Your Questions/Julian Block's Answers Tax Facts for by Julian Block In these tough times , it becomes more important than ever for freelancers to familiarize themselves with steps that can keep their taxes to a minimum - and, of course, keep them out of legal trouble. To help subscribers take year-round advantage of legitimate tax breaks while not running afoul of the IRS rules, we offer some tips from our tax expert and columnist, Julian Block. If you need additional information or guidance in specific areas, you should contact the IRS or consult your personal tax advisor. Julian is available for consultation – julianblock@yahoo.com Question: I went to New York from the West Coast to attend an ASPP members' meeting plus a seminar last spring. I'm pretty sure that I'm entitled to claim some deductions. But what sorts of expenses can I deduct, and can I deduct them totally? Answer: You get to deduct 100 percent of what you spend for the attendance fee, tapes of sessions, books on photo research and the like, plus travel between your home and New York and expenditures for hotels. There's a limitation, though, for meals not covered by the attendance fee, including both what you eat en route and food consumed while you're in New York: Deduct only 50 percent of those expenditures. Question: My spouse (who isn't a researcher and didn't attend the conference) came along on the trip. Any chance that any of my spouse's expenses qualify as deductible? Answer: There's no deduction whatever for the portion of the outlays attributable to your spouse's travel, meals, and lodging - with a limited exception, one that will allow relatively few freelancers to salvage deductions for a mate's travel expenses. To qualify for that exception, these requirements must be met: (1) The spouse (or dependent, or any other individual) accompanying you on business travel is a bona fide employee of the outfit that pays for the trip (in this case, your freelance research business); (2) the spouse has undertaken the travel for a bona fide business reason; and (3) the spouse is otherwise entitled to deduct the expenses. Special tip: Take heart. Some often-overlooked tax relief remains available for lodging costs, even when your spouse, or someone else tags along only for fun. You are entitled to a deduction for lodging based on the single-rate cost of similar accommodations for you - not half the double rate you actually paid for the two of you. Let's say the two of you drive to New York, and you stay at a hotel in New York where rooms go for $200 for a single and $240 for a double. Besides a deduction for the total cost of driving to and from New York (you obviously incur the same driving expenses whether your spouse accompanies you or not), you are entitled to a per-day deduction for your hotel room of the entire single rate of $200, rather than half the double rate, or $120. To help safeguard your deduction in case the IRS questions it, remember to have the hotel bill note the single rate, or be sure to get a rate sheet. Question: Can I deduct money spent for magazines purchased at a newsstand for pre-query research? These are not magazines I'm now researching for but magazines I hope to research for. And if I can: Where on Form 1040 do I list those deductions? Answer: The law allows you to deduct business-related publications, and these magazines are in that category. Like your other photo research expenses, you claim them on Schedule C (Profit or Loss From Business) of Form 1040. Question: I went to a get-together with some fellow work-at-home colleagues. There wasn't a speaker; it was more of a social event. But I see it as networking with my fellow professionals, and most of the talk was about work-related issues. Can I take a business-expense deduction for the cost of getting there? How about my cash contribution to the refreshments for the group? Answer: The event does qualify. You're entitled to claim the entire cost of round-trip travel between your home and the site of the gathering. For travel by bus, train, or taxi, just keep track of your fares and claim them as business expenses; for auto travel, you can claim actual expenses or a standard mileage allowance. Whether you claim actual expenses or use the mileage allowance, remember to deduct parking fees and bridge, tunnel and turnpike tolls that you pay while you are on business, too. As for other outlays, they fall into the category of meals and entertainment; like the food consumed on that trip to New York, they're only 50 percent deductible. Question: I research for several magazines. One magazine’s 1099 form reports not only the fees they paid me during the year in question, but also includes sums that compensated me for out-of-pocket expenses. Of course this doesn’t agree with my records: I don’t count those payouts as expenses, since I know that I’m going to get them back – and I don’t count expense checks as income, either; it’s just a wash. Suppose I receive a 1099 form that shows $2987.53, which actually includes a $2500 payment for services rendered and $87.53 worth of reimbursement for telephone calls. It doesn’t make sense that I’d have to include the latter amount in totaling my income for line 1 on Schedule C, since it wasn’t income. Answer: Contrary to what many self-employed people mistakenly believe, it’s not “just a wash.” You should make sure your return reflects the consistency that will keep the IRS computers in a calm, unagitated state. You should include in your line 1 total the full amount shown by the magazine, $2587.53. Then count the $87.53 among your deductible business expenses, since you should not be paying taxes on it. Question: A university asked to reprint a magazine article I wrote about photo research in its alumni publication. I gave permission without asking for any payment. Since this is an educational institution, can I take a charitable contribution deduction equal to the fee I would have asked of a commercial publisher? Do I need a letter from the school? If so, what should it say? Answer: Sorry, a letter won’t help. You are not allowed any deduction. Julian Block, a former IRS agent and a tax attorney, is the author of “The Stock Photographer’s Tax Guide.” For details on how to purchase this important 70-page publication: http://www.photosource.com/reducingyourtaxes. For Julian’s tax saving and tax planning reports, go to http://www.photosource.com/products and click on “2008 Tax Tip Guides.” Julian can be reached at julianblock@yahoo.com. |