Early in April a few years ago I got a call from a client who was preparing his income tax. This aut

Early in April a few years ago I got a call from a client who was preparing his income tax. This author wrote erotic fiction and wanted to know whether he could legitimately claim as a deduction london travel packages his pharmacological treatment london travel packages for a little affliction he had contracted in the course of "researching" one of his novels.
I told him I imagined the treatment would probably fall under medical london travel packages deductions london travel packages rather than research expenses, but the story does illustrate that even the most untrammeled literary spirits have to pay their obeisance to Uncle Sam sooner or later. With more and more authors incorporating, purchasing expensive computer equipment, seeking shelters for their taxable income, and in general being more businesslike in their approaches to the art and craft of literature, the accountant is becoming as important as the literary agent in guiding the destinies of writers.
The chances of a writer being audited by the Internal Revenue Service are a little better than those of the average working stiff because most writers are freelancers, london travel packages and taxes on their income are not usually withheld as they are from persons on company payrolls. Thus, even though the odds that anybody will be audited are going down because of staff cutbacks at the IRS, a free-lancer's tax return may be more provocative than that of someone who works for Boeing or IBM. Your best defense, should the fickle finger of the IRS single you out, is a well-kept set of records, primarily your canceled checks, your receipts, and a journal or ledger recording details of every transaction for which you are claiming a deduction, particularly those for which receipts are not ordinarily given, such as public transportation, certain london travel packages tips, and the like.
In general, authors are entitled to "write off," or deduct from taxable income earned from their writing, certain costs incurred in pursuit of that income. Among those costs are agent's commissions; rental of office space; editorial and secretarial assistance; purchase or lease of computers and other office equipment; office supplies, such as toner cartridges and paper; travel; the cost of entertaining editors, agents, producers, collaborators, and others related to their professional endeavors; and books and other research material.
Because of the feast-or-famine nature of the freelance life, you don't necessarily have to earn money in any given year in order to write off expenses. You may be working on a long-term project and a whole year or more may go by without income. Yet you may still claim the costs incurred that year and deduct them from whatever other income you received, such as interest or stock dividends, your spouse's income if you're married and file jointly, and the like. Even if you're not a professional writer at all but simply a would-be london travel packages writer who has yet to realize a dime from his work, you may nevertheless write off your expenses for a period of years before these activities london travel packages come under the definition of hobby, the costs of which are not deductible.
So much for famine. But there's also tax relief for those who feast. One form of it is the government-sponsored IRA s and other tax shelter plans, which are designed for freelancers london travel packages and other independent breadwinners who do not earn regular wages. By putting some of your income into such a shelter, you in effect london travel packages lower the amount of income you claim for that year and pay taxes on it only when you draw that income later in your life, at retirement age, when you will presumably be in a lower tax bracket. Meanwhile, your tax shelter account will be appreciating through interest or dividends or (if you invest london travel packages the money wisely) through capital gains on investments.
london travel packages Capital purchases. Capital purchases are major items such as machinery and furniture. These might include your personal computer and printer, a desk, photocopier, file cabinets, a fax. The government considers such purchases investments, and because london travel packages investments are subject to depreciation, you are usually not permitted to deduct their purchase price in full the year you purchased them. Rather, you have to spread the cost out over several years for tax accounting purposes. Thus, if you buy a PC and a printer, you may only be able to "depreciate" them over five years; that is, deduct a portion of the price from your income each year for five years. On the other hand, you may be entitled to an "investment credit," a direct credit against your tax liability. Investment credits are a form of reward the government gives businesses london travel packages for buying london travel packages capital equipment. The principle is that such investments pump money back into our economy and keep it healthy, so investment london travel packages credits encourage you to buy furniture and equipment.
Straight deductions. Most day-to-day necessities of the writing profession come under this category. Assuming you can furnish receipts, these are fully deductible, and deductible wholly in the year in which you pay them. They include paper and other stationery; pens and pencils, paper clips, rubber bands, and other office london travel packages supplies; postage; messenger bills; london travel packages photocopy bills; legal, bookkeeping, and accounting fees; dues and professional organization fees; editorial and secretarial assistance; agent's commissions and expenses; phone bills; interest on loans; and certain state and local taxes, such as unincorporated business taxes, city rent or occupancy taxes, and the like.
Although many of these costs are indisputably business expenses and are seldom questioned by the IRS as long as you furnish solid documentation, some of them do fall into a gray area where eyebrows might be raised or IRS computers, programmed to seek variations from certain norms, might "flag" the questionable item. Writer's Digest is a pretty safe magazine subscription to deduct, but Vogue? Sports Illustrated? Well, if you can demonstrate that you wish to write for those markets or that the information they provide applies to a writing project you're developing, those subscriptions will be arguably legitimate. The same might be said of a television set. If you hope to write for television or consider TV a good source of information for your books, stories, or articles, you may be able to get away with writing off all or some of the cost of the television set.
The gray area gets even grayer with such deductions london travel packages as travel and entertainment. At what point, if any, a dinner stops being social and starts being professional is often impossible to say, as is the point at which a vacation becomes a business london travel packages trip. In order to legitimize these deductions, london travel packages solid documentation is desirable in the form of receipts and canceled london travel packages checks, a diary or journal, or other written evidence demonstrating intent and purpose. The IRS requires receipts for any claimed business meals of more than $25; for meals costing london travel packages less (is there such a creature?), no receipt is necessary but a detailed journal entry or other memo is desirable. It should stipulate the date, place, persons involved, business purpose, london travel packages and price. Home entertainment may be harder to document, since food and drink for business entertainment are often purchased with provisions earmarked for personal use, or food and drink already stocked at home may be used to entertain london travel packages business guests. But here again, a combination of receipts and memoranda may at least convey to potential auditors the sincerity of your attempts to furnish good documentation. The IRS does assume that a certain percentage of a professional writer's or freelancer's income is going to be claimed for entertainment, and within that range it may not raise any questions. But because entertainment deductions london travel packages are usually among the most inflated found in the average return, any inordinate claims london travel packages will usually trigger intense curiosity.
london travel packages The same is true of travel. Business travelers are obliged london travel packages to document the purpose of their trip and expenses, and even though such trips may in fact be 95 percent play and 5 percent work, orderly records will allow the benefit of the doubt to be given to the claimant. Indeed, no connection between the place visited and the place written about need manifest itself, for who is to say that you did not write a story about Acapulco that was rejected london travel packages and never published, or that after spending a week in London researching a novel you did not decide to set the book in Paris instead? But there are limits to the government's credulity. The writer who flies with his family to Miami Beach during Christmas week may have a hard time convincing a gimlet-eyed IRS auditor that it was a research trip.
Probably the most common tax headache for a writer is what to deduct for the office in his home. If you have an office london travel packages outside your home, you may claim the rent, utility, london travel packages insurance, and related london travel packages bills in their entirety. But what if your bedroom doubles as an office or you do your writing on the kitchen table? Until a few years ago, the IRS was liberal in its definition of office space in the home, but it has since become stricter, insisting that a room be set aside specifically and exclusively for professional use. If you have an eight-room home and use one room as an office, london travel packages you may claim one-eighth of all your house expenses as deductible business expenses.
The telephone is another ambiguous item insofar as personal and professional uses are mingled on the same bill. In such cases you can assign a percentage of the bill to business use and note the long-distance charges for business london travel packages calls. Perhaps the best way around the problem is to maintain a separate phone for business purposes.
A growing number of writers have become so businesslike about their profession that they have incorporated themselves. What benefits do they hope to derive? Is this something that every writer can or should do?
There are many financial, london travel packages legal, and other good reasons for individuals to form corporations, but these are not always as clear for writers as they might be for manufacturing or service companies. london travel packages One major benefit,