Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q: I am retired and collect Social Security, a pension and some investment income. This year I've also earned a little by selling advertising for a publication on a commission basis. I'm considered a self-employed contract employee and will receive a Form 1099. Expenses incurred in performing this job such as postage, toll calls, and mileage are not reimbursed. Can I deduct these expenses from the small income I received from this job?
A: Generally, recipients of a Form 1099 are considered an independent contractor, not an employee. An independent contractor files a Schedule C with his federal tax return to report the income received and deduct applicable expenses. Assuming you are an independent contractor, all of the expenses you mention would be deductible. You may also have incurred expenses such as office stationery items, photocopies, photography or other expenses which would be deductible if directly attributable to the work performed. Business mileage for 1995 is deductible at a rate of 30 cents per mile.
Q: Last year I sold a mortgage that I held personally and at the settlement I received approximately $300 in late payment penalties that weren't covered by the mortgagee. Do I have to pay taxes on that $300?
A: Yes, the $300 is taxable as additional interest income.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
A joint service from The Sun and the Maryland Association of Certified Public Accountants can help you with your tax queries. Association members, all CPAs, will answer questions from readers until April 15. To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Using a touch-tone phone, enter 6225 after you hear the greeting.
Callers are asked to leave their names and phone numbers should questions need to be clarified. Selected questions will be answered in the Business section. No questions will be answered by phone. Names and numbers will not be published.