March 25th, 2007
Since we’ve all got tax returns on the brain, I figured it was time for another tax-related post. Earlier this month, a friend of a friend of a friend told me she had a freelance web designer pal who deducts the time he spends tricking out his website as a tax write-off — after all, it’s advertising and marketing for his business, right? Basically the web designer pal of this friend of a friend of a friend would multiply his hourly rate (let’s say it’s $75 US) by the amount of hours spent spiffing up his site or blog (let’s say it’s 10 hours a month), thereby claiming $750 in business expenses for the month on his annual tax return.
I’ve said it before and I’ll say it again: I’m not a tax professional. But my gut told me this guy’s “marketing” write-off was a big fat no-go. (If not, I would have tried that tactic myself long ago.) My Friend the CPA confirmed as much, as did my friend of a friend of a friend’s Bookkeeper Pal. So we are not taking a cue from my friend of a friend of a friend’s web designer pal, who sounds like he needs to sit down with H&R Block — and quick.
In other words, we self-employed types can’t claim as business expenses the non-billable hours we spend marketing ourselves, sending out invoices, researching new clients, and the like. However, we can deduct some or all of the printing costs we incur for said marketing materials, money spent hiring a web designer, printer paper used to print our invoices on, dinners splurged on in an effort to woo new clients, magazine subscriptions purchased to stay abreast of industry trends, Internet connection used to research new clients, and so on.
But I’m not here to single out one freelancer’s ill-informed move. In fact, I’d now like to share with you some of the boneheaded tax write-offs yours truly has attempted to claim on income tax returns past (only to have her accountant laugh in her face):
- Gas used to drive to a year-long, onsite temp gig — aka contract job, or permatemp assignment. (That’s like trying to claim the gas you use to get to your employee job, a big no-no.)
- Groceries. (Since I’m not a chef or caterer, the IRS doesn’t care what I whip up for lunch each day.)
- Drycleaning. (This only works if you’re a model or an actress or perhaps a magician’s assistant.)
Resources you can use:
- If you’re not sure what constitutes a legitimate write-off, check out the IRS page on business expenses.
- For some fantastic freelance tax FAQs, check out these tips and resources compiled by Debbie Ridpath Ohi of Will Write for Chocolate. (Full disclosure: Debbie includes this page from my blog.)
- Do talk to an accounting professional. Really. Because you don’t want to mess with the IRS. And you shouldn’t take my word as gospel because — repeat after me, class — I’m not an accredited tax professional.