To itemize or not

[RhythmKats]

My SO did some freelance work for the first time earlier this year (for about 3 mos). She is now a salaried employee and not working freelance. Typically she prepares her own taxes since it's usually just one W-2 (I think she uses Turbo Tax online). However, we're wondering if it would be worthwhile to pay someone to prepare her taxes this year since she had some expenses related to her freelance work. Her situation breaks down as follows:

$50k salary position (taxes, etc withheld)
$8k freelance income (nothing withheld)
$58K gross income

I don't know her exact expenses for the freelance work, but she bought some computer software and hardware as well as some basic office supplies. She also worked from home during that time, meaning she could potentially deduct some rent (although her office space is quite small). I think a reasonable estimate for business expenses would be about $800-900.

She will also open a traditional IRA this year, which she will be able to max out ($5500).

We live in NYC and are not married, so she will file as single. Tax prep around here is about $250. Is it worth it go through the trouble of itemizing the business expenses?

I've tried to list as many details as I think are relevant, but if something is missing, let me know.

[Numbers Man]

Purchase Turbo Tax on line. Indicate to Turbo Tax in the on line interview that there is a w-2 income and that there was freelance income. It should be rather painless for someone that is used to doing their own taxes.

[randymarsh]

I'm not a tax expert, but I think you're confusing whether to take the standard deduction or itemizing (listing out charity giving, mortgage interest, etc) with business expenses. Business expenses are deducted from business income, but that doesn't have an effect on whether you itemize.

I have a blog and it earned around 2K in 2012 plus I worked a W2 part time. I just used Turbo Tax and listed my wages from my W2 job. Then it asked about business income so I reported revenue of 2K and I also reported expenses (web hosting mainly) of $200. This made my profit $1,800. You don't really see this when using Turbo Tax, but the program uses that information to create a Schedule C Profit or Loss Statement.

I'm a college student and would have nothing to gain by itemizing, so I just took the standard deduction. But my business income had no effect on that decision.

From what you've described, I think Turbo Tax could easily handle this situation, but $250 also isn't a huge amount of money if she wants some peace of mind from a professional.

[Under_Score]

I suggest getting a tax expert for this year and maybe one or two more.

I had one do my taxes for three years. He paid for himself each year by finding additional deductions (I am an accounting major, so this does mean something). Now, as I prepare to do my own taxes next year, I will know to include that deduction.

When my tax situation changes again 4-5 years down the road (more income sources, buying a house) I will likely have one do my taxes again just to see if I would have missed anything. I probably will, they will pay for their own service, and I'll be able to use that each year afterward when I do my taxes.

If you aren't sure you are getting everything, find a local accountant to do your taxes for a reasonable price. I paid $125.00.

[RhythmKats]

Thanks for all the responses. It doesn't seem like it'll be as complex as I thought.

thefinanancialstudent: Thanks for correcting my terminology. I am referring to schedule C, self employment income and expenses....so my subject is misleading for sure. I'm sure she'll be using the standard deduction as it would not be worth itemizing.

Maigahane: You are correct about local NYC taxes. I don't know the exact rate, but it's higher than many other places. I'm actually partially self employed myself (with many more business expenses) and have someone prepare my taxes for between $250-$300, so it is possible around here. Although it's more common to see folks charging in the $400-$500 range.

Thanks again.

[Jamesqf]

It's worth deducting everything on Schedule C that she legitimately can, because she will also have to file Schedule SE (Self Employment Tax), which is about 12% of the business income, on top of regular income tax.

If she worked from home, she should also look at filing Form 8829 (Business Use of Home).