Behold the tax season is here with us. It began on January 24, 2022 and will run until April 18, 2022. In truth it is a season many wish they did not have to deal with or could avoid altogether. It is therefore not shocking that according to Forbes, 43% of Americans do not file their taxes simply because they do not want to deal with it. Moreover, majority of richer Americans do not disclose about 20% of their earnings to IRS, to lower their tax implication on taxable income they earned throughout the year. Others wait until the last minute and even then, don't know where to start because none of the relevant paperwork has been compiled in readiness for filing their taxes. Some haven’t received all the relevant forms for monies they earned the previous year either their W2s, or different types of 1099s and they are not sad about it. If honest those who worked double to triple shifts or did a lot of overtime or generally just made a lot of money, dread the receipt of all the tax documents. Woe unto those who paid no taxes or underpaid their taxes, you might owe!!! Can you relate….is reading this already making you sick or uncomfortable?
Newsflash - apparently, someone who frequently avoids negative information or hearing and dealing with things that make them uncomfortable is said to be suffering from the Ostrich Syndrome (OS). In this case it includes tax filing avoidance, especially for people who make a lot of money and are afraid that they may owe IRS or others who underwent a change in their marital status, or are in a higher tax bracket, hence afraid they may warrant less desirable tax related outcomes. .
“You've heard that ostriches bury their head in the sand when they're scared or threatened. They think they are safe if they can't see the danger. That's a myth!. Ostriches don't live that way. The Ostrich Syndrome describes human fallibility."
According to Carey Kirk, a counselling psychologist at The Arabia Lighthouse in Dubai, the Ostrich Syndrome is a way of coping called ‘avoidance coping’, that individuals use to manage uncomfortable feelings they may experience in different scenarios of their life. Carey adds to say that “Avoidance is a form of non-acceptance of life,” hence perceived as an attempt at fighting reality and sadly this takes up a lot of energy. One of the risks of acting like an ostrich that sinks its head in the sand, is being short of energy in other areas of one’s life. An individual may feel fatigued, have difficulty concentrating, or be irritable for reasons one can’t easily identify. .
Other risks posed by having the OS includes experiencing anxiety and discomfort around certain topics, circumstances, or varied aspects of life. For example, when this type of personality rents an apartment for their first time and receives their first bill, the tendency to ignore the bill is inevitable. Amazingly in so doing, they get their anxiety soothed in the short run, however when other bills accumulate, which will often be the case, their anxiety hits the roof. All the bills will continue to be ignored and the person becomes trapped in a negative cycle, where avoidance feeds into their anxiety, and this then prompts the person to sink their heads even further into the sand. The reason why this occurs is because they soon discover their avoidance of issues is related to not only bills but anything in life that overwhelms them. And they are forever wishing if only they did not have to face these problems. In fact, it would even be better if someone else handled those issues for them.
With Covid-19, the number of people who have exited active employment and become self-employed, run single LLCs or started their own proprietorships is unprecedented. In addition, online brokerages witnessed a tremendous increase of day traders and longtime investors. All looking for alternative ways to earn a living due to the precarious ways the pandemic catapulted their lives. As such, several people will be receiving 1099-Nec, 1099-B, 1099-D and 1099-K forms among other IRS forms. They will need to file the IRS Schedule C, a tax form used for reporting profit or loss from a business.
While all these can certainly be overwhelming, as you prepare for this tax season, please be advised, taking the Ostrich Syndrome stance is not a strategy. Instead take the bulls by the horns and be better prepared for the tax filing season. That starts by compiling all your tax documents before filing. Secondly, for those who became self- employed in 2021, started side hustles and/or did contractual work, be on the lookout for your 1099 form in the mail. In case you are due one of these forms and have not received any one of them, call the entity that contracted you and request that, they send it to you for tax filing purposes. Remember after reviewing your 1099 form if you identify any discrepancies, you may reach out to the entity that you contracted/invested with and request for a correction of the document, before filing. Also, if you are unable to get the 1099 form from the entity you worked for, such as Uber or Door Dash you may reach out to IRS and request them to assist you in securing the form from the entity you worked for.
Once you have all your documents, it is time to present your tax preparer with all your relevant documents for 2021. Below is a curated list of potential business expenses normally incurred that one may claim to get deductions. And perhaps save some money, maybe owe less, or get a refund that brings a smile to one’s face.
Top 1099 Tax Deductions
Health Insurance Premiums - considered a medical expense if it was out of pocket.
Home Office Deductions - space in your home that was used as your office. For example, basement used as day care (know the square footage, including utility bills)
Car Expenses - i.e. gas, tolls, car repairs and car rentals.
Cell Phone Costs - related to your business (did you buy a business phone?).
Mileage - total business miles travelled (does not include personal vehicle use).
Commissions or Fees paid - such as tax prep, legal fees, commission paid to a contractor, commission fees truckers may pay dispatchers for giving them work etc.
Depreciation of Assets - Examples of fixed assets that can be depreciated are buildings, furniture and office equipment (land - shambas not included).
Work Supplies - like uniform, technological devices, cleaning materials, bulbs, stationery etc.
Travel - air travel, hotel stays and food expenses related to the business.
Business Insurance - payments you made to protect your business.
There may be more deductions you may claim, based on the nature of your business, nonetheless, to ensure you get all your deductions keep records and receipts for all the costs you incurred throughout the year. These ensures proper accounting, accuracy and makes the filing experience more streamlined.
Meanwhile, since filing taxes and making money go hand in hand don’t stop earning, don’t stop investing. PeteandPete Investors continue to be here for you, to support you at every level of your investment journey, from learning the basics to trading in the Futures Markets. Enroll in a course soon and horn your trading/investing skills.
By Cyd Nzyoka, PhD
Cyd is an independent researcher, writer & HR consultant. She’s versatile, passionate about investing, taxes, teaching at the tertiary level, corporate training and dissertation coaching. She’s involved in writing on multicultural education, social justice and careers among other topics. You may read her works under IGI Global Publications. Cyd is a graduate of Capella University - School of business and technology. Email thoughts and comments to Cydnz@yahoo.com
This blog is written for educational and informational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. They author may or may or may not have positions in Financial Instruments discussed in this blog. Future results can be dramatically different from the opinions expressed therein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.