Journalism 101: Tax Time!

by

Reporter

I started freelancing in ’98.

When tax time came around, I did what I had done since my first job at the East Orange Public Library. I gathered up my paperwork and gave it to my mom. She and my dad had an accountant who came each year around the same time. And for years, he did my return for a small fee that my parents paid for me.

Then I moved out of my parents home. And soon, taxes were one of those Things That Grownups Did. You know. Like, laundry and food shopping.

In 2000, I didn’t file at all. The 1099 forms that came in the mail from the magazines I wrote for scared me. There were no taxes taken out! What did that mean? How much did I owe the government? How much would I have to pay to get the return done?

I did what I usually do in these situations:

head-in-the-sand

2001. Tax time rolls around. The 1099s start piling up in the mail. And I’m thinking, no way i made this much money! Where the hell did it all go? And how much do I now owe?!?!?!

I didn’t file a return. Again.

The following year, I vowed to save 20% of every freelance check for taxes so that I wouldn’t get an April surprise.

That didn’t happen. 2002, didn’t file. Again.

Finally, in 2003, I knew I had to get it together. I couldn’t just keep running away. TH, (who was just TB back then), asked around and heard about a guy we’ll call Farc Malk. TB heard that Farc Malk was official. And that he was particularly knowledgeable about freelancers and their specific needs. I made an appointment for me and TB and we went together.

Farc Malk wears jackets that are two sizes too big. He’s been in New York, working as an accountant, since before any of us were born. He’s always always always got a cigarette dangling out of the side of his mouth. Always. He rolls his sleeves up to his elbows while smoking. His fingers fly across his huge calculator and he mutters to himself as he determines how much he can save you.

Farc is a dead ringer for this guy.

Farc is a dead ringer for this guy.

Dude takes his job very, very seriously.

The first day we met, he looked me and TB over and took a cigarette out of the inside pocket of his suit jacket.

“Who referred you to me?” he asked.

TB told him.

Farc nodded, lighting a cigarette.

“What’d she say about me?”

“She said you were the best,” said TB.

Farc nodded and sat back in his chair. He let out a plume of smoke and then took another deep drag.

“Did she tell you I was cheap?”

“No, she didn’t…”

“Good,” said Farc. “Because I’m not. But I’m worth it. Now let’s go.”

I hadn’t filed in years. And Farc didn’t bat an eye. He flipped through three years of 1099s and looked up at me.

“You lost yourself about three thousand dollars,” he said.

“Excuse me?”

“You only have three years to file if the IRS owes you. So it’s too late for some of these. You just gave the government a whole lot of money. I’m gonna get it some of it back. Not all. But as much as I can. From now on, you will file every year. If you owe, they’ll find you eventually. If they owe you, get your money.”

Farc has done our  taxes ever since. And dude is a monster. I remember one year, I was so happy with the returns that I blurted out: “Farc you are the best. I’ll never let anyone else do my taxes. Not ever!”

Farc looked at me with a wan smile.

“Not true. I know your type so well.”

“What do you mean?”

“Eh. You’re a writer. Not making much money right now. So I don’t charge you my usual rates. I cut you a break…”

(At this, I raised an eyebrow. Cause I felt like we paid Farc a lot).

“But you’re going to make more money. You and TH are doing well. And as the years go by, you’re only going to get better. And then, one year, you’ll start making enough money that you have to pay the government instead of getting money back. Then you won’t like me so much. Then one day, you’ll start making enough money that you get charged my non-starving-artist rate. And then you’ll think, maybe I’ll just go to H&R Block. You’ll leave for a year. Get your returns done by someone else. And then you’ll appreciate me…And you’ll come back. It’s happened dozens of times.”

“That won’t happen,” I told Farc. “I just know it.”

Farc smiled and lit a cigarette.

“We’ll see…”

Fast-forward to 2008.

I am ashamed to say that I still don’t save 20% of my income. So I’m still dealing with April surprises.

And Farc was right on every single point he made all those years ago. I grew from a starving artist to a working writer to a semi-successful writer. And while the numbers got bigger, I never felt a real jump. Life happens. I got married, had a kid, bought a house. Though I was making more money, I didn’t feel like I was.

At any rate, this was the year Farc hit us up with his real fee. And my mouth dropped. Immediately, I started Googling H&R Block and Turbo Tax. I was pissed off. Charging us all that money when we weren’t even getting a refund. We owe. And we owe big. Damn if I’m gonna owe the government and pay Farc xyz. Damn that.

But before I could really bolt, I sat down and looked at my returns from previous years. I thought back to when we went to talk to mortgage companies and one broker said, “Wow. You’re accountant is something else…” as she looked over my taxes. “So smart to use the blahganfga form and cite the alfalfjg tax code since you’re a freelancer…” (I’m substituting jibberish cause I don’t know what form she was referring to. It’s all Greek to me.)

I thought about how much money I made this year. And I did a quick calculation of what 20% of that would be. Which is a rough estimate of what I could be expected to pay.

I knew Farc would do better than that. So I didn’t bolt. He completed our return once again. I hit him off with a check that made me want to double over in pain. (Though, I must admit,  his fee plus what we owe is still less than what I would end up paying without him….)

Yikes. I digress.

(Speaking of digressing. I keep hearing my posts are too long. That I lose readers by overwriting. A few folks have suggested I half my posts. And then continue the discussion in the comments. One person emailed me: “Get your posters to talk to each other. Stop hogging the whole post. Make a community. Stop talking so much.” Ouch. That actually makes sense. But I don’t know how to stop talking…Let me try it right now and see what happens…..I’m gonna wrap this post up in the next 50 words!)

Okay. So Farc did our taxes. I owe a bazillion dollars. But I’m lucky to be in a situation where I’m earning enough to have to pay a lot. So I will not complain.

The point of this post is to give my fellow freelancers some tips, straight from Farc Malk, that will hopefully keep more money in your pocket. So let’s get it:

1. Hire a real accountant…

No disrespect to my H&R brethren but Farc says there’s no way you should be going to a cookie cutter accountant if you are a freelancer. The tax codes change so much. And drive-thru tax places are really not designed for people with multiple 1099s. If you have a full time gig and a very simple return, go for it. But if you are a full time freelancer, hire someone who specializes. (And don’t go flooding my email inbox. Find your own Farc.)

2. Keep. Your. Receipts.

Not just some of them. all of them. And not just occasionally. ALL THE TIME. Every year, Farc would tell me to save all my receipts. And every year, I’d start strong and then get lazy. Finally, Farc got tough with me. “Look, you are throwing away MONEY. Save your goddamned receipts.” The thing is, if you’re a freelancer, the government understands that taxis, newspapers, magazine subscriptions, etc, are an employment expense. If the item is under a certain amount, (I think less than a dollar), you don’t need a receipt. But for everything else, it’s essential that you hold on to your reeeipts. Your accountant won’t hand them in. But if you get audited, (and you will. Freelancers have complicated returns and get called out for returns way more than other folks), you’d better be able to back  up all the deductions you claim.

3. Keep a calendar.

Great tip from Farc. Start of each month, print up a calendar. Throughout the month, jot down the dates of work related events. Album release parties, concerts you cover, pitch meetings over lunch, etc. At the end of the year, it will be much easier to estimate how much of your discretionary income actually went to work events. There are so many times I will take 35.00 worth of taxis for a story and never hand in the receipts to get reimbursed for the magazines. You can estimate how much of your money you spend on these functions if you have a calendar. Hard to know without a calendar how much you’re really spending….Calendars are also legal documents that can be used in an audit. So if you lose all your receipts. Or you don’t do a great job of keeping receipts, you have a better chance if you have a calendar that outlines what work-related events you attended all year.

4. Know your deductions

My favorite deduction is the home office deduction. Now that I have an outside office, obviously the rent, internet connection and phone line are all completely deductible. But so is the paint I bought from Home Depot to decorate. And the file cabinet I bought. And the blinds. And the movie poster. And the frame I put it in. And the desk. Everything that goes into that office, (within reason), is deductible! Now, there are some rules to this. I can’t redecorate my office every year and still claim the deductions.

But the crazy thing? Even before I had an office, I was able to write off the cost of rent for the bit of square footage I used as office space. Do y’all hear me? Whether you rent or own, measure the square footage of your work space. Is it 5% of your total square footage? Then you can claim a deduction of 5% of your mortgage or rent for the year. I’m dead serious.

There are tons of rules to this. I actually had to give Farc a detailed map of our apartment. And one year, we couldn’t use this deduction because the layout of our apartment meant that our home office didn’t fit the IRS’ rules. If I remember correctly, you have to have a common area leading to your office space in order to claim the deduction. It has to be a space that a client could come to. Can’t be like, a closet in your kid’s bedroom.

5. Know even more deductions:

If you write about music and entertainment, don’t forget movie ticket stubs, itunes receipts or other digital music downloads, all your online fees for blogs and such. Ladies, If you get your hair done before an important event, you can deduct it! (Has to be an exceptionally fancy hairstyle. And it can’t be a reg’lar event.) Fellas, no fancy haircuts for you. Sorry. But if you have dreadlocks and need them done up before an event. Ch-ching! Deduction!  If you buy a couture outfit for an industry function, you can deduct it! (Every year Farc looks up at me with wide eyes and says, “Did you buy any couture!? And every year, I say, “No Farc. I’ve never purchased couture anything in my life…”) Regular clothes, no matter how expensive, are not deductible. It’s gotta be a gown or something really fabulous for a fancy schmancy event.

If you’re any kind of writer, all your books, magazines, newspapers are deductible. Don’t forget a single thing. Travel is important: Subways, gas, tolls, even part of your car note and car insurance can be a business deduction if you’re using your car to travel for writing assignments.(Even if you’re just driving to a train station.) Every bit helps!

Damn. I was supposed to end this post about a thousand words ago.  Guess I’m no good at the short post thing. Oh well….As I was saying…

Your cable bill can be deductible, depending on what you write about. And anytime you step foot in Office Depot, Staples, et al, you’d better be socking away that receipt!

At some point, it may make sense to incorporate yourself and have all earnings sent in the name of your company. But you have to carefully weigh the risks there. You have to be making a certain amount of money for it to make sense for you.

As a matter of fact, let me make it clear that most of the hardcore deductions are for people who are solely freelancers. Not people who freelance and also have a salaried position. These do-or-die suggestions or for folks who make the bulk of their money in 1099s.

Ask your tax specialist if any of these tips make sense for you…

Dear readers, did you send your taxes off today? Are are you one of those lucky people who actually files early since you’re getting money back. Do you claim any deductions? To my freelancing homies, do you have any secrets you can share? Any deductions that Farc might not know about it? I doubt it. ‘Cause Farc is a monster. But still…

I’d love to hear from you….

taxes2

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16 Responses to “Journalism 101: Tax Time!”

  1. NakedWithSocksOn.com aka NWSO Says:

    My added tip is write down exactly what your receipt is for on the back of it. Each year I make a folder that I toss receipts in, before I do I jot down the event, reason, person etc on the back so when I’m sorting through them I know what the hell it’s for. No way I’m gonna remember what my receipt for today is a year from now. Guess the calender thing could work too, but I like the direct connection on the actual receipt.

    By the way, I tried but trailed off after tip 4 and just skimmed to comment

    Weren’t you an editor or something? :P

  2. Alisha Says:

    Great tips! I recently did my taxes with Turbo Tax, then went to an accountant because I didn’t know what to do with those 1099s. Is there a rule about filing only if the payment is over $600?

    I’m going to deduct my face off for next tax season! The posts can be a bit lengthy somtimes, but I just chalk it up to your writing style. You make a story out of everything, which makes it a good read to me.

  3. Lashonda Silver Says:

    I have to say I read the whole thing, no skimming through. As I am a salaried person none of this pertains to me, but I read because I have dreams that do not include what I am currently doing and I need to file things away in my head. I filed because I get money back. I honestly enjoy your post and have never thought they were too long, but I think that is the reader in me.

  4. la negrita Says:

    Posts too long?? Le sigh. In the spirit of Goodie Mob:

    “People don’t read no’ mo’, all the do is Twit…all they do is Twit…all they do is Twit…”

  5. Caila K Says:

    Excellent tips-must print when I get home. This could very well apply to me in the future!

  6. Imani Dawson Says:

    Brilliant blog! I really felt it. I didn’t file for years, frightened of what I owed. Turns out, I did owe. I wish I’d had a Mr. “Malk” in my life when those taxes came due. Just squared away my debt with Uncle Sam. Next year, “Farc Malk” will most definitely be on the radar. Thanks for the tips.

    And real readers love words, so don’t be hampered by a pesky little thing like word count.

  7. paul cantor Says:

    went to jackson hewitt last year. Did turbotax myself this year. Owed a lot. Couple g’s. Definitely hurt. Took a decent amount of deductions, deducted my apartment, took some depreciation deductions as well. Wouldn’t be surprised if I got audited, just cause my life is like that. Will go to an accountant next year.

  8. Aliya S. King Says:

    @Alisha: i have heard that if your payment is less than 500 from a publication for the whole year, you may not get a 1099. And I can say from experience that in the early days, I never got 1099s from a few places for which I only earned a few hundred bucks. BUT keep in mind, if you earn ONE PENNY, you owe the IRS part of it. Up to you if you want to take that chance. But just because you don’t get the 1099, doesn’t mean you don’t owe the money.

    @Paul: ouch. get an accountant. No turbotaxing for freelancers! Though Farc says it’s almost unheard of for TurboTaxing folks to get audited. The IRS goes for freelancers with very complicated returns prepared by accountants first. Don’t I know it. UGH.

    And to everyone, thanks for backing me up on my way-too-long posts. I think I will try to streamline them just a bit, though. NWSO is right, I am an editor. Kind of. Just better at editing other people’s stuff…

  9. Aliya S. King Says:

    P.S. Back in ’06, I told Farc I was having a baby. He didn’t even say congratulations.
    He just said, “hmmm…”
    Then I could hear him through the phone, pounding away at his calculator.
    He said, “when are you due?”
    I said, I’m due on March 23.
    He said, “hmmm… No way we could get that baby out by December 31?”
    I said NO Farc, the baby would be VERY premature.
    He said, But I could save you so much money!

  10. DaniBani Says:

    This is really interesting and helpful.
    Do NOT shorten your posts. This blog is a break from the twits, quick skims I look at everyday. I look forward to this because I know the post is going to be long, thorough and well researched. Not some stupid ass quick comment or a quick read I’ll forget about in the next minute. Keep it coming.

  11. paul cantor Says:

    Hey Aliya… you’re right. I should have gone to an accountant. Though I was thinking of tacking on whatever it is they cost to what I was going to owe, and just felt like ah fuck it. These are tough times, I was looking for any possible way to keep the $$$ amount low that I’d have to pay out, whether it was to the government or anyone else. And all things considered, it probably wasn’t that much, compared to other folks. I need to get better at keeping receipts though, that’s for sure. I always ask for them, but then lose track of them in my wallet or whatever. I gotta get a “receipt” bucket, and need to start printing out all the paperless bills I get in my email for things that I purchase online.

  12. tmpringl Says:

    There is NEVER such a thing as too many words. That’s like breathing too much air. Pffft…keep writing long!

  13. clove Says:

    receipts, receipts, receipts! I joined the club a couple years ago and my tax life has been much better ever since. I’m fulltime + freelance (so lots of 1099s) but I actually don’t use an accountant (although my sister is one and could help me out). I use Turbo Tax business file and I make sure to go through each step carefully and just know what I need to file. I feel like the amount an accountant could get me wouldn’t be that much of a difference, esp since I don’t have a mortgage or any kids. Also, I’d probably be paying them more than I would get back. It doesn’t make sense for me now but I can see how later on it will. I’ll definitely use one once the house and kids come into play cause that complicates a lot. So I don’t think you absolutely should use an accountant if you’re a freelancer as long as you don’t mind doing your researching and checking what you can deduct. every little penny.

    great post! Young writers really need to know about this – I was ignorant to it for a minute

  14. Michael Says:

    Thank you for this post. I’m [so] glad I asked you about it. I took the L this year, albeit with a few decent deductions, but I’m already prepping for next year.

    I was [this] close to becoming a Republican and joining them at the tea party today after I found out how much I owed the IRS.

    As for the length of your posts, good writing is good writing. If it’s too long for some folks, they can always come back and read.

    Thank you again!

  15. Aliya S. King Says:

    @clove good point. You don’t *need* an accountant if you’re single, no house, etc. (Though I still highly recommend it). You can Turbo Tax it IF you are very anal about your receipts and you know about all the deductions…

  16. Retha Says:

    Hi Aliya! Yes, you do make a story out of everything. I like! How do you remember all the details :) Anyway, about receipts, nowadays I find I have to make a copy of some of them because the ink now fades, like the receipts from taxi cabs. So freelancers….make copies of your receipts as well.

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