Authors and Taxes
Many people don't
know this about me, but my profession is accounting. At my day job, I conduct
audits but I am preparing to start up a tax practice in 2015/2016. As an author and
an auditor, I know that we are all prone to being audited by the Internal
Revenue Service (IRS).
However, being a
small business owner can make you more susceptible being audited. It is true
that there are loopholes for authors and other small business owners, but from
what I see and hear in my field there are a lot of people either taking
deductions that they shouldn’t, evading taxes all together, or dodging owed
back taxes.
Mistake # 1: Home Office Space Deduction
Just because you
have a desk and a laptop at home does not mean that you automatically qualify
for this deduction. You must meet certain criteria for the home office to be
recognized and no, never claim your monthly rent for the apartment you live in
as the deduction. You must be able to prove that the amount you claim is what
you use reasonably in relation to the space. If you live in a home that you
own, try separating the utilities—an account for the main house and another for
your office space. This way, there are no questions about who uses what. The
IRS is big on documentation. Be prepared.
As I writer, I
don’t take the home office deduction because I spend most of my time
writing/working away from home. Too bad I can't take a deduction for the coffee
I drink in coffee shops.
Mistake #2: Meals and Entertainment
The only way you
can legitimately take this deduction is if you're having a meal with a client while
discussing business or you are traveling overnight away from your residence.
Just like travel expenses, the meal cost must be reasonable.
Mistake #3: How You
File
If you own a
publishing company where you are taking on other authors, you should NOT be a
sole-proprietor. Be sure to convert to an LLC or an S-Corporation. Speak to a
tax and/or legal professional to help. This protects your liability and you
show the IRS that you legitimately have a business and not a hobby.
What You Can Deduct
One huge gripe of
mine is someone telling me what I can’t do without providing solutions to what
I can do. So below are a few things you can do to make your tax burden a little
more bearable.
1.
Office Supplies –
Consider printing, book mailings, postage, envelops.
2.
Travel – If you
travel more than 30 miles outside of your city it is deductable. Be sure to use
mileage (document in a notebook) versus gas costs. You can find current mileage
rates on the IRS website.
3.
Advertising and
Public Relations Costs—if you pay a publicists or buy ads you can claim these
costs.
4.
Computer and
Internet Services-you can use this as a deductable if you are using it solely
for business.
There are plenty of
deductions that you can take when you own a business. If you have questions,
feel free to contact me at Tremayne_Moore@yahoo.com.
