Share this article on Facebook
10 Tips for Writers Filing 2004 Tax Returns
by Beth Fowler
In fiscal year 2003, total US Government
internal revenue refunds amounted to $302,556,797,000. Make sure you get every
dollars that's due to you this year.
1. Get Down to Business: A new rule allows up to
$5,000 of expenses incurred after October 2, 2004 in starting a new business to
be deducted, but only in the first year. If you've been treating writing as a
hobby, this might be the year to set up a business. Tax laws state that a business must have a clear business
purpose and profit motive before writers can claim business expenses Visit
http://www.irs.gov/ and type Hobby or Business in the search field. Read over
the descriptions distinguishing a business from a hobby.
2. Hire a Professional Tax Preparer: "It'll be
one of the best things you could ever do for yourself," Peter Bowerman wrote in
his book "The Well-Fed Writer" (www.wellfedwriter.com). The average person doesn't have the time or the
expertise to keep up with tax law changes. CPAs know about deductions, recent
rule changes, which receipts and records to keep and are less likely to make
mistakes. Ask other writers to recommend an accountant. Accountants' fees are
tax deductible for small- or home-based business owners using Schedule C or
C-EZ. The IRS cautions tax payers against hiring preparers who charge inflated
fees and advertise guaranteed larger refunds. The taxpayer is responsible for
all information on the 1040, no matter who prepared it.
3. Deduct Home Office Costs: Writers can claim a
portion of their home as a home office if the portion is used exclusively and
regularly for business. Exclusively means the area doesn't double as a guest
room. Regularly means writing is an on-going business. If the office meets those
criteria, writers can deduct fractions of utility bills, home repairs and other
related costs. "Claim everything you deserve," is New York tax lawyer Gary
Schatsky's advice in "SmartMoney" (March 2005 http://www.smartmoney.com/). For information on deducting home business expenses,
see IRS Publication 587.
4. Itemize Miscellaneous Deductions: Travel,
meal and entertainment costs, professional and association dues, and fees for
classes taken to improve one's current job skills are deductible. The standard
rate for business miles is 37.5 cents. Sorry, that new suit you bought to wear
during your "Freelancing is Fascinating" speech isn't deductible. Read
Publication 535 Business Expenses at the IRS web site.
5. Claim Charitable Gifts: The old suit and
other groovy stuff totaling more than $500 that you excavated from the back of
your closet and donated to charity are deductible. Include a written
description. (I take photos of donations in case the tax man cometh.) Also,
donations to tsunami victims through January 31, 2005 are deductible.
6. Keep Receipts: Keep those little chits from
the parking garage and whatnot. Keep receipts so you don't forget deductible
expensesnew laptop, scanner, digital cameraincurred over the year and also in
the unlikely event an auditor will want proof of expenditures. Keep receipts for
7. Remember Simple Stuff: Bill Cressman, IRS
spokesperson based in Philadelphia, says that less than one percent of returns
are audited. Two simple mistakes trigger many auditsforgetting to sign the
return form and incorrectly writing the Social Security number. Other red flags
are charitable donations far more than the norm for the donor's tax bracket and
questionable business expenses.
8. See EIC: The earned income credit (EIC) is a
tax credit for certain people who work and have earned income under $35,458. EIC
usually reduces the amount of taxes owed and might also entail a refund.
According to a 1995 National Writers Union survey of 1,143 writers, median
annual income from freelancing was $4,000 (http://members.aol.com/nancyds/wlot1.html). Depending on other income and spousal income, it might
be worth a look at IRS Publication
596 for EIC rules.
9. Claim all Income: The IRS says US citizens
are taxed on their worldwide income, whether a person lives inside or outside
the United States. The foreign income rule applies regardless of whether or
not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099.
Travel writers especially take note.
10. Go to Uncle Sam: Visit www.irs.gov/smallbiz or call
1-800-829-3676 for the free
"Publication 3207 The Small Business Resource Guide CD-ROM 2004." The resource
includes business tax forms, instructions and publications and information on
how to prepare a business plan among other topics.
"Getting free tax advice over the internet may
be tempting," writes Tara Harper (http://tarakharper.com/k_tax.htm), "but I'd just like to remind you that you get what you
pay for. Free is not necessarily a good price, especially for tax
She's right. Consult an accountant for specific
advice on your particular circumstances.
© Copyright 2005, Beth Fowler
Find more interesting articles at authorsden.com/bethfowler
Other articles by Beth Fowler :