Ben Franklin said that nothing is certain but death and taxes. I’m not so certain.
Yeah, I know that the deadline for filing income tax was last midnight. I've only filed my tax return on time once in the last 40-plus years, so I assume that some other folks still have the opportunity to tweak their returns to minimize their contribution to the government. If you've already filed, but are inspired by what you read here, you can file an amended return.
This book doesn’t exist, at least not yet. This blog post will give you an idea of what it might contain if I decide to write it.
As the title implies, writers and other members of the media can often get away with business tax deductions that ordinary people can’t get away with. I’ve been making my living as part of the media since 1969. My income tax returns have never been audited and my deductions have never been denied.
In order to maximize the money you keep, you must maximize the income tax deductions you take—but don’t be greedy or stupid about it.
DISCLAIMER: I am not an accountant, a lawyer, a financial adviser, an enrolled agent or an H & R Block alumnus. HOWEVER, I have years of experience in avoiding taxes. (Avoiding is legal; evading is not.)
Years ago, when I lived in New York City, I had a simple formula that worked very well (i.e., no audits ever, and refunds every year):
- No more than 10% for the feds.
- No more than 5% for the state.
- No more than 1% for the city.
I'll pass on a vital tip I developed while working as an advertising copywriter and have continued to use as a webmaster and writer/publisher.
EVERY piece of media you consume should be deducted in the range of 25% to 100%. Deduct movies, CDs, games, concerts, artwork, vacations, MP3 players, big TVs, books, magazines, newspapers, iPad, smart phone, museum visits... all that stuff that helps you stay aware of trends in culture. (more below)
Years ago my father owned a chain of clothing stores. He once considered deducting his subscription to Playboy (which did provide news and advice about men's fashions among the airbrushed large-breasted babes). Alas, he was afraid to list a skin mag on his tax return, so he sent too much money to the IRS. I have no such reluctance -- and may have bigger cojones.
With proper classifications, you can probably get Uncle Sam to subsidize porn, booze and hallucinogens.
Here's some more advice of uncertain value:
- A successful small business is one that breaks even each year, with a slightly higher gross income.
- Big profits are nice if you're trying to sell the business, but not when you're filing your income tax return.
- Write about stuff you like, whether it's wine, sports cars, clothes, travel, cameras, horse racing or sex. Then you can deduct everything you spend on fun -- if you classify it as "research."
- There's almost nothing that's too crappy to donate to Goodwill Industries or the Salvation Army and claim an appropriate deduction for. Bill Clinton was criticized for claiming a deduction for donating used underwear. I'm not the president and don't care what Sean Hannity or Rush Limbaugh will say about me. I've lost a lot of weight recently, and last year I donated lots of oversized underwear. Washed, of course.
- If you are bad about saving money for a rainy day, you can let Uncle Sam save money for you. If you are sure you are due a refund, you can delay filing your return for a few years. When you finally do file -- SURPRISE -- you will get your refund plus interest. Big Uncle may get pissed if you don't file on time, but the penalty is a percentage of what you owe, so if you owe nothing, the penalty is nothing. I think there is a limit to how long you can let your money sit in Fort Knox (or wherever they keep the surplus) so check with a pro. Also: your state tax people may be tougher than the IRS and could assess a penalty just for filing late, even if you don't own them anything.
If you're a writer who'd like to learn about taxes from a genuine tax pro, read Julian Block's Easy Tax Guide for Writers, Photographers, and Other Freelancers. The price is $15.95 (tax-deductible, of course).
The book was published by my online buddy Christy Pinheiro's PassKey Publications -- so I know it's a superb book, even before I read it.
Christy (a writer as well as a publisher) says, "It’s more important than ever for writers, photographers and other freelancers to familiarize themselves with steps that can keep their taxes to the legal minimum. This book offers detailed help, in simple language that everyone can understand, on how to keep more of what you earn. It is a guide to use throughout the year for advance planning that alerts you to new and frequently overlooked changes in the tax rules and explains how to take advantage of them and steer clear of pitfalls -- all completely legally. The author is a nationally recognized tax attorney and also a published author."
As a writer, it is important that you be in tune with contemporary culture. When I was an advertising copywriter, I deducted 50% of the cost of every movie I went to, every concert, every CD I bought, and most newspapers and magazines I bought. The only magazines and papers I bought that I didn’t claim as 50% deductions were those that were bought solely for business use—and I deducted 100% of their cost.
If you are an author or a journalist, the key to creative tax avoidance is to write about things you like.
- If you like to travel, write about travel, and then deduct the cost of traveling.
- If you like cars, rent some really cool cars, and write about them.
- If you like to eat—and who doesn’t?—go to lots of restaurants, attend cooking schools, stock your pantry, and write about food.
- If you smoke, write about pipes, cigars, tobacco, hashish or marijuana—and deduct the cost of your research.
- If you like sex, deduct the cost of sex toys, enhancement drugs, porn, lascivious underwear, hookers or gigolos—and write about them.
- If you like building things, buy lumber, hardware, tools and paint, write about building, and deduct the cost of your research materials.
- If you like to take pictures or paint pictures, write about art and deduct the cost of your equipment and supplies.
- No matter what you write about, deduct the cost of your computer and internet access, and e-readers, and books, and magazines, and newspapers.
Use one credit card for business expenses only. This will make it much easier to keep track of business expenses and prepare your taxes.
Something that's an expensive toy for your neighbor can be a vital business tool for you!
If your writing or publishing business doesn’t make a profit in at least two years out of five, the IRS may consider it to be a hobby, not a business, and could disallow business expenses as tax deductions. If you have no profit in five years but can show a serious business effort, you may still be OK. Talk to your accountant.
It's best to have an accountant who has big balls (or big eggs, if it's a female accountant). Years ago, my first accountant, Henry Petillo, told me he had two principles for tax preparation:
- His clients will not pay one penny more than they have to.
- He will not do anything that might get himself put in jail for a client.
That's good advice. Be creative, be frugal, but don't be greedy or stupid.
A lot of the money the government spends is wasted on unnecessary or overpriced crap (remember the $600 toilet seats and $400 hammers), so by minimizing the taxes you pay, you may actually minimize government waste.