Reporting loss on Schedule C for 1099-NEC consulting work for family business?
Hey everyone, I could use some tax advice. My mom recently incorporated her home remodeling business and paid me for some bookkeeping consulting this year. I earned $1,500 and received my first 1099-NEC (previous years I helped but earned under $600 so no forms). I'm working on my 2024 taxes now and it's prompting me to fill out a Schedule C. I've seen this form before, but I'm questioning some deductions. I used my SUV for this consulting work, which I purchased new in 2022 for $57,000, but I've never claimed it on my taxes before. Is it okay to start claiming it now? The tax software is calculating depreciation at line 13 as $7,825 and my vehicle expenses on line 9 are $5,950. This includes $3,700 insurance, $870 loan interest, 325 business miles, $635 repairs/maintenance, and $745 registration fees. The way I've entered everything, I'm showing a $14k loss instead of income. Does this sound right or am I missing something? Is it legitimate to claim these expenses against the $1,500 I earned from my mom's business?
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Nina Chan
This is a common situation with side consulting work. Yes, you can absolutely start claiming business use of your vehicle in the year you begin using it for business purposes, even if you've owned it for a couple years prior. However, there are some concerns with your calculations. First, vehicle expenses can be claimed either using the standard mileage rate OR actual expenses (insurance, loan interest, repairs, etc.) plus depreciation - not both methods together. If you only drove 325 business miles, the standard mileage method would likely result in a much smaller deduction. Also, the IRS will scrutinize large losses from businesses, especially those involving family members. To be considered a legitimate business expense, costs must be ordinary and necessary for your consulting work. A $14k loss on $1,500 income raises red flags about whether this is actually a profit-motivated business or a tax strategy. I'd recommend recalculating using just the standard mileage rate for those 325 miles and only including expenses directly related to your consulting work. Remember that commuting miles are generally not deductible.
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Ruby Knight
•If they choose the actual expenses method, wouldn't they need to track the percentage of business use vs. personal use? Like if the SUV is driven 10,000 miles a year but only 325 were for business, they'd only be able to deduct 3.25% of those expenses, right? Also, can they really claim full depreciation on a vehicle used less than 4% for business?
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Nina Chan
•You're absolutely right about tracking business use percentage. With only 325 business miles out of presumably many more total annual miles, they would only be able to deduct that percentage of the actual expenses, not the full amount. For depreciation, the same principle applies - you can only depreciate the business-use percentage of the vehicle's value. With such minimal business use, the depreciation deduction would be significantly lower than what they calculated. Also, luxury vehicles have additional limitations on depreciation amounts.
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Diego Castillo
I went through something similar with my side business and found taxr.ai super helpful for sorting out all my 1099 deductions! I was totally confused about vehicle expenses and depreciation until I uploaded my docs to https://taxr.ai and got clear guidance. The tool explained exactly how to properly calculate business percentage for my car and what documentation I needed to keep for the IRS. Saved me from potentially claiming too much and getting flagged.
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Logan Stewart
•How does taxr.ai actually work? Do I have to upload all my receipts and stuff? I'm nervous about putting financial docs online.
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Mikayla Brown
•Does it actually tell you if your deductions look suspicious or likely to trigger an audit? My dad's accountant is always super conservative and I feel like I'm leaving money on the table.
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Diego Castillo
•The system just needs your tax documents, not individual receipts. You upload your forms (like your 1099-NEC) and it analyzes them against tax regulations. Everything is encrypted and secure - I was hesitant at first too. It definitely flags potential audit triggers! That's what I found most valuable. It warns you when your deductions seem out of proportion to your income (like your $14k loss on $1.5k income would definitely get flagged). It's not about being super conservative, but about taking legitimate deductions that won't raise red flags.
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Logan Stewart
Just wanted to update after trying taxr.ai - it was actually really straightforward! I uploaded my 1099s and it immediately identified that my vehicle expense calculations were way off. Turns out I was double-counting some expenses AND not properly applying the business-use percentage. For my situation with only about 5% business use of my car, it recommended the standard mileage rate which was much simpler and still gave me a legitimate deduction. Definitely avoided what would have been an audit risk!
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Sean Matthews
If you're worried about documentation for your deductions, especially with family business transactions, I'd strongly recommend getting ahold of the IRS directly to ask about your specific situation. I know it sounds impossible to reach them, but I used https://claimyr.com and got through to an IRS agent in about 15 minutes instead of waiting for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly what documentation I needed for family-related business deductions and what would likely trigger extra scrutiny.
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Ali Anderson
•How can this possibly work? Every time I've called the IRS it's a minimum 2-hour wait if they don't just hang up on me.
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Zadie Patel
•Sounds like a scam tbh. How would some random service get you through the IRS phone queue when millions of people can't get through? The IRS literally tells people not to call because they're so backed up.
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Sean Matthews
•It uses an automated system that navigates the IRS phone tree and waits in the queue for you. When an agent is about to pick up, it calls your phone and connects you. I was skeptical too, but it actually worked! It's definitely not a scam - it's just technology working around an inefficient system. Think of it like having someone wait in line for you. The IRS is severely understaffed which is why the wait times are so long, but this service just handles the waiting part for you.
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Zadie Patel
OK I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it myself since I've been trying to reach the IRS about a similar business expense question for weeks. Got connected to an agent in about 20 minutes! The agent confirmed that claiming large vehicle expenses against minimal consulting income would likely trigger a review, especially with family transactions. They suggested documenting everything meticulously and considering standard mileage rate instead. Worth every penny not to spend hours on hold!
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A Man D Mortal
I'm a bookkeeper for several small businesses and see this situation often. One important thing no one has mentioned: You need to be able to prove your consulting work was legitimate and priced at market rate. The IRS looks closely at family business transactions to make sure they're not just tax arrangements. Make sure you have: 1. A written agreement/contract for your services 2. Invoices for work performed 3. Proof of payment (checks/transfers, not cash) 4. Documentation of actual work (reports, spreadsheets, emails) 5. Proof that your mom's business paid you a reasonable market rate Without these, even with modest vehicle deductions, you could face issues if audited.
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Declan Ramirez
•Does it matter if the family member business is an S-Corp vs sole proprietor? My sister started paying me for IT work but her business is just a Schedule C.
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A Man D Mortal
•The business structure does make some difference in how the transactions are reported, but the fundamental requirement that transactions be legitimate business activities at fair market value applies regardless of structure. With an S-Corp, there's typically more formal documentation and separation between the business and owner, which can help establish legitimacy. With a sole proprietor/Schedule C business, transactions between family members often receive more scrutiny because the line between business and personal is less formal.
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Emma Morales
Aren't you making this way more complicated than it needs to be? Just claim the standard mileage rate for those 325 business miles and be done with it. That's about $195 in deductions, so you'd still report $1,305 in net profit. Yeah you'll pay some tax but honestly claiming a $14k loss on $1,500 income is basically asking for an audit, especially with family transactions lol
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Katherine Hunter
•This is the most sensible advice here. The standard mileage rate is so much simpler and the IRS rarely questions it as long as you have a mileage log. Taking huge vehicle depreciation for minimal business use is asking for trouble. The IRS isn't stupid.
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