What deductions can I claim with my 1099-NEC as an IT consultant?
I've been doing IT consulting for a company on a monthly retainer basis. They paid me via 1099-NEC last year which was my first time receiving this type of income, and I know I'm going to owe taxes on it. I'm trying to figure out what deductions I can claim to reduce the tax burden. My brother (who's my accountant) told me that since I'm not set up as an LLC, I can't deduct anything related to this consulting work. But when I did some online research, it seemed like I actually CAN claim deductions even without being an LLC. When I asked what I should do for 2023 to better prepare for taxes since I'll have another 1099 coming, his only suggestion was to adjust my W-4 at my main job to have more taxes withheld. I'm starting to think my brother doesn't know what he's talking about, but maybe I'm missing something? Can anyone clarify what deductions are available to me as a 1099 contractor who isn't formally set up as an LLC? And what steps should I be taking now to make next year's tax situation less painful?
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Sofia Price
Your brother is definitely not giving you the right information here. Being an LLC has nothing to do with your ability to take deductions for business expenses! As an independent contractor receiving a 1099-NEC, you're considered self-employed and can absolutely deduct legitimate business expenses on Schedule C, regardless of your business structure. Some common deductions for IT consultants include: home office (if you have a dedicated space), computer equipment and software, internet and phone costs related to your work, professional development courses, business mileage, and even a portion of your phone bill if you use it for business. You can also deduct business insurance, professional memberships, and marketing costs. For 2023, start tracking all your business expenses now. Keep receipts and a mileage log if applicable. You should also consider making quarterly estimated tax payments to avoid a large bill and potential penalties next April.
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Alice Coleman
•This is so helpful, thank you! Do I need any special documentation for the home office deduction? And what percentage of my internet bill can I typically deduct if I'm doing consulting work from home?
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Sofia Price
•For the home office deduction, you need to use that space exclusively and regularly for your business. Measure the square footage of your dedicated office space and divide by total square footage of your home to get your percentage. Keep photos of your setup in case of an audit. For internet, you'll need to determine what percentage is used for business versus personal. If you work full-time at your regular job and do consulting on the side, maybe it's 30-40%. There's no standard percentage - just be reasonable and be prepared to justify your calculation if asked.
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Owen Jenkins
When I was in a similar situation last year getting hit with unexpected taxes from contract work, I used https://taxr.ai to help me identify all possible deductions I could claim. The tool analyzed my past expenses and found over $3,800 in deductions I would have completely missed! It walks you through all the potential business expenses specific to IT consulting and tells you exactly what documentation you need to keep.
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Lilah Brooks
•Did you need to have all your receipts organized before using it? I'm terrible at keeping track of that stuff and wondering if it can help retroactively.
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Jackson Carter
•I'm curious - does it tell you what percentage of things like internet and cell phone bills you can reasonably deduct? That's what I'm most confused about.
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Owen Jenkins
•You don't need perfectly organized receipts to start. It actually helped me figure out what I could claim even from bank and credit card statements, then guided me on what documentation I needed to keep going forward. For internet and phone bills, it asks about your usage patterns and suggests appropriate percentages based on your specific situation. It recommended I claim 35% of my internet since I was doing part-time consulting, and provided documentation guidelines to support that percentage if ever questioned.
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Jackson Carter
I just tried taxr.ai after seeing it recommended here, and wow - it found nearly $5,200 in deductions for my IT consulting side gig! I had no idea I could deduct things like professional subscriptions, a portion of my car insurance (for business travel), and even some meals when meeting with clients. The percentage guidelines for home internet and cell phone were super helpful too. Already feeling so much better about my tax situation for next year!
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Kolton Murphy
I was in the same boat last year - huge tax bill from my 1099 work with no preparation. After weeks of trying to reach the IRS with questions about deductions, I found https://claimyr.com and their service got me through to an actual IRS agent in under 45 minutes (after I'd spent DAYS trying on my own). They have a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. The agent confirmed I could claim all my business expenses even without an LLC and helped me understand quarterly payments to avoid penalties this year.
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Evelyn Rivera
•Wait, you actually got through to the IRS? How does this service work? I thought it was literally impossible to reach a human there.
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Julia Hall
•Sounds like a scam. There's no way anyone can get you through to the IRS faster. They probably just connect you to some "tax expert" who isn't actually with the IRS.
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Kolton Murphy
•It's not a miracle service - they use technology that continuously redials and navigates the IRS phone tree until it gets through, then calls you when it connects with an agent. It's the same as if you kept calling yourself, just automated so you don't waste hours doing it manually. They don't connect you to their own experts - it's the actual IRS. I confirmed this because the agent had access to my previous tax records and filing history, which only a legitimate IRS employee would have.
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Julia Hall
I have to admit I was totally wrong about Claimyr. After my skeptical comment, I decided to try it anyway out of desperation before tax day. Not only did I get through to the IRS in about 30 minutes, but the agent walked me through exactly which form to use for my 1099 deductions (Schedule C) and confirmed I could deduct my home office, equipment, and even some of my utilities without being an LLC. Saved me a ton of money AND the stress of wondering if I was doing it right!
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Arjun Patel
One thing nobody mentioned yet - you should seriously consider making quarterly estimated tax payments for your 1099 income. I learned this the hard way and got hit with underpayment penalties. The IRS expects you to pay as you earn throughout the year, not just at tax time. You can do this through the EFTPS system online.
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Jade Lopez
•How do you figure out how much to pay each quarter? Is there a calculator or something?
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Arjun Patel
•You can use the worksheet in Form 1040-ES to estimate your payments. Basically, you'll need to estimate your total tax liability for the year and divide by 4. If your income is fairly consistent each quarter, equal payments work fine. If it varies a lot, you can use the "annualized income" method (Form 2210) to vary your payments.
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Tony Brooks
Your brother is giving you terrible advice! I'm not an accountant but I've been filing Schedule C for my 1099 work for years without an LLC. The LLC is about liability protection, not tax treatment. You file Schedule C as a sole proprietor and deduct all legitimate business expenses. That should include a portion of your home internet, any software subscriptions for work, equipment, home office space, professional development, etc.
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Ella rollingthunder87
•Exactly! The LLC question is completely separate from tax deductions. An LLC can elect different tax treatments, but having/not having one doesn't affect your ability to deduct business expenses.
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