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Strategic Tax Write-Offs

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First things first: this is NOT tax advice. I am simply telling you what I do to protect myself. Use this info at your own risk and don’t say I didn’t warn you to get the advice of a tax expert before committing to a financial strategy like this. I take no responsibility for…anything every anwhere. Nyah nyah.

Onward.

One of the best things in the world any freelancer can do for themselves is to–this Monday–gather up all the year’s receipts and tally them up. Compare your deductions to how much you think you’re going to owe on your 2008 tax form.  If you don’t know how to do that, consider how much money you made this year, calculate approximately 22% to 28% of that sum as your taxable income. If you made 30K this year, chances are you’ll be closer to 22%. If you made more than 50K chances are you’re edging closer to 28%. (These are guesstimate figures, folks. Do your homework.)

Once you have a number, take a good look at your office equipment, your desk, your phone, and anything else that might need to be repaired, replaced, upgraded or purchased as a legitimate enhancement to your business. Do you have a resume website? Are you conducting business on your home phone instead of a dedicated line? Does your computer have a date stamped on it older than 2005?

If you are in dire need of some additional deductions, consider making some FY2008 last-minute purchases that legitimately apply to your freelancing business. You have two choices–you can pay the money you’d spend (and legally deduct) to the government, or you can take any deduction you’re entitled to by law and improve the state of your freelancing business in preparation for 2009. Continue reading Strategic Tax Write-Offs →

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Freelance Tax Hell? Take Some Sage Advice

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.

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Working for Yourself: Law & Taxes for Freelancers

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.

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Small Business Taxes 2008

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Granted, this book won’t apply to many writers out there, but if you’re a professional blogger, writer’s website owner, or have your own small press imprint, chances are you need a book like this even if you have someone preparing your taxes. Not all tax prep services are created equal, and the ones that just want your business might not be motivated enough to look into all your possible deductions and other tax advantages. When it comes to taxes, knowing is half the battle, and that’s where Small Business Taxes 2008 comes in. 

Some writers miss their most obvious deductions. Do you get inspiration or story ideas from television? Do you blog about current events discussed on the talk shows? Are you using your cell phone for business? If you’re not asking about your cable bills and cell phone payments as a tax deduction, you should be. If you’ve reviewed any music or DVDs this year, you could be writing your “entertainment” expenses off as well-within reason. How many photos did you take to submit with your articles last year? How many memory cards and battery replacements did you purchase for the camera? Your wheels are turning now, aren’t they? We thought so…

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