Business expenses deducted for means test?

[tallberry]

Okay, my attorney told me something today I swear I;ve never heard of. We are filing chapter 7 but are over the median income by $2000/annual. I am an independent contractor (sell pre-need insurance) and he said that I can deduct my business expenses (postage, mileage, tolls, paper supplies, etc) for my means test. Has anyone heard of that? If so, I have been looking through the paperwork he gave me for the last hour and can't find a place that you would plug in business expenses for a deduction on the means test. Can someone please help me out with this? Also, if you are someone who has done this successfully in a situation similar to me, please give me a shoutout on what all you deducted? I listed the obvious ones but whatabout a portion of the internet bill, electric bill (I work from a home office)...those types of things? He made it sound like we could almost negate my income. I need to have a P&L to him ASAP! Thanks to all!

[biotechsolution]

you would add an additional page of business expenses. then total them and put them on under that same heading business expenses. If you are self-employed you can most likely add another 1K pretty safely of additional expenses. Just about anything can be a business expense.

[tallberry]

bio, I guess what I am saying is that where on the means test (what line) do you put business expenses? I see a line for child care expenses, education/care of disabled child expenses, etc. but no place for business expenses. I believe my attorney when he says that they can be deducted from my gross income but I can't create a line in the means test that isn't there. That's what I am so worried about...

[tallberry]

okay, good news, I found it on the worksheet (what a ditz I am, right under my nose). Now here's my next silly question...it looks like if I deduct my expenses in the proper place, this will actually adjust my income that is compared to the state median income amount. true or false?

[tallberry]

Also, what business expenses are typically allowed? What if I don't have all of my receipts for what I bought but have debits to Staples and other places on my debit card?

[eloisa]

i think the form is asking for own personal business income and expense, not the company per se. im not very sure about this though

[eloisa]

i mean not the company's income per se

[tallberry]

I'm sorry, eloisa, I don't think I am following you. I am an independent contractor (self employed), so my expenses to run my business are deductible. I just need to know what is acceptable. For instance, can I use a portion of cell phone bill, internet bill, electric bill (for home office), etc. ?

[Knew_it_all]

Get a copy of last years 1040 form and whatever schedule you listed your <business expenses> on..Transpose those numbers onto the Means Test worksheet...Done!

[tallberry]

Great idea, but I have only been self employed for 4 months. However, I will try to find that schedule on the internet and fill it out accordingly. I did find on the irs.gov website some information but, for instance, it says if you have a home office you can deduct a "portion" of your rent. Well, what does "portion" mean? Couldn't they just make it simple and give me a formula to use to get to the amount allowable? Does anyone know that that formula is?

[ejny65]

Hi Tallberry, is your business a corporation? mine is and I dont see how I would bring any expense from corporation to means test or schedule J. My debts are all personal. Thanks Tallberry.

[biotechsolution]

tallberry. anything you use in the course of your business can be a business expense if you are self-employed. since you are self-employed your home office expense is easier than if you were to receive a w-2. more than likely you will only write-off between 10-20% of your total home expenses for your home office. but being self-employed you can expense your cell phone, internet, phone/fax lines. all business related travel at the 48 or so cents a mile plus parking and tolls. meals.
all of these expenses are in addition. these would apply after all your means test expenses are added up.

[tallberry]

I am not a corporation, simply self-employed and work from my home office. Bio, that is great information. I read on the IRS website that as long as I use my office in my home exlusively for business (which I do) than you can deduct a PORTION of rent, phone, internet, etc. What in the world does a PORTION mean? You gave me more info by saying 10-20%...is it up to my discretion or is there a formula? I want to play by the rules...One more thing, my sister said my lunches may not be deductible because my sales territory is only 45 minutes away. But it isn't like I can come home for lunch in between appointments, anyone know the guideline on this?

[Bobby'sGirl]

Links to answer your questions: base use on square footage (example: 10x12 ft den =120sq ft or 5% of a 2400 sq ft home)

http://www.irs.gov/newsroom/article/0,,id=163079,00.html

Generally to deduct 50% of personal meals (as opposed to "entertainment meals" for business with a client) you need to be away from your "tax home" far enough to warrant overnight or "extended rest" stay...open to fuzzy interpretation by IRS but the Big Mac at the corner McD' on the way to an appointment won't cut it...

http://www.irs.gov/faqs/faq12.html

Get yourself a good "small business tax deductions" book from the local library or booksellers and set up some really good record keeping. You are going to need ALL of this to make a go of record keeping for your small business...trying to make sense of a shoebox of faded receipts washed in your pants pockets will cost you money next year at Schedule C time.

Good luck!

[tallberry]

You are a life saver, Bobby'sGirl, this was what I was looking for...Thank You!!