While browsing some of the top headlines this evening, I spotted this article, about the IRS's recent push to reclaim taxes. It's probably unsurprising that the amount of unreported income is so high. I know that I've heard a range of comments and excuses from people, from the misconception that PayPal income isn't taxable to the reasons why a personal car should be written off as a business expense.
Lying about your income is a shady thing to do, in my opinion. Deliberately writing off expenses that are completely unrelated to work is even worse.
Judging by what this article says, though, if you are not already honest with the IRS, you had better reconsider your evil ways. It sounds like the IRS is going to start cracking down on self-employed individuals and small businesses. Getting audited is a hassle, but it's even worse if you've been naughty.
There's really no excuse for not keeping good track of your income and expenses. My personal preference is to keep an Excel spreadsheet for income and another one for expenses. Anytime I receive payment or spend money on something work-related, I just enter it into the correct spreadsheet, copy the check if it's a payment, and file the receipt if it's an expense. That way, not only do I have a running tally throughout the year, I also have a paper trail to back up the income and expenses I report to the government.
If you're interested in more about doing taxes as a freelance writer, you might be interested in several articles I wrote for Write-From-Home.com:
How to File Taxes as a Freelancer: An Overview
Filing Taxes as a Freelancer: How Deductions Work
Taxes for Writers: Paying Your Estimated Tax
I really hope for your sake that you're not still working on your tax return at this late hour, but if you are, maybe these articles will help. Even if you have already filed your taxes, perhaps you might want to be better prepared next year -- or perhaps you still need to figure out your estimated taxes. (You know about that, right?)
Either way, good luck -- and remember, be honest!
Sunday, April 15, 2007
Writers and taxes: Why you should be honest
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