Over at my other blog, Turntabling.net, I wrote about the Austin Record Convention, a twice-yearly sale of vinyl, CD and DVDs that’s touted as the largest sale of recorded music in America. Originally I was planning to go as a vinyl junkie, but the existence of Turntabling.net means I could use this as a legitimate business expense. But how do you do that legally with IRS approval?
Simple–you have to be able to demonstrate that you did actual work on the trip, that the work was sold or otherwise used to promote your business. In the case of a blog, you should be actively trying to monetize your blog and you’ll need to do more than throw up one doofy post saying “I’m here!”. For my part at the Austin Record Convention, I’ll be trying to get interviews with vendors and writing several reports a day on the show. I’m already running ads on Turntabling, so it’s obvious that I’m trying to make it a profitable venture. If you want to mix business with pleasure, you can–and legally–but you have to show that you actually tried to promote your business while doing it.
P.S. This ain’t tax advice. I’m not an expert in taxes. Your mileage may very. Ask an adult before touching the hot stove.
Mark your calendars, April 15, 2009 is fast approaching. Tax time is hell time for most freelancers, but here’s a little hint that will make tax season 2010 seem like a breeze. Grab your pens, kids, this one’s a real brain tickler.
When you see how much you owe in taxes for 2008, make a mental note. That’s the minimum you should consider spending on your business in legitimate, legal expenses for 2009.
You’re going to earn more freelance money in 2009 than you did in 2008 unless you hit bad luck, give up and go back to your day job or just quit trying. Plan on spending more money on your business this year–what’s the point in giving it over to the government when you can take legit, IRS-approved deductions for upgrading your office, advertising your business or hiring casual labor to take some of the donkey work off your plate?
Why did I choose a 2005 calendar to illustrate this blog post? Because I wound up owing the IRS for my earnings in 2005, and if I had just planned ahead and made some crucial investments in my writing business I could have paid far less while giving my work a much-needed boost with a high-speed Internet connection, a GOOD cell phone instead of the crappy one I had put up with for so long, and several other upgrades.
Be smart in 09. Do the math and plan ahead. Make those purchases and promote your business. You should pay all the taxes you owe–but make damn sure you don’t owe as much as you could when there are legit deductions to be had.
It’s not tax hell time…YET. But do you know what your tax issues or problems might be when filing for 2008? Do you know what’s good and what’s bad when it comes to deductions? Are you scared of the big, bad tax man? Here is a list of random links I found while doing research into freelance tax issues.
Jennifer Mattern has some excellent advice for freelancers in this recent post on freelance marketing. One great point she makes about holiday marketing is not to overlook sending Christmas cards or other holiday-themed communications, even if you don’t personally celebrate that holiday. It’s easy to get tunnel vision about that sort of thing, and this advice is well-timed.
Another great bit of advice in this article; take stock of your accomplishments this year and start thinking ahead to next year. I’ve always started doing this round the end of the year, but earlier is definitely better when it comes to making plans for next year. What I would add to Jennifer’s advice is to start thinking ahead in terms of your budget, especially if you need to get new business cards and other promotional items.
Are you launching any new ventures in 2009? Will you start teaching writing classes or doing seminars? You’re going to need money for promotional materials and supplies. Do you need some extra tax write-offs for 2008? Get those supplies early and count it towards this year’s taxes where it’s legal to do so. A little extra thinking time never hurts. Great advice and food for thought all around in Jennifer’s article, Evaluation Time – Monthly Marketing Mix.
Stephen Fishman has tackled one of the trickiest subjects related to freelance writing; taxes. A book like this should be in every freelancer’s library unless you’re convinced you know the rules inside and out–but even if you DO, it’s good to have a reference for those gray areas.
Why are taxes such a minefield for freelance writers? A major portion of the issue has to do with your deductible expenses, your status with the IRS and the amount of money you make with your freelance income. You are entitled to take deductions for your legitimate business expenses, but if those deductions end being more than you make, you take a loss at tax time. This means you get no refund, but you probably don’t OWE the IRS any money. So far so good, right?
You can only take a loss for three years in a row before the IRS starts raising its collective eyebrows at you. The IRS can reclassify your freelance writing income into the “hobby” category, and while there are exceptions, you need to dive headfirst into the tax code to learn what they are and how you should go about filing. Why should that concern you? Because hobby income is NOT eligible for the same deductions you’d get in the business category. You do NOT want to be relegated to the hobby bracket unless that’s where you want to be as a VERY part-time freelancer.
Working For Yourself offers plenty of valuable information and insight on the labyrinth of tax issues freelancers and independent contractors have to navigate. It’s available from Amazon for $26.39. If you buy by clicking the link, you support Freelance-Zone.com, but regardless where or how you get this info, all freelancers should know what they’re getting into at tax time.