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Writing is Taxing

 

 

Ooops!

When I speak with clients or other writers, it’s not uncommon for them to mention an item they claimed as a deduction on their tax return that isn’t actually deductible. Most of the time, the person sincerely thought he or she was entitled to the deduction and simply made an honest mistake. Other times, the person was trying to get away with something.

Some common items that people have taken business deductions for that are not actually deductible are:

  1. the full amount of business-related meals. Per tax law, only half of the cost of business-related meals is deductible. After all, we must eat to stay alive so there’s always a personal element to our meals.

  2. clothing costs. The cost of clothing worn for business events is not deductible. The only exceptions to this rule are for items in the nature of a costume or uniform that could not be appropriately worn elsewhere.

  3. grooming costs. The costs of having your hair cut or styled, getting your nails done, and other costs associated with our appearance are considered to be inherently personal and are not deductible.

  4. charitable contributions. Unless you receive a specific business benefit in return for a contribution to a charity, the cost is not deductible as a business expense and should instead be claimed as a personal itemized deduction. An example of a specific business benefit would be advertising services in a church bulletin in return for a contribution to the church.

  5. the full cost of items or services used partially for personal purposes. Many people deduct the full costs of their computers, printers, and similar equipment even though they use the items for both business and personal purposes. The same goes for cell phones and Internet service. The cost of these items and services should instead be pro-rated based on the relative business to personal use. It can be difficult to estimate the relative percentages with 100 percent accuracy, but as long as a taxpayer has a reasonable basis for the allocation, the IRS is not likely to challenge it.

  6. travel costs for friends or family members who attend events with the taxpayer. While it’s common for writers to bring a spouse or significant other along to writers conferences and similar events, the costs of that person’s travel are not generally deductible. The fact that the person may help you in incidental ways, such as lugging your books to a signing, helping you set up for a presentation, or zipping up the back of your ball gown isn’t enough for their travel to constitute a business expense. In order for the person’s travel expenses to be deductible, his or her assistance must be significant and essential. If you could have traveled alone with no real problems, chances are that person’s expenses are not business-related.

  7. meal costs while eating alone near home. While many writers hang out at local coffee shops or eateries to write, the cost of food and drinks consumed alone near your home location are considered personal and therefore not deductible. In order for a local meal to be deductible, you must eat the meal with another person and engage in a substantial business discussion with that person before, during, or directly after the meal.

If you discover that you wrongfully deducted some expenses, it’s not too late to make amends. You can correct a previous year’s tax return by filing Form 1040X, which can be downloaded from the IRS website at www.irs.gov. Be sure to explain in Part III of the form why you are amending your    Continued on page 20

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