I was hoping that someone might clarify a fine point regarding deductible expenses against 1099 income- specifically, for those of us who have a moonlighting position, how essential must expenses be to the moonlighting activity in order to be deducted against 1099 income on schedule C ?

For example - a pediatrics resident moonlights two nights per month on the pediatrics floor at Happyland Community Hospital, where she admits any kids that come into the emergency department, covers any overnight issues, then goes home in the morning.

Does the IRS consider it reasonable for her to deduct a home office allowance and her annual dues to the American Academy of Pediatrics against this income?
Hard to say that she really needs such expenses to do that job, but they are technically related to her practice of pediatrics.

In reality, how finicky is the IRS about these types of subtleties ?

Zip Code: _

We get this question a lot. And here is an area where you can be aggressive with your taxes. Remember, the more expenses you claim direclty against your 1099 income, the less taxes you'll end up paying.

Here is the advice I give my clients. First, make sure you can substantiate the expenses you're claiming. For the most part, that means having receipts or other documentation. For your home office, you'll need to demonstrate that you use a portion of your home exclusively for business on a regular basis.

Then, if you get audited, the IRS agent will also ask you to explain why each item you claimed against your 1099 income is related to your 1099 income. Here is where things get a little tricky. But if you can at least document that you spent the money as I mentioned in the paragraph above, you're more than halfway there.

Zip Code: 01801

My understanding is the IRS has gotten more aggressive in auditing returns with home office claims, esp. wrt the exclusive-use requirement. There was a true story in a finance magazine about someone losing his audit because his kid was found to be playing in his "home office" when the IRS agent came visiting.