Tuesday, April 10, 2012

Creative tax advice for creative people

Info below is from my upcoming
 Self-Publish Your Book Without Losing Your Shirt

April 15th is normally Income Tax Day in the USA. This year the 15th is on Sunday, so Uncle Sammy is giving folks an automatic extension until April 17th. I don't understand why he didn't give us just one extra day. (In truth, I don't care about the deadline because I almost never file ontime, anyway.)

There's a lot to misunderstand about income taxes. However, my birthday is April 15th, so I am particularly qualified to give tax advice. If you need help in setting up bank accounts in Switzerland or the Cayman Islands, ask Mitt Romney.

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):
  1. No more than 10% for the feds.
  2. No more than 5% for the state.
  3. No more than 1% for the city.
For 11 years I've been in Connecticut. There are no city taxes, but life is more complicated. I pay my accountant about $700 for a few hours work necessary to produce my annual business and personal federal and state returns. After much scientific number crunching, he still comes up approximately with the same percentages I established 40 years ago.

I'll pass on a tip for a deduction I developed while working as an advertising copywriter and have continued to use as a webmaster, writer and 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.

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 mens' 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:
  1. A successful small business is one that breaks even each year, with a slightly higher gross income.
  2. Big profits are nice if you're trying to sell the business, but not when you're filing your income tax return.
  3. 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."
  4. 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 lost a lot of weight recently, and a few years ago I donated lots of oversized underwear. Washed, of course.
  5. If you are bad about saving money for a rainy day, it’s tempting to let Uncle Sam save money for you. I did that for years, and even earned interest on the money that was due me. Now there is a limit to how long you can let your money sit in Fort Knox (or wherever they keep the surplus) and the IRS may assess a penalty just for filing late, even if you don't owe anything, so check with a pro. Also: your state tax people may be tougher than the IRS.
I am  not a professional tax advisor. I'm more of a professional wiseass (who usually gets away with his wiseassing).

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.

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."

I'm thinking of putting all I know about taxes into a book, The Wiseass Writer's Guide to Apparently Absurd Tax Deductions that only Members of the Media Can Get Away With. I was kidding when I started typing the previous paragraph. Now I'm not sure. Stay tuned, folks.


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