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Expenses worth it?

Forum|Forum|2 years ago
April 2, 2024
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Hello. I'm a U.S. citizen living in Japan and I earn money and pay taxes here.

I am fully employed and also work freelance on the side.

All of my income counts towards the "foreign earned income exclusion" and my federal refund is always zero.

Is it worth it or should I even bother to enter business expenses for the freelance side of things when I know my federal refund won't change?

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Best answer by DMarkM1

Generally, if you have an allowable expense deduction, you should take the deduction. Here is an IRS reference. Specifically, this is related to showing an increased self-employment income in order to maximize the earned income tax credit (EITC) and/or social security benefits.

"A self-employed individual is required to report all income and deduct all expenses. Revenue Ruling 56-407, 1956-2 C.B. 564, deals with the issue of taxpayers not taking all allowable deductions in computing net earnings from self-employment for self-employment tax purposes. Rev. Rul. 56-407 held that under §1402(a), every taxpayer (with the exception of certain farm operators) must claim all allowable deductions in computing net earnings from self-employment for self-employment tax purposes.

Net earnings from self-employment are included in earned income for EITC purposes. It is defined by cross-reference to the definition of net-earnings from self-employment under I.R.C. §1402(a). This ruling applies equally to the EITC."

DMarkM1Answer

Generally, if you have an allowable expense deduction, you should take the deduction. Here is an IRS reference. Specifically, this is related to showing an increased self-employment income in order to maximize the earned income tax credit (EITC) and/or social security benefits.

"A self-employed individual is required to report all income and deduct all expenses. Revenue Ruling 56-407, 1956-2 C.B. 564, deals with the issue of taxpayers not taking all allowable deductions in computing net earnings from self-employment for self-employment tax purposes. Rev. Rul. 56-407 held that under §1402(a), every taxpayer (with the exception of certain farm operators) must claim all allowable deductions in computing net earnings from self-employment for self-employment tax purposes.

Net earnings from self-employment are included in earned income for EITC purposes. It is defined by cross-reference to the definition of net-earnings from self-employment under I.R.C. §1402(a). This ruling applies equally to the EITC."

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