1099 income - SE tax - Means test

[GWBcasualty]

Hi everyone,
On the means test there is a line to deduct taxes.

How do you go about it in case of 1099 income (independent contractor about $2,000/mo)?

I can calculate the monthly SE tax and enter it on that line, but the tax is not actually withheld or paid monthly.

[newbie2]

I took the amount I paid to the Fed and State taxing authorities the previous year and divided by 12. Your income tax returns will back up your figures. (If the amount you are making is less, then figure on less taxes..)

[GWBcasualty]

I took the amount I paid to the Fed and State taxing authorities the previous year and divided by 12. Your income tax returns will back up your figures. (If the amount you are making is less, then figure on less taxes..)

That is a possibility.

However on my taxes I treat that income as a schedule C (turbotax) and I am able to deduct expenses such as meals, biz travel and biz use of my car.

Since I am taking the car deduction on the means test wouldn't that mess it up?

The key is. I am getting paid $2k/mo for this job but the taxable income is only about $1.2k/mo after expenses. So, do I do the same on the means test or do I take larger cut for SE tax?

On the wages line it says to put "gross" income.

Not sure if I made sense...

[newbie2]

You still put your gross wages, and then estimate what your taxes will be (minus expense deductions). That is why I said to look at your previous years tax returns. It will be a good guideline..if you paid $2400 last year in income taxes after your expense deductions then you would estimate $200 per month as an income tax expense. I'm not sure how the car deduction is looked at in your district (whether you can still take the operating expense and use the mileage deduction to reduce your income tax) Best to ask your attorney how this plays out in your district.

[catleg]

I suspect this can be done several ways.
You could check the US Trustee website for guidance.
I would put the income according to schedule C as my gross income and not take the BK deduction for the car.
But that's just my gut instinct.
I mean you could have 1,000,000 gross income with 950,000 in expenses...then what is your income? 1,000,000 or 50,000? Which gives a more accurate picture of your financial status?

[GWBcasualty]

I suspect this can be done several ways.
You could check the US Trustee website for guidance.
I would put the income according to schedule C as my gross income and not take the BK deduction for the car.
But that's just my gut instinct.
I mean you could have 1,000,000 gross income with 950,000 in expenses...then what is your income? 1,000,000 or 50,000? Which gives a more accurate picture of your financial status?

That's what I thought... although I get a check every month, it's still a 1099 job and I drive about 2k miles a month for work... with gas at $4/gallon it really adds up.

So, I guess it's common practice to treat 1099 income as business income in BK filing just as one would in the 1040?

[catleg]

I don't know this for a fact, but it's a grey area and you can make a case for it.
Of course the trustee may not agree, but bankruptcy is ultimately a negotiation process.

[tcreegan]

Hi GWB,

For the means-test your 1099 income should be the gross on line 4a. Then you subtract line 4b ("ordinary and necessary" business expenses) to get your net on line 4c (essentially the same as Sched C income, but on the means-test you want avg monthly for the last 6 months)

You won't have anything from 1099 on line 3, gross wages (unless you are getting W2 income from another job)

Your SE tax goes on line 25

Don't double dip, if it comes off as a business deduction on line 4b, don't deduct it in Part V of the means-test. And vice-versa

Same song, second verse on Schedule I, business income (net) goes on line 7 w/ a detailed statement, nothing on line 1 gross wages (unless you have W2 income from somewhere else)

The SE tax goes on Schedule J, line 12

Hope this helps, hang in there!

Tom in Colo

ps: I mentioned another job when I saw 1.2K a month and California in the same post. CA median income is ~4K a month, if you are only pulling in 1.2K a month, the means test and schedule I&J are just a formality, heck even w/ the 2K gross you don't have to fill out half the means test, no expenses needed.