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Topic: Freelancers...What are you deducting for taxes?
| Author | Message |
| uffda | Posted – 3/31/2006 1:44:31 PM | show profile I tried to search this topic and found nothing of value, so please let me know if I missed a recent discussion of tax deductions. I've been a staff writer for most of my career, but have freelanced for the past year or so--and I've been pretty bone-headed about keeping track of tax deductions. Would love to hear suggestions from savvy freelancers who have taken a disciplined approach to this. Some of the things my accountant said are fair game: office supplies, cost of lunch meetings w/ sources, subscriptions to pubs I use for business, car expenses (mileage for business-related trips, parking in downtown Chicago for interviews...) I'm sure I'm missing some obvious stuff, and I could really use help reducing my enormous IOU to the IRS. Thanks! |
| slink | Posted – 3/31/2006 2:01:31 PM | show profile Some of your rent, if you work from home. Computers, software, union membership, etc. Your accountant should know all of this -- is he doing your taxes for you? |
| leftcoaster | Posted – 3/31/2006 2:34:13 PM | show profile Business-related classes and conferences, your Web site domain name, e-mail, and hosting charges, business license fees, health insurance premiums (that's a big one), reference books, membership fees (e.g. AvantGuild, writersmarket.com, etc.), your accountant's fees, business insurance, long-distance calls for business, fees for business bank accounts... Also, if you haven't yet contributed to any kind of retirement account for 2005, talk to your accountant about your different options. Businesses have more options than individuals. For example, I have a SEP IRA, which has a much higher annual contribution limit than a personal IRA. If your accountant isn't doing your taxes and you're using something like Turbo Tax, make sure you get the version that includes Schedule C. It does a great job of walking you through all the deductions you can claim and will also calculate the maximum you're allowed to contribute to the different types of retirement accounts. |
| dribbledrive1 | Posted – 3/31/2006 2:41:33 PM | show profile Other stuff: 1. Any technology (phones, computers, software). 2. Travel for stories. 3. The newspaper you buy to get ideas. 4. Phone calls for stories 5. Home office deduction. 6. Lunches and dinners with other writers Writer usually dont have all that many deductions apart from equipment, travel, and home office. |
| uffda | Posted – 3/31/2006 3:58:37 PM | show profile Thanks much for the helpful responses. My fiance's accountant is doing my taxes, but he didn't have a handy checklist of tips for self-employed deductions. That surprised me, since he seems reasonably intelligent and has been an accountant for many years, but perhaps he's more accustomed to working exclusively with corporate-America folks. |
| mumbo jumbo | Posted – 3/31/2006 4:04:56 PM | show profile You have until 4/17 to make a 2005 contribution to an IRA or some other types of retirement plan. This was my first freelance year in a very long time and I had to do that to whittle down the taxes. Still owed a lot but it helped. |
| clairezulkey | Posted – 3/31/2006 5:20:16 PM | show profile | email poster My plane tickets to New York, where I go visit with editors when I'm in town. My internet bill yeah I'm working on it. I want to cry when I think about how bad my taxes are this year. I mean it's really, really, really bad. ------ Editor of MBToolBox |
| uffda | Posted – 3/31/2006 8:15:53 PM | show profile I know this won't help pay the tax bill, Claire, but I'm glad you chimed in. Your comments made me feel a little better-- because it's gonna be a reeeeal ugly tax year for me. Thanks to those who offered the IRA tip--I should have thought of that before. Planning to meet with someone tomorrow to set that in motion. |
| willwriteforfood | Posted – 3/31/2006 9:24:36 PM | show profile I think most of the deductions are covered in previous posts, but I would say Turbo Tax is awesome. I did my taxes in January (as soon as I got the 1099s) and I thought I was going to owe about $1500 (didn't do a whole lot of freelance last year) but Turbo Tax kicks up suggestions for deductions, and I ended up getting money back! Amazing. 2006 will be a different story because I'm 100% freelance, but it was a nice suprize this year. The IRA contribution was what kicked me over to getting money back. I just did a personal one, but it was good for me. One thing I'm not sure if was covered, but as well as your home office deduction, you can also deduct the proportion of gas, electricity, homeowner's insurance that is used by your home office. Your accountant can work out what percentage of your home is used as a home office, and then you take that percentage of all of your bills. |
| clairezulkey | Posted – 3/31/2006 10:04:55 PM | show profile | email poster My bf just told me that according to H&R Block's website, if you used H&R Block last year, you can write off what you paid to do it. I'm sure that works however you paid for your taxes though. ------ Editor of MBToolBox |
| Suet | Posted – 4/1/2006 12:10:12 AM | show profile h&r block / tax cut nightmare i've spent several hours trying to get their program to work. it's a mess. their tech support is poor too - the online chat is useless -the non-English speakers ask you questions that are more general instead of more specific as you go on! and if you email them a question and they send a reply and you write back to tell them that's the wrong answer, they write back with ... the same answer. the phone support is a bit better if you speak to a supervisor (you must insist on it to do so). i'm still waiting for them to acknowledge that their forms don't work - they told me ''in some cases you can't file electronically'' instead of just saying ''we screwed up on that form, fill it out on paper, here's your refund, we'll try to fix it next year'' maybe turbo tax is better? |
| Lotus665 | Posted – 4/1/2006 10:37:10 AM | show profile I pay a professional tax prep person to do my taxes; it is worth it because they do all the work and know all the gory details. AND the prep fee is tax deductible itself. NYers may want to try Trudy C. Durant, who specialize in writers, artists, actors and other freelance creative weirdoes like us. :-) |
| Lotus665 | Posted – 4/1/2006 10:37:57 AM | show profile That's not a grammar error by the way -- Trudy C. Durant is a ''they'' (& Assocs). |
| willwriteforfood | Posted – 4/1/2006 2:05:49 PM | show profile Suet- Turbo Tax is MUCH better. I used H&R Block last year, ended up owing $400 to the IRS and paid them $300 for doing the paperwork (I have to do a schedule E, schedule C and 1040). As Claire said, yes you can deduct tax preparation fees on your taxes (including quickbooks/quicken programs). I used Turbo Tax this year and it was so much easier. All of the forms were online, I filed electronically and had my refund in 2 weeks. I got to do it free because my husband is military, but I think it's only about $40 otherwise. And you don't need to buy the software, I just went to the website and did it from there. |
| anonymouse | Posted – 4/1/2006 4:49:34 PM | show profile health insurance? can you really deduct it if you're full time freelance? That would be awesome. |
| willwriteforfood | Posted – 4/1/2006 6:07:49 PM | show profile Anonymouse- I don't think you can deduct it, but you can pre-tax it so it reduces your Gross Adjusted Income. Maybe that works out to be the same thing when it's on a schedule C. I'm not sure. I get military healthcare so I don't deal with this part, but I used to work in insurance and we would pre-tax it for all W2 employees. You can do the same with any supplemental insurance (AFLAC, etc.) too. ------ "Anyone who is capable of getting themselves made President should on no account be allowed to do the job." --Douglas Adams |
| leftcoaster | Posted – 4/1/2006 6:57:45 PM | show profile You can deduct your health insurance premiums directly off your gross revenue, just like you deduct any other business expense. (That benefit can almost balance the fact that we're paying double social security taxes as business owners.) It's just the premiums you can deduct. You can't deduct other health costs (e.g. co-pays, deductibles, etc.) unless they amount to more than a certain percentage of your adjusted gross income (I think that's the relevant line item). I used the TurboTax software two years ago and TurboTax Online this year. The one disadvantage of the online version is that if you don't complete everything in one session, when you go back, you often have to go through a bunch of screens again to get to where you left off. (It does remember the data you've already entered, though.) If I remember correctly with the desktop software, there was easier navigation to the different line items. But even with that, I found the Online version very easy to use and by e-filing and selecting direct deposit, you get your refund very quickly. |
| rosesnyc | Posted – 4/5/2006 1:38:06 PM | show profile Some useful categories where I've found myself dumping a whole boatload of random deductions: Education and Training Promotion Research Meals and Entertainment Dues and Subscriptions Banking Fees |
| Info27 | Posted – 8/27/2006 1:30:44 PM | show profile | email poster Need Help With Tax Prep ? Call or visit "The Associates" on our websit WWW.theassociatestax,com, We also specialize in the Theatre & Arts. |
| jmm | Posted – 8/27/2006 8:38:42 PM | show profile Yes, health Insurance is a huge tax break for most freelancers. It doesn't matter if you are on Cobra or not, you get a break for the premiums you pay. |
| chucho | Posted – 8/28/2006 8:53:11 AM | show profile I'm not a tax expert, but I believe the home-office deductions are based on a percentage, and then that percentage is applied to your bills (besides the itemized long distance phone calls and specific work-related costs of running a home office, maybe including then entire separate line of you have one). And I've heard that 10% is big. In other words, if you have a two-bedroom apartment, and one bedroom is an office, you can't write off 33% of your rent and bills. If you try, you risk being audited because they have worked out formulas for raising red flags -- then you have to prove everything you write off. This may not be right, but I have heard the prercentage is based on literally measuring out yoru workspace in your home and calculating how much of that square footage makes up your home as a percentage; then apply that percentage to heating, electricity, etc. They presume that even if you have a room in your two-bedroom apartment as an office, not everything you do in that entire room is work related (therefore you can't simply write off a large chunk of your apartment just because you have a desk, computer and fax machine in one of your two bedrooms). This kind of sucks if you have a big house in the suburbs and work from home and is good if you have a small flat in NYC where your workspace takes up a larger portion of your square footage. I recently received a request for information about my 1999 taxes, so, yes, you can be audited right up to that seventh year ( I think it's seven years, right?) on the statute of limitations. They see 33% writeoffs on your home-office, you might increase your chances of being audited. Write off EVERYTHING you can possibly justify and prove on paper to whittle down that SE tax, but don't go overboard in over-estimating how much of your home is an office. I know it's tempting to write off the square footage of your kitchen because you eat Cheerios over the sink while proofing your stories, but I don't recommend it. |
