It’s Tax Time! Follow These Tax Deduction Tips for Freelance Writers

It’s Tax Time! Follow These Tax Deduction Tips for Freelance Writers

Freelance writers wear many hats, from being their own stand-alone IT departments to scheduling meetings and interviews, ordering office supplies, designing web pages, invoicing and being their own accounts-receivable departments.

But one category many freelancers feel ill-equipped to tackle is the world of taxes.

Missing deductions is leaving money on the table, and declaring income incorrectly can easily get you into hot water with the IRS.

Rus Garofalo was a writer, performer and video producer when he started working for a tax preparer. He soon realized he and his friends were doing their taxes wrong and losing money as a result. Realizing many freelance creative professionals did not know the intricacies of the tax world, he decided to do something about it. He started Brass Taxes in 2008.

“It made me angry that I had been losing money because I was never told this information and the information is not easy to find online and know that we are doing it right,” Garofalo said. “So I created the business that I wish existed.”

We asked Garofalo, who now specializes in doing freelancers’ taxes, a few questions about just what freelancers should be doing tax-wise. Below are a few take-home points from our conversation.

1. You might be able to deduct more than you think

You always hear the phrase “the cost of doing business,” and that applies to freelancers as well.

Even if you work from home in your pajamas most days, you still likely have many businesses expenses you are able to deduct.

“When you’re freelancing, you’re spending money on things you need to do your work that would otherwise be covered by an employer,” Garofalo says. “And the IRS lets you deduct those things that are ‘necessary and ordinary’ expenses related to your work. That can mean obvious things like office supplies and software licenses, but also less obvious things like a portion of the rent and utilities you pay if you have a dedicated office space set up at home.

Any travel you do for stories you’re working on, travel for conferences or seminars and the fees to attend, the cost of getting from A to B just to go meet with editors… that can all be fair game too. To make sure you’re not leaving anything on the table, it’s a good idea to work with a tax professional who understands your industry.”

2. Your story doesn’t necessarily have to be published to deduct related expenses (but you can’t be shady about it)

One thing many freelancers don’t realize is you don’t have to sell every story to deduct your expenses for it. The IRS realizes that not every business endeavor (like a story) works out, and you can still deduct many of these expenses if they meet the right criteria.

But this doesn’t mean you can deduct things that aren’t legitimate business expenses.

“With expenses related to writing a story, the piece doesn’t have to get published in order for you to deduct those, necessarily,” Garofalo says.

“You might travel to Mexico to cover changes in the beach resort industry in Tulum. If you can demonstrate that you legitimately made best efforts to pitch the story and that the intention of the trip was professional, then you may be able to deduct the related travel expenses. But if you’ve never written a travel story and your best friend happened to be getting married there at the same time…that’s not going to fly.”

3. Claim your territory and utilize the home office deduction if it’s applicable

Rumors abound that taking a home office deduction is a red flag for an IRS audit. But, according to Garofalo, that isn’t true.

He says that it’s important to take the deduction if you qualify for it. But you have to have an actual home office. A kitchen table or guest room doesn’t count.

“Especially in places like New York City where rent is very expensive, the benefit of claiming a large portion of it as a home office deduction can be significant, so it’s an often-abused category,” Garofalo says.

“As long as you’re being accurate though, it’s a totally legitimate expense and you should take it if you really do have a dedicated office space. Just remember when calculating the percentage that 100 percent of your home includes all square footage: bathrooms, closets, hallways, storage space, etc. Your home office needs to be only the square footage that is exclusively used for work. It can’t be your couch or your kitchen table, or a room that you sometimes rent out on Airbnb. But it can be space used exclusively for storage of things you use for your business (like filing cabinets or book shelves).”

4. Document everything—receipts and records are your friend

Make sure you keep receipts and records for anything and everything you would like to deduct.

It will make it much easier to tabulate your deductions and, even more importantly, make it easier to furnish the information to the IRS if they request additional records and documentation.

“Receipts are best,” Garofalo says. “And for meals and entertainment (whenever you’re using food or drinks for schmoozing purposes), write on the receipt who you met with and what kind of work stuff was discussed. It can be specific to a project, or just general networking with a ‘profit motive.’

Where you don’t have receipts, you might look to your bank statements as evidence of your expenses, or to email exchanges or calendar appointments where those apply. The more information on the record, the better, which is why receipts are king.

If you’re deducting miles driven in your car that were related to work (other than a commute to and from a regular work location, which is not deductible), it’s best to keep a logbook of those miles in your car. Really, though, the best record keeping method for you is going to be the one you actually do.”

In addition to receipts, Garofalo recommends keeping a mileage log and other records.

5. An audit isn’t the end of the world, but the more records you keep, the easier it will be

Everyone dreads an IRS audit. And most people don’t even fully understand what one entails.

Garofalo likens the process to a school assignment, saying, “An audit is essentially the IRS assigning you a research paper,” Garofalo says. “They’re basically saying, ‘prove it.’ The amount of time and stress involved with going through the audit will depend on how well you’ve kept records of your income and expenses and how accurately they were represented on your return.

If you keep good records it’s not going to take much time. But if you have to go back and try to dig up evidence of every expense you claimed on your return, it’s going to be weeks of your life gone. If there are expenses you can’t prove, they get disallowed and you owe taxes on that money you tried to claim as deductions. If there is income you made that you didn’t claim on your tax return, that’s a bigger deal. Hiding 25 percent of your income puts you in felony territory, so don’t do that.”

Whether you prefer to DIY your taxes or work with a pro, the earlier you start, the better off you are. Nobody wants to be the person going through a shoebox full of receipts on the day taxes are due.

With more time to work on your taxes (and double-check them), you’re less likely to make a mistake. So why not get started today?

Filed Under: Freelancing
Business for Authors: be an author entrepreneur

Featured resource

Business For Authors. How To Be An Author Entrepreneur

Ready to make a living as an author? Full-time author Joanna Penn explains how to manage the business side of your writing habit.

3 comments

  • JP Carsten says:

    All great advice to claim what you can prove and even better advice to not claim deductions that may get your return challenged unless they make a really big difference. The service has threshold percentages/amounts that will trigger an audit. My policy is to weigh the value of the deduction. I relocated to a much warmer climate from the frozen North and donated thousands of dollars (resale value) of cold weather clothing well beyond the $500 allowance without receipts limit. Sure I could have legitimately claimed the donations but it would likely have triggered the audit and resulted in time lost, accountant expenses and my expenses to the interview. MY cowardly motto is to not poke the bear.

  • Writing is a business. If you never sell anything you don’t have a business or there should be reasonable evidence and expectations that profit over expenses will accrue, that income will come in. I think if you don’t start making sales in 5 years the business deductions no longer apply. Your writing is a mere hobby. but I am not an expert.

Speak Your Mind

Your email address will not be published. Required fields are marked *