing this article in December 2020, it’s likely that many in our industry may receive a Form 1099-G. This one is from government agencies that report both income tax refunds and, unfortunately due to current events, unemployment compensation. You should be receiving information from the revenue department of your home state regarding any unemployment benefits you’ve received over the year.

Back to our 1099 forms that you’ve received from your various clients over the year. It is important for you to check them all for accuracy. The number one mistake I hear of most often is that the bookkeeping department of the company that issued the 1099 included the per diem that was paid/received. Per diem should not be listed on a 1099 form as they are not reportable taxable income. Provided that certain regulations are followed, the IRS need not know about your Perdiem payments. Click here for more on per diem.

 If you find this mistake on your 1099 form you must alert the payor and request a revised Form 1099 be issued. Surprisingly, the IRS expects you to occasionally have trouble getting an updated form. “If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.” (irs.gov)

 When might you not receive a Form 1099 from a gig you’ve worked on? Employers are not required to issue one if you earned less than $600 from them over the course of a year. Unfortunately, this is not free money as the IRS still wants to know about it. Remember that if there’s any type a paper trail such as checks, PayPal payments, written receipts, contracts, letters of agreement, invoices, etc. and anyone gets audited, you may be on the hook for both the back taxes and possible penalties for not reporting income. 

 If you have been keeping up with your bookkeeping over the year than the total amount of all these Form 1099s you’ve received should equal the gross amount of money you’ve received in payments. Remember that your paying taxes on the net amount of money.

Gross versus Net income.

 With various exceptions we are supposed to pay taxes on the money we get to keep personally. We are not supposed to pay taxes on what it costs us to run our business. These expenses may or may not include the following:

• A tool purchase for a specific task related to your work. 
  • Gloves, earplugs, harnesses, wrenches, etc. all count.
  • Multimeters, DMX tools, cable testers, etc.
• Unreimbursed travel expenses.
  • Any travel beyond that of a normal commute can be included as a deduction. Transportation ticket fees and such are calculated on the dollar amount. If you’re driving, you would deduct the mileage rather than the cost of filling your tank.
• Meals where business is discussed.
  • Keep in mind that going out for dinner and a beer with the crew at the end of the day is different than discussing the afternoon tasks over lunch. Be careful here if you are receiving a daily per diem as this can create murky waters.
• Home office expenses.
  • You can deduct a percentage of all the home expenses you pay out if you use a dedicated space for doing work related tasks towards running your independent business.
  • This works if you have actual work that needs to be performed against the income you’re making. In other words, if your job includes prepping paperwork in order to be prepared for loading day, then you are legitimately using your home office for work related tasks in exchange for the money you’re receiving.
    Albiet this can also include the work you do towards obtaining future employment. Website update time, resume preparation, cover letter writing, etc. all count as work-related tasks
• Storage space for your tools. I’m not necessarily talking about the corner of a closet where you keep your tool bag. If you have a significant area in your basement or garage in which you store a significant amount of gear, you may be able to deduct a percentage of the expense for that space. What expense? Usually rent or mortgage.

 The above is just an example of deductions and such. We will have more on this elsewhere on the site. 

 It is important to note that the above information is written using personal knowledge of this individual writer. The reader is advised to do their own research that fits with their individual situations and is strongly advised to seek guidance from financial and/or tax professionals. This writer hasn’t done his own taxes in 30 years. There’s too much to keep up with and I prefer to research the latest toy being used by the entertainment industry.