Tradesmen & Unionized Workers

CARPENTERS, MASONS, FRAMERS, ROOFERS

If you work for yourself as a tradesperson or independent contractor, such as a computer technician, electrician, carpenter, construction worker, forklift operator, mechanic, machine operator, painter, plumber, welder, or laborer, you should expect to receive Form 1099-NEC. Any payments you receive for providing trade services, whether it’s your main job or a side gig, should be reported as self-employment income on Schedule C, Profit or Loss from Business. You can deduct all related expenses from your self-employment income on Schedule C. However, expenses related to your W-2 job are not deductible.

For example, if you receive payments for installing overhead fans in a home or wiring backyard lighting for a homeowner, that income should be reported as self-employment income. You may receive a Form 1099-MISC, Miscellaneous Income, for such work. If your net earnings are $400 or more, you must pay self-employment tax on the income reported on Schedule C. Additionally, you may need to make estimated payments to cover self-employment tax or income tax associated with the income reported on Schedule C.

You may be able to lower your taxes by deducting job-related expenses. If these expenses are related to self-employment, they may be deductible on Schedule C. Make sure to keep receipts to support these deductions. Some examples of items you may be able to deduct include:

  • Subscriptions to trade journals related to your work
  • Dues for trade associations or unions
  • Insurance premiums for protection against liability or wrongful acts
  • Specialized equipment or tools that are replaceable within one year
  • Safety equipment such as steel-toed shoes or boots
  • The cost and upkeep of uniforms if they are required for work and not suitable for everyday wear (for example, specialized coveralls, hard hat, work gloves, safety shoes, and goggles not suitable as street wear)
  • State or local government regulatory fees, licenses, or flat rate occupational taxes,

*You may be able to deduct work-related education courses or seminars if they meet certain requirements.

ADDITIONAL EXPENSES MAY BE DEDUCTIBLE IF YOU ARE A SELF-EMPLOYED TRADESMAN FILING SCHEDULE C. EXAMPLES OF SOME ITEMS YOU MAY BE ABLE TO DEDUCT INCLUDE:

  • Car and truck expenses when getting from one work site to another
  • Employee salaries or other forms of compensation such as bonuses or commissions
  • Legal and professional fees, such as accounting or legal advice that are directly related to the operation of your business
  • Rental expense for business use property such as trailer and equipment rentals
  • Travel expenses for traveling away from your business home if you are required to be away from home for longer than an ordinary day’s work – examples of deductible travel expenses include transportation by car, air, or bus, tolls and parking fees, lodging, and meals (with limitations)
  • Advertising
  • Tool and equipment repairs and maintenance
  • Supplies and incidental materials
  • Excise taxes and personal property taxes imposed on your business
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I AM UNION WHAT ABOUT ME?

If you’re self-employed, you can deduct union dues as a business expense. However, most employees can no longer deduct union dues on their federal tax return in tax years 2018 through 2025 as a result of the Tax Cuts and Jobs Act (TCJA) that Congress signed into law on December 22, 2017.

The job-related expenses deduction is still available to people who work in one of these specific professions or situations:

  • Armed Forces reservist
  • Qualified performing artist
  • Fee-basis state or local government official
  • You’re disabled and have impairment-related expenses
  • Additionally, job-related expenses may be deductible in your state.

WHAT TO EXPECT AND WHAT YOU NEED GENERAL TAX PREPARATION

Please keep the following information in mind for tax preparation:

What to Expect During Tax Preparation – How Can I Be Prepared? 

According to the Internal Revenue Service (IRS), nearly 85 million taxpayers enlist the help of professionals to complete and submit their tax returns. If you’re among them, it’s crucial to organize your receipts, forms, and other documents well before tax time.

Here are some of the things that Big Bear will expect from you if we are handling a “simple” return. More complex returns will require additional information. However, a little preparation will help you get through the process quickly and easily. Even if you do your own taxes, the steps below will help you get organized.

KEY TAKEAWAYS

  • Gather all the annual tax documents that record your taxable income and deductible expenses. Most of these documents will arrive by the end of January.
  • Collect all your receipts and organize them by category if you itemize your deductions. If you use the standard deduction, you don’t need to worry about the receipts.
  • Retrieve a copy of last year’s taxes for reference.
  • Your tax professional, tax software, or the IRS will have all the tax forms you’ll need for your tax return.

Choose a Tax Preparer

Make sure the person you choose has a preparer tax identification number (PTIN) showing they are authorized to prepare federal income tax returns. Also, inquire about their fees, which depend on the complexity of your return. Avoid using a firm that takes a percentage of your refund. The IRS website has tips for choosing a preparer and a link to the IRS directory of preparers, which you can search by credentials and location.

Are you in an affected area?

Taxpayers who were victims of wildfires and winds in areas of Colorado, California, or hurricanes in Florida and Texas have been given extra time to submit returns and make tax payments.

Schedule an Appointment

The sooner you meet with your preparer, the sooner you should be able to complete your return—even if you decide to file for an extension. If you anticipate a refund, you’ll get that sooner, too. Waiting too long to schedule an appointment with a tax preparer might cause you to miss out on opportunities to lower your tax bills.

Gather Your Documents

You should receive all the tax documents you need from your employer or employers, as well as from banks, brokerage firms, and others with whom you do business, by the end of January. Check that the information matches your records on each form. Some common forms include:

  • Form W-2 if you had a job.
  • Various 1099 forms that report other income you received, such as dividends, interest, and nonemployee compensation paid to independent contractors. Brokers aren’t required to mail Form 1099-B, which reports gains and losses on securities transactions, until mid-February.
  • Form 1098 for reporting any mortgage interest you paid.
  • Form W-2G if you had certain gambling winnings.

The better organized your records are, the less time it will take a preparer to process your taxes, which translates into lower fees for their service.

Round Up Your Receipts

The receipts you’ll need to provide depend on whether you itemize your deductions or claim the standard deduction. You’ll want to choose whichever produces the bigger write-off, but the only way to know for sure is to add up your itemized deductions and compare the result with your standard deduction.

For the 2022 tax year, the standard deduction for single taxpayers is $12,950; for married couples filing jointly, it is $25,900. Those figures increase in 2023 to $13,850 for singles and $27,700 for married couples filing jointly.1819

Make sure you look for receipts for medical costs not covered by insurance or reimbursed by any other health plan (such as a flexible spending account (FSA) or an HSA), property taxes, and investment-related expenses. These are all subject to limits, but if they’re substantial enough, it may be worth your while to itemize.

If you itemize your deductions, you’ll also need to collect any backup you have for charitable contributions. For example, donations of $250 or more require a written acknowledgment from the charity stating the amount of your gift and that you did not receive anything (other than perhaps a token item) in return.20 If you don’t have such an acknowledgment, contact the charity and request it. You can find more details on charitable deductions in IRS Publication 1771.21

If you have business income and expenses to report on Schedule C, you will need to share your books and records, such as QuickBooks or any other accounting system, receipts for expenses, and relevant bank and credit card statements.

Please make sure to have the following information ready:

  1. Your Social Security number and the Social Security numbers of any dependents you claim.
  2. If you own a vacation home or rental property, note their addresses. If you sold a property in the past year, note the dates of purchase and sale, the original purchase amount, and the sale amount.

Consider whether you need to request an extension for filing your tax return. If you do, remember that you still need to estimate and pay the taxes you owe by the regular deadline to avoid penalties and interest.

Plan ahead for any tax refund you expect. You can apply it to next year’s taxes, receive a check by mail or direct deposit, contribute to specific accounts, or split the refund among different options.

Find a copy of last year’s return, especially if you’re using a new tax preparer. This will help ensure you don’t overlook any important items, such as interest and dividends or charitable deductions.

Remember that income tax returns are generally due on April 15, but the deadline may be extended in certain situations. For example, the deadline for filing 2020 tax returns was extended to May 17, 2021, due to the pandemic.

The cost for tax preparation using Form 1040 was $220 with the standard deduction and $323 with itemized deductions in 2020.

If you need more time to file your tax return, you can request an automatic six-month extension using Form 4868, but remember that this extension only applies to filing, not to paying any taxes owed.

Starting early can help make the process smoother and ensure you have everything in order for another year.