1040 http://www.wisebread.com/taxonomy/term/3548/all en-US What Freelancers and Side Giggers Need to Know About Income Taxes http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-freelancers-and-side-giggers-need-to-know-about-income-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/desk_hands_paperwork_623498764.jpg" alt="Freelancers learning what they need to know about income taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The freelance lifestyle has numerous advantages &mdash; among them, freedom and flexibility. Even so, you can't escape your tax obligation to Uncle Sam, and being a freelancer poses its own challenges at tax time. Consider these factors that might impact your income taxes: (See also: <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make?ref=seealso" target="_blank">8 Tax Return Mistakes Even Smart People Make</a>)</p> <h2>1. Track All Forms 1099-MISC</h2> <p>Every client from whom you earn $600 or more in payments for services performed must file <a href="https://www.irs.gov/pub/irs-pdf/i1099msc.pdf" target="_blank">Form 1099-MISC, Miscellaneous Income</a> with the IRS. Like employer-issued W-2s, every time that a client issues you a 1099-MISC, the IRS receives a notification. They're essential in order to prove your income, so make sure to keep track of all of them. Generally, form 1099-MISC needs to be issued by January 31st. If you haven't received your form by February 15, request a duplicate from your client for your own records.</p> <h2>2. Include Income From All Sources</h2> <p>While a client isn't obligated to file a 1099-MISC when their total payments in the same year to you are under $600, you're still responsible to report those payments as taxable income in your return. The IRS charges a 25% inaccuracy penalty on top of applicable taxes and interest for late payments, including income from all sources, even when not reported on a 1099-MISC.</p> <p>(As a side note, we keep on specifically referring to a 1099-MISC by its full name because there are several types of 1099s, including 1099-DIV, 1099-G, 1099-H, and 1099-INT.)</p> <h2>3. Separate Individual and Business Finances</h2> <p>To help you track cash flows directly related to your business, open a separate business bank account and credit card. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses?ref=seealso" target="_blank">The 5 Best Credit Cards for Small Businesses</a>)</p> <p>The monthly statements of those business bank accounts and credit cards will allow you to reconcile your monthly income statement and will be very handy in case of an IRS audit. When shopping around for a business checking account, consider one that keeps copies of used checks. The reason is that bank statements and canceled checks are acceptable documents in case you receive a <a href="https://www.irsvideos.gov/audit/docs/Form%204564,%20IDR1%20-%20Howard.pdf" target="_blank">Form 4564, Information Document Request</a> from the IRS.</p> <h2>4. Hire an Accountant if Using Schedule C</h2> <p><a href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank">Schedule C</a> from Form 1040 is one the most useful tax forms for freelancers and side giggers because it allows them to deduct all applicable business expenses, ranging from cost of promotion in local media to use of home space for business purposes. (See also: <a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers?ref=seealso" target="_blank">101 Tax Deductions for Bloggers and Freelancers</a>)</p> <p>However, individuals using Schedule C often make mistakes on this form. Whether those errors are intentional or unintentional, the IRS has noticed the higher number of mistakes and has set the policy of auditing individuals using Schedule C <a href="http://www.reuters.com/article/us-yourmoney-freelancing-irsaudit-idUSTRE81R1QR20120228" target="_blank">three times more often</a> than it does corporations. Hire an accountant to file your taxes and they will make sure to cross your t's and dot your i's throughout your return, including the pesky Schedule C. Not to mention, their fee is an eligible expense on your Schedule C, too!</p> <h2>5. Calculate Your Withholding</h2> <p>Unless you're a full-time freelancer, keeping track of your estimated tax liability can be hard. When you're receiving income from both an employer and portfolio clients, you'll have more sources of income. In that case, the <a href="https://www.irs.gov/individuals/irs-withholding-calculator" target="_blank">IRS Withholding Calculator</a> is a useful tool to avoid having too much or too little federal income tax withheld throughout the year.</p> <p>Analyzing data from your most recent pay stubs, invoices from your clients, and copies of past tax returns (they will help you estimate applicable deductions), this calculator will provide you suggestions on how to update your Form W-4 with your employer. Adjusting your W-4 throughout the year is a smart way to increase the take-home portion of paychecks from your employer when you're withholding more than you really need to.</p> <h2>6. Make Estimated Tax Payments</h2> <p>Due to the nature of freelancing, you may receive some last minute assignments that will make your bank account happy in the short term. Prevent those lucky breaks from turning into an unexpected large tax liability by the time you file your return next year. Whenever you expect a very large payment or an end-of-year assignment, use the IRS Withholding Calculator to estimate your necessary withholding.</p> <p>An alternative to adjusting your W-4 is to make a lump-sum payment using <a href="https://www.irs.gov/uac/form-1040-es-estimated-tax-for-individuals-1" target="_blank">Form 1040-ES, Estimated Tax for Individuals</a>, which allows you to pay estimated tax payments on April, June, and September of the current year and January of the next year. Form 1040-ES can be a lifesaver to compensate for extreme low withholding throughout the year. For example, you can submit a payment for tax year 2016 on January 17, 2017.</p> <h2>7. Don't Forget About State Income Tax</h2> <p>On top of federal income taxes, you're also liable for applicable state and local income taxes. Depending on the legal structure of your business, you may file business income taxes on a separate form. Sole proprietors report their personal and business income taxes on the same form.</p> <p>Spreading out your state tax liability is a better idea than trying to come up with a large lump sum in very few days. If you have an employer, you can also adjust your withholding of state taxes throughout the year. Most states allow freelancers and side giggers to submit estimated state tax payments on a quarterly basis. To learn more about your applicable state tax obligations, find the <a href="https://www.sba.gov/starting-business/filing-paying-taxes/determine-your-state-tax-obligations" target="_blank">appropriate office in your state or territory</a>.</p> <h2>8. Get Health Coverage</h2> <p>Under the Affordable Care Act (ACA), better known as Obamacare, you're subject to a penalty when you go more than two months without health coverage. In 2016 and 2017, the penalty fee is 1/12 per month of <a href="https://www.healthcare.gov/fees/fee-for-not-being-covered/" target="_blank">2.5% of your household income</a> or $695 per adult, whichever is higher. If you didn't meet the minimum essential coverage during 2016, use the IRS tool to estimate your <a href="https://taxpayeradvocate.irs.gov/estimator/isrp/" target="_blank">individual responsibility payment</a>.</p> <p>When you're a full-time freelancer, you're responsible for getting qualifying coverage on your own. January 31, 2017 is the last day to enroll or change a 2017 health plan. After that date, you can enroll or change plans only if you qualify for a special enrollment period. To learn more about available plans in your ZIP code, visit the health insurance marketplace at <a href="http://www.healthcare.gov" target="_blank">HealthCare.gov</a>.</p> <h2>9. Save for Retirement</h2> <p>Freelancers and side giggers with no employees can open a solo 401K to build or give their nest eggs a major boost. With a solo or Roth 401K, an independent contractor could save up to <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits" target="_blank">$53,000 ($59,000 if age 50 or over)</a> in 2016 and $54,000 ($69,000 if age 50 or over) in 2017. By the way, married couples and legal partners receiving income from the same business practice can double those contribution limits. This means a couple under age 50 could potentially contribute up to $108,000 to a solo 401K in 2017!</p> <p>If you're one of the estimated 54 million of U.S. independent workers or freelancers, consider a solo 401K to lower your taxable income and get closer to the target amount of your retirement fund.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-common-tax-mistakes-we-need-to-stop-making">5 Common Tax Mistakes We Need to Stop Making</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/35-bizarre-things-you-can-be-taxed-on">35 Bizarre Things You Can Be Taxed On</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes 1040 1099 accountants audits income taxes IRS miscellaneous income schedule c self employment side jobs Fri, 20 Jan 2017 11:00:08 +0000 Damian Davila 1871080 at http://www.wisebread.com 101 Tax deductions for bloggers and freelancers http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/101-tax-deductions-for-bloggers-and-freelancers" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/448878029_7593296b57.jpg" alt="taxes" title="taxes" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Anyone here like doing taxes? Didn&rsquo;t think so. We all have to do them; we all have to pay money to Uncle Sam (although some get away with paying much less than others).<span style="">&nbsp; </span>But as a freelancer and/or a blogger, are you overlooking dozens of legitimate deductions that could save you a whole lot of money?</p> <p class="MsoNormal"><span style="color: black;">I own a small business (very small, it&rsquo;s just me) and it basically involves doing some writing for advertising, marketing, the web and of course, blogging. None of this will ever replace my full-time career, but it does eat up various costs that my accountant has told me I can deduct from my taxes. And when I looked into it further, I found not just a handful of possible deductions, but a veritable smorgasbord.<o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></p> <p class="MsoNormal"><span style="color: black;">Here are the expenses you should look into deducting if you&rsquo;re a blogger and/or freelancer, assuming they apply to your chosen blogging or freelancing field (you can&rsquo;t deduct movie tickets if you have no reason to be at the movies&hellip;but if you have a blog all about movies and reviews, go for it). <o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></p> <p class="MsoNormal"><span style="color: black;">As always, you need proof of this stuff. No good saying you bought 50 magazines last year if you can&rsquo;t find the receipts. With the government hemorrhaging money, they&rsquo;re looking for any opportunity to keep as much of your cash as they can. In the event of an audit (aaarggghhh) you want your finances to be watertight. <o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></p> <p class="MsoNormal"><span style="color: black;">It&rsquo;s also worth noting that your expenses shouldn&rsquo;t really outweigh your income (although sometimes it's inevitable in your first year of business, taking into account start-up costs and so forth). But, if you made $1500 from your blogging adventures, writing off a $3500 computer system may trigger a big bad red flag. The IRS doesn't like it when you spend more than you make. <span style="">&nbsp;</span>And if in doubt, double check with an accountant. <o:p></o:p></span><span style="color: black;"><o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></p> <ol type="1" start="1" style="margin-top: 0in;"> <li style="color: black;" class="MsoNormal">Industry books &amp; periodicals, including audio books<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Other books and periodicals used for research<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Library book charges<o:p></o:p></li> <li style="color: black;" class="MsoNormal">DVDs and CDs related to your blogging <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Movie or theater tickets, if related to your blogging or freelancing<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Music and TV show downloads<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Magazine subscriptions<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Research sites that require a subscription<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Further education classes<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Webinars<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business podcasts<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business-related websites (for me, that would be Adweek) <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Memberships to professional clubs and affiliations<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Internet access fees (at about $40 a month, that&rsquo;s a biggie)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Public internet access fees (Internet café&rsquo;s, airports etc)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Stock photo purchases for your blog<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Search Engine Optimization services and fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Paid site submissions<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Website hosting fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Website design and/or maintenance fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Website/blog templates<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Domain name cost(s) and renewals<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Blog expenses (e.g. WordPress additions)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Film &amp; Digital cameras<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Web cameras<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Handheld video recorders<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Digital memory cards<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Recordable CDs and DVDs<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Zip drives<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Photo printouts<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Film &amp; film processing<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Printer ink and copier toner<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Phone charging stations (e.g. at the airport)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Second phone line for your business/fax machine<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Long distance charges related to business <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Cost of phone/fax/scanner/copier equipment<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Cell phone &amp; PDA expenses (bills, equipment, accessories)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Personal voice recorders and memo machines<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business equipment rental<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Computer equipment &amp; peripherals<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Computer upgrades (I had to upgrade my RAM twice last year)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Depreciation costs of computer equipment<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Data storage (both online and external HDDs)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Any business related software (not games&hellip;unless you review them)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Software licensing fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Anti-virus and anti-spam subscriptions<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Unpaid invoices. If you do some work for someone, be it a simple blog article or a much bigger job, and you get stiffed on the bill, you can write off your loss. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Fees for other bloggers and freelancers. If you get overwhelmed and pay a friend or relative to help out, any money you pay that person for their assistance is a tax deduction.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Tax and accounting software<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Tax preparation fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business incorporation costs<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Costs for Trademarks or Copyrights. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business logos and graphic design fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business cards, letterhead and other stationery (even stuff you print yourself)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Office supplies (everything from paper to paper clips)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Home office expenses. You can deduct the part of your home you use <u>exclusively</u> for blogging or freelancing as an expense, including a portion of the rent, water, heating bills and so on.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Percentage of your home insurance (for your home office)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Online self-promotion fees (that includes banners and Adwords costs)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Trade show fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Advertising costs (newspapers, stickers, posters, postcards etc)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Photography fees (e.g. headshots, pack shots etc)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Photocopying/faxing fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Transportation costs: car mileage; airline tickets; taxis; buses; trains.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Highway tolls<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Parking fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Hotel costs for business trips.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Cleaning &amp; laundering services when traveling for business. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Costs of conferences, plus all related expenses (e.g. BlogHer)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Health insurance costs (if you&rsquo;re self-employed)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Computer equipment insurance<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Food and drink purchased on business trips<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Client entertainment (be reasonable&hellip;not sure you&rsquo;ll get away with Strip Club deductions)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Postage costs (Stamps.com is ideal for keeping track of postage, and the service itself is tax-deductible)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">PayPal and Western Union fees<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Post Office Box fees. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Safe Deposit Box fees. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Self-storage fees, especially useful if your files and records are spilling over into your garage and you need extra space. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Advice. Any professional advice you pay for that pertains to your business is a tax deduction, and that includes counseling or coaching.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Membership dues to labor unions (do bloggers have a union?)<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Charity work or donations (this one&rsquo;s tricky. It&rsquo;s limited to your out-of-pocket costs, not the final cost of the product. In my case, I&rsquo;ve done some writing for charity, which is not applicable because you can&rsquo;t deduct time spent. But any materials used during your charity work can be deducted).<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Prizes and giveaways. Here at Wise Bread, we give away some very nice things. Often, they are generously given to us as gifts to pass on to you, or readers. But when we go out and spend money on a prize to give away, that can be deducted, as well as the cost to mail it out to you. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business furniture. If you use it exclusively for your blogging or freelancing, then anything from a chair or filing cabinet to the whole desk can be written off.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business functions. If you hold a little get-together for clients, even just one or two, then everything from the rental of the room (or golf course&hellip;know what I mean?) to food and drink can be deducted. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business lunches. You can't include your own meal, but if you pick up the tab at a power-lunch (or just a meeting with a potential client) you can write off their part of the check. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Props. I sometimes use props for photoshoots, and the cost of those props can be deducted. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Job search expenses. Any money you spend trying to get work, from postage to travel, is a deductible expense. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Alcohol and drug abuse treatment. If the pressure turns you into a Betty Ford patient, you can deduct the expenses of treatment. Let&rsquo;s hope you never have to though. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Any losses due to theft. Away on business, your laptop gets stolen&hellip;write it off. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Moving expenses related to your blogging or freelancing. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">You can deduct 50% of your self-employment tax<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Home improvements. Turn the basement into a home office, those expenses are deductible. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Clothing and accessories. If you have to buy any clothing for a particular job (maybe you needed protective clothing &amp; headwear to write an article about a building site) then those costs are also deductible. But don&rsquo;t try and write off your new Gucci watch. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business checking expenses. If you have anything more that free checking, it&rsquo;s a deduction. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Business gifts. This is cool. If your mom watched the kids while you went off to do an interview or write an article, and you then bought her flowers or choccies, well, the gift is tax deductible. Very sweet. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Annual fees for business credit cards.<o:p></o:p></li> <li style="color: black;" class="MsoNormal">Physical therapy. Writing for eight hours a day can cause all sorts of problems, including the dreaded Carpel Tunnel Syndrome. I've been advised by many accountants that you can deduct the cost of that therapy. However, medical expenses are a complex beast, and usually need to be a percentage of your income. Check with your accountant for details. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Headache pills, eye drops and so on. If staring at the screen all day gives you a killer migraine, you can write off the cost of the meds to help you get through it and keep on working. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Wages. Say you pay your kid $20 a month to empty your office trash can, maybe as a way to earn an allowance. Well, you can deduct that expense. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Your dog. No kidding, if you can prove it's a guard dog and is protecting your equipment, you can write-off the doggie expenses. <o:p></o:p></li> <li style="color: black;" class="MsoNormal">Net operating loss. If your deductions outweigh your earnings, which often happens in your start-up year, you can use that loss to lower your taxes next year. <o:p></o:p><span style="color: black;"><o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></li> </ol> <p class="MsoNormal"><span style="color: black;">And one big final deduction you may want to think about:<o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></p> <ol type="1" start="101" style="margin-top: 0in;"> <li style="color: black;" class="MsoNormal">Your TV cable or satellite bill. I can deduct it because I need it&hellip;I work in the movie business. It&rsquo;s a <u>very</u> nice deduction, too. If you blog about soaps, movies, TV shows, or anything else in the entertainment field, this could be a nice write-off for you.<o:p></o:p><span style="color: black;"><o:p><br /> </o:p></span></li> </ol> <p class="MsoNormal"><span style="color: black;">It's a big list, but even if only 25% of it applies to you, it could add up to a nice chunk of cash back in your pocket. And before I get chastised, I'm not against paying taxes. But when corporations are finding ways to jump through every legal loophole and pay almost no federal tax, I don't think it hurts you to take the legitimate tax deductions on the table. <o:p></o:p></span><span style="color: black;"><o:p><br /> </o:p></span></p> <p class="MsoNormal"><span style="color: black;">Go stake your claim. <span style="">&nbsp;</span><o:p></o:p></span></p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-a-divorce-improve-your-finances">Could a Divorce Improve Your Finances?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/eco-capitalism-how-to-make-money-from-garbage">Eco-Capitalism - How to make money from garbage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-should-donate-a-blood-sucking-timeshare">Why You Should Donate a Blood Sucking Timeshare</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Taxes 1040 business deductions income Making Extra Cash money stay at home jobs taxes write-offs Mon, 23 Feb 2009 05:27:57 +0000 Paul Michael 2862 at http://www.wisebread.com 20 amazing, outrageous and just plain weird tax deductions http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/20-amazing-outrageous-and-just-plain-weird-tax-deductions" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/101997329_b5724319d9.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="333" /></a> </div> </div> </div> <p>Well, it's that time again. The tax deadline is just around the corner. If you're like me, you will have taken care of your taxes months ago and already be enjoying the cash your high-interest savings account is giving you on your return.</p> <p>If you're smarter than me, you won't have any tax return at all. It's best to come out owing nothing and getting nothing. Evens is best here. But if you still haven't done your return, take a look at the top 20 funky, strange and outrageous deductions that folks have tried, and sometimes failed, to get away with.</p> <p>It's ironic that I was sweating over the deduction of office supplies for my home business, when some folks out there are deducting breast implants and beer. As I'm often told, God Bless America.</p> <p><strong>1 - Free beer - YES</strong><br /> Strange but true. A gas station owner gave his customers free beer (brand unknown&hellip;I doubt it was Stella Artois though) in lieu of trading stamps. And the Tax Courts said yes, this is a legitimate business expense and tax deductible. Which makes the next entry even stranger&hellip;</p> <p style="margin-right: -9pt;"><strong>2 - Free whisky &ndash; NO</strong><br /> How ironic. A cunning fella thought a case or two of whisky would make nice client gifts, and thus tried to deduct them on his annual tax return. The category he chose was client entertainment. However, not only was it not allowed, it was a gift that violated state laws. Ouch.<span> </span></p> <p><strong>3 - Cost of hiring an arsonist &ndash; NO</strong><br /> Hard to believe, right? A man with a failing furniture business decided to hire someone to burn it down. The store-owner's plan was not only to collect the $500,000 insurance money, but also to deduct the $10,000 expenses of hiring the arsonist! He was denied. I&rsquo;m sure it wasn&rsquo;t too long before the police were also looking carefully at his return. Not a smart man.</p> <p><strong>4 - Fake Boobs - YES</strong><br /> This one is infamous. A stripper going by the name of CHESTY LOVE used her hard-earned savings to boost the size of her boobs, to the eye-popping size of 56-FF (do they even make bras in that size?) She figured it would get her more tips. And the write-off was allowed, being considered a stage prop essential to her act. Ha!</p> <p><strong>5 - Prostitution expenses &ndash; NO</strong><br /> Maybe in Amsterdam or at the Bunny Ranch in Nevada, but you can&rsquo;t deduct expenses of illegal professions. Trying to deduct 4000 condoms or push-up bras are no good if you put down &ldquo;prostitute&rdquo; as your career. Similarly, drug dealers can&rsquo;t deduct the cost of baggies or soil for Marijuana plants.</p> <p><strong>6 - Cat food - YES</strong><br /> Junkyard owners set out bowls of pet food nightly to attract wild cats. The wild cats also took care of their nasty snake and rat problem, making the junkyard safer for customers and providing a useful business service. Yep, you guessed it&hellip;the pet food is a business expense, it was allowed. I need to get the number of their tax attorney.</p> <p><strong>7 -Your own racehorse &ndash; NO</strong><br /> I can see how this would be a business expense to some people. But if you just go out and buy your own prize-winning horse, name it after yourself (the ego on some folks) and then take clients out to see your horse run, you cannot deduct this. It&rsquo;s not a business expense, it&rsquo;s a personal expense. But hey, if you can afford a racehorse and stables, why are you worried about the deduction in the first place?</p> <p><strong>8 - A fabulous African Safari</strong><strong> <span> </span>- YES </strong><br /> If the IRS considers a business trip &quot;ordinary and necessary&quot;, you can take it as a deduction. For the owners of a dairy business, this included a wonderful African Safari, because many of the activities on the trip were focused on wild animals.<span> </span>Please note &ndash; going to see adult shows in Vegas would not count as viewing exotic wildlife.</p> <p><strong>9 - The costs of moving&hellip;the family pet - YES</strong><br /> Whether you&rsquo;ve got a Great Dane or a Great White Shark, your pet is considered a personal effect. And that&rsquo;s great news for you. When it comes to any expenses relating to any kind move associated with a job, the tax man says yes. But I suspect hiring a Hummer Limo to move your gerbil across the state may not be looked upon favorably.</p> <p><strong>10 - A Trip to Bermuda &ndash; YES, YES, YES</strong><br /> I love this one. I have to find a way to do it. ANY business convention held in Bermuda can be written off without even showing there was a special reason to hold your business meeting in paradise. And it&rsquo;s not the only place. Barbados, Costa Rica, Dominica, the Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Saint Lucia, Trinidad and Tobago, Canada, Mexico and all U.S. possessions also fall into this special tax treatment. But outside the U.S. is a different story. I guess I can&rsquo;t hold a board meeting in England so I can go see my folks then :-(</p> <p><strong>11 - Body Oil - YES</strong><br /> If you&rsquo;re a regular Joe, body oil is a once in a blue-moon splurge. Maybe something to spice up an evening with your partner, but certainly not a write-off. However, if you&rsquo;re a pro bodybuilder and need gallons of body oil to make your muscles glisten, then it is a genuine tax write-off. Just don&rsquo;t turn up at a client meeting covered in oil, wearing nothing but a thong and a smile. It won&rsquo;t be considered &ldquo;ordinary and necessary.&rdquo;</p> <p><strong>12 - A trip to the Super bowl &ndash; NO</strong><br /> <span>I&rsquo;d like to put this one in the &lsquo;nice try&rsquo; category. Someone decided to take clients and their spouses to the Super bowl, but just could not prove that the shindig was in any way related to business. And even if it was, it&rsquo;s an extravagant expense for a meeting and would have been disallowed anyway. Sorry bud. </span></p> <p><strong>13 - A Private Airplane - YES</strong><br /> A couple with a rental condo didn&rsquo;t fancy the hassle of driving up to 7 hours to check on it. They didn&rsquo;t want to be stuck to the schedule of the only daily flight available. So, they did what you ore I would do. They bought their own jet! They were allowed to deduct all expenses on the jet relating to the condo, including the high costs of fuel. That must have been some</p> <p><strong>14 - A Mink Coat - NO</strong><br /> And thank goodness, because I hate fur. Claiming that the Mink coat was a conversation piece when visiting clients with his wife (what was the topic&hellip;blood on the runway?) a man tried to deduct the garment. Fortunately, he was denied.</p> <p><strong>15 - Babysitting costs - YES</strong><br /> Believe it or not, you can deduct the cost of a babysitter as a charitable deduction, if the mother of the child is leaving the house to do volunteer work for a charity. Which, of course, we all do on a daily basis.</p> <p><strong>16 - A &lsquo;Playmate' Party</strong><strong> <span> </span>- YES! </strong><br /> How he got away with this one is beyond me. The owner of a nightclub promotions firm decided that a regular party wasn&rsquo;t good enough for his clients. So, he brought in a bunch of scantily clad &ldquo;bunnies&rdquo; as decoration. The tax man said sure, it&rsquo;s a valid expense. Whether or not pictures of the bunnies were attached to the return is unknown at this time.</p> <p><strong>17 - A Nuclear Fallout Shelter &ndash; NO</strong><br /> This one bombed (ouch, sorry&hellip;bad pun). Yup, way back in the days of the cold war and the threat of nuclear meltdown, one clever chap built a nuclear fallout shelter on his property and then decided to list it as &ldquo;preventative medicine.&rdquo; The IRS gave that one a big thumbs down. But who&rsquo;ll be laughing if Word War 3 does happen?</p> <p><strong>18 - A beautiful swimming pool - YES</strong><br /> This one&rsquo;s a great example of lateral thinking. After being told by his doctor that he needed to exercise (after developing emphysema), the smart fella put in a swimming pool. The deduction was put down as a necessary MEDICAL EXPENSE and was allowed, along with the various chemicals, heating, cleaning and general upkeep of the pool. Now that&rsquo;s using your head.</p> <p><strong>19 - Dancing lessons &ndash; NO</strong><br /> Dancing With The Stars may be popular, but it&rsquo;s not going down well with the IRS as the subject of a deduction. You CANNOT take dancing as a deduction for medical expenses, and the following reason are outlawed &ndash; dancing to relive varicose veins, dancing to cure arthritis and finally, dancing to alleviate nervous disorders. Try any of these and you&rsquo;ll be dancing all the way to the tax courts.</p> <p><strong>20 &ndash; Sperm donation as a loss &ndash; NO</strong><br /> It&rsquo;s one thing to make a little extra cash as a sperm donor. It&rsquo;s quite another to try and claim a depletion loss on the aforementioned sperm. Unless you&rsquo;re an oil well, that kind of depletion is not really going to make much of an impact.</p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">What Freelancers and Side Giggers Need to Know About Income Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/charitable-giving-get-a-receipt">Charitable giving - get a receipt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/35-bizarre-things-you-can-be-taxed-on">35 Bizarre Things You Can Be Taxed On</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income Taxes 1040 deductions income taxes IRS tax deductions tax time taxes uncle sam weird news Sun, 08 Apr 2007 19:05:57 +0000 Paul Michael 476 at http://www.wisebread.com