A community of 30,000 US Transcriptionist serving Medical Transcription Industry

Tax Filing Question

Posted: Jan 29, 2016

I'm curious as to how everyone files (which is a nice way to say I think my husband is doing it wrong) :) He did a quick estimate on our taxes this year, and mentioned that he categorized me as a 'small business owner'. I know this is probably splitting hairs, but I don't think in years past that that was an issue. The reason I'm asking , this distinction is has the potential to cost us upwards of $10k in taxes that I don't think would apply if he didn't list me as a small business owner (I don't have an LLC...just do the 1099 thing...).

Do you list yourself as a small business owner?

Is there a distinction between that and just being a 1099 contractor as most of us are?

Yes, I should consult a tax professional, but thought I'd take a completely off-the-record poll here and see what was the general concensus. Thanks in advance!

;

My two cents - WS

[ In Reply To ..]
I never listed myself as a small business owner when I was an IC. I listed myself as self employed. I have not been self employed for almost 10 years though, this was many years ago but I was using a licensed tax professional to file at that time.

Hope it helps!

Self-employed with home office - sm

[ In Reply To ..]
I have now switched to employee status from IC, but I was able to deduct a percentage for space, heat, gas/electricity, garbage service, office supplies and equipment (including depreciation of house and computer), property taxes, insurance, etc. By the time I had all my deductions figured did the IRA, health insurance and SS payments, I did not have to pay much of anything. I was able to do it with purchased software, but an appointment with a tax person is not that expensive either (and is also deductible). Good luck to you.

He is classifying you incorrectly...SM - Old Anon

[ In Reply To ..]
On Schedule C (Profit or Loss From Business), my CPA puts Transcription Services on line C which is code 561490 in the box labeled B. He also does Form 4562 (Depreciation and Amortization) for the value of my computer and he takes a deduction for mileage based on a percentage of use for business, not actual miles. On schedule C, I also take percentages of mortgage insurance, mortgage interest, taxes, electric, heat, sewer charge, water, cost of health/dental insurance (including copays), office supplies, reference books, software, cost of internet based on hours used for work only (not the whole bill), business-related postage, yard maintenance, snow removal. Home phone is not a deduction, unless you have a separate line specifically for business. My office measures 12 x 12 (144 sq. feet) and my house is 900 sq. feet, which is 16%. So, he takes 16% of all those things mentioned above as an expense. My expenses outstrip my income, so I always run a loss. If I ever get audited by the IRS, it is all documentable and my CPA will represent me with the IRS. It's part of his service. So, you are not a business owner. You would use code 561490, which is transcription services on Schedule C. It may be helpful to have a professional do your taxes the first time, then you can see how it's done and try to do it yourself next year.

schedule C is for businesses - no name

[ In Reply To ..]
He is doing it correctly. In order to file a schedule C, that is for independent business. You can take your expenses like computer and house and other things at a portion with depreciation value like she says, but either way you are still labeled a business owner.

Yes, you are correct...SM - Old Anon

[ In Reply To ..]
and my business is transcription services. Apparently, there is more than one classification and code. My CPA just chose a more specific code rather than just business owner. Don't know if it makes any difference. I've been using that classification and code for about 15 years. No problems.

The OP mentioned she was worried about using business owner as a classification and that she is not an LLC. She is a sole proprietor which is quite different. If she were an LLC, she would have to file a corporate return. No need to do that as a sole proprietor who is not incorporated.

I have always used code 561410 on my C-EZ form - sm - InkMT

[ In Reply To ..]
without a problem and put medical transcription in box A. File using a 1040, but schedule C-EZ, kind of weird, but that is what the Turbo Tax does. I don't do the home office write-off as I don't want to deal with it later when/if we sell the house, which may happen once kids through college, we have land in another county we might finally go to, will see. I do write-off a percent of all the home expenses, heat, electric, phone, supplies, etc.

Thank You - mel268

[ In Reply To ..]
Thanks to everyone for your response. That helps. I've been doing this for about 12 years now, and I actually think that he just hit something wrong in his estimation. Appreciate all of your input!

The only danger with claiming a loss - Nick

[ In Reply To ..]
There is at least one danger about claiming to run at a loss for too many years--it may trigger an audit and the IRS will reclassify what you do as a hobby, not as a business. You would have to ask your CPA for the specifics (I loathe tax law and it sounds like you have a good pro at your side, so ask him about this), but I distinctly remember the warnings about claiming a loss for too many years. Good luck to you! I once saw a bumpersticker that said: FIGHT ORGANIZED CRIME--ABOLISH THE IRS. Nuff said.

Tax question - Old Pro

[ In Reply To ..]
Here is my 2 cents' worth--you know what they say about free advice--it is worth about what you paid for it ;) but here goes. I have been everything from an IC to a statutory employee to a regular old plain vanilla employee to an MTSO myself. I have always used the services of a CPA. My sense is that CPAs are more expensive in California than elsewhere (like everything else), but I have been with the same CPA for 30 years and it is well worth it. As he said when we first started to use him, he believes in paying honest and fair taxes. He told me that he tells all first-time clients that he is not the kind of accountant who will dummy up a financial statement or put blue sky in your tax return. But he will make sure you do not pay a dime more than you owe. As I progressed from being an employee of a large hospital to being an IC, then an MTSO, etc. he was able to guide me along so that I did not inadvertently make mistakes. If there is anybody you don't want to make mad, it is (as Nick calls it) the Infernal Revenue Service. I have found that the money I have saved by using a CPA has really paid the cost of his fee. Even though I am now (mostly) retired, I still use him. I think it is worth the money. Just IMHO. Here is a thought: Back after the earthquakes here (many years ago) the husband of a friend of mine, a civil engineer, was hired to work on the project of rebuilding roads, etc. His wife (a Navy reserve officer) was called up to serve and her engineer husband did their taxes that year. They used the EZ-E form. Well, gues what? The IRS called them in for an interview! He had made some silly mistake that had thrown the whole thing off. His wife was so angry--she said that she did not think it was possible to mess up an EZ-E form and she hoped he did a better job on the California roads than he did on doing taxes. It was pretty funny--and is food for thought. Good luck!

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