Working as a freelancer is tough. You’re always worried about where you’re next job is going to come from, your income is not steady, and, as a freelancer, you’re technically you’re own business, so with the stress of looking for work, finding work, booking work, and then finishing that job up to expectations, you also have the added stress of having to keep track of your finances for when tax time rolls around.
Hopefully all you freelancers know that when it comes to tax time, you have a lot of different possibilities for tax write-offs, or deductions. Here’s a link to some common ones that you should be aware of:
To summarize the above link, here are some common deductions you may not know about (see the link for details):
UPDATE: I’ve looked into this subject a little more, and I’ve found an article published by the IRS that tells you EXACTLY what is deductible. You can download it here:
So basically, here’s all the stuff I get away with writing off, and it’s actually quite a lot.
UNPAID INVOICES-someone stiff you and not pay the total amount due? WRITE THAT SHIT OFF, SON.
RESEARCH (Books, movie rentals, etc) Just HAD to go see THE DARK KNIGHT RISES IN 3D IMAX AND BUY THE POPCORN TOO? It’s research, for your craft, you are researching new filmmaking techniques, and scouting out the competition (Yes, Mr. Nolan, you heard me…you are competition)…WRITE THAT SHIT OFF, SON.
MEETINGS (At coffee shops, restaurants, etc) Even if it was totally just to impress that hot director’s assistant…WRITE THAT SHIT OFF, SON.
JOB HUNTING (like paying to access job boards) Can’t afford to lose your IMDB PRO account, or your very expensive subscription to Below The Line Production Listings? Well, now you don’t have to! Because you can WRITE THAT SHIT OFF, SON.
HOME OFFICE EXPENSES…you know what to do, SON. This can be anything from office supplies, to utilities, to computer software that you need for your job…nearly everything.
CELLPHONE and SKYPE Need a second cellphone to keep track of your “business clients”, cough, cough, (drug dealers?)…WRITE IT OFF
PROFESSIONAL ADVICE Need to go to a lawyer to find out what the best way is to get rid of dead bodies, or to steal someone else’s ideas without infringing on their intellectual property? WRITE THAT SHIT OFF, SON.
MEALS/ENTERTAINMENT This is a biggie, any meals you buy during the course of work are deductible, any drinks you buy for prospective clients, etc. KEEP TRACK OF ALL YOUR RECEIPTS!
Unreimbursed Employee Expenses
These are pulled straight from the IRS WEBSITE
“You can deduct only unreimbursed employee expenses that are:
- Paid or incurred during your tax year,
- For carrying on your trade or business of being anemployee, and
- Ordinary and necessary.An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is neces- sary if it is appropriate and helpful to your business. An expense does not have to be required to be considered necessary.You may be able to deduct the following items as un- reimbursed employee expenses.
- Business bad debt of an employee.-UNPAID INVOICES
- Business liability insurance premiums.
- Damages paid to a former employer for breach of an employment contract.
- Depreciation on a computer your employer requires you to use in your work. -THIS IS A BIGGIE
- Dues to a chamber of commerce if membership helps you do your job.
- Dues to professional societies.-YOUR FILM SOCIETIES THAT YOU’RE IN
- Educator expenses. – IF YOU TEACH ANY FILM WORKSHOPS OR ANYTHING, THIS IS A GOOD ONE
- Home office or part of your home used regularly and exclusively in your work. -THIS ONE GETS A BIT TRICKY, so make sure to have “seperation” between your home office and your living space. Check out this link to find out more:http://workathomemoms.about.com/od/taxes/a/qualifyhomeoff.htm
- Job search expenses in your present occupation.-ALL THOSE PRODUCTION LISTINGS that you pay for, like “BELOW THE LINE”, “MEDIA-MATCH”, “BACKSTAGE”, etc
- Laboratory breakage fees.
- Legal fees related to your job.
- Licenses and regulatory fees.
- Malpractice insurance premiums.
- Medical examinations required by an employer.
- Occupational taxes.
- Passport for a business trip.
- Repayment of an income aid payment received under an employer’s plan.
- Research expenses of a college professor.
- Rural mail carriers’ vehicle expenses.
- Subscriptions to professional journals and trade magazines related to your work.-Your subscription to ENTERTAINMENT WEEKLY applies here
- Tools and supplies used in your work.-LIKE MOST FREELANCERS, THIS LIST IS VERY LONG FOR ME, SO KEEP TRACK OF ALL OF YOUR SET SUPPLIES
- Travel, transportation, meals, entertainment, gifts,and local lodging related to your work.-THIS IS HUGE
- Union dues and expenses. -FOR ALL YOU FELLOW DGA and SAG/AFTRA members.
- Work clothes and uniforms if required and not suita- ble for everyday use.Work-related education. -ANY TRAINING WORKSHOPS, SEMINARS, BOOKS ABOUT FILM, DOCUMENTARIES, EVERYTHING…EVEN MY NETFLIX ACCOUNT IS WRITTEN OFF HERE.
Just to reiterate, I’m not an accountant or a lawyer…so to find out for sure if you’re up for these, consult a professional tax person…which again…I am not.
SO, if you know that anything you spend money on to further your career or business is a possible deductible expense, now we come to the task of how you keep track of all this stuff? There are a couple different things I do to help me keep track of my bookkeeping.
I use this as my main time-tracking and invoicing system. It’s slick, user-friendly, and you can create an invoice and email it out all from the website…and it’s FREE. Another cool thing is that your client can even pay that invoice online via the FRESHBOOKS website. You can also set up auto-invoicing, and auto payment reminders for your clients. Pretty cool.
This is a biggie–keeping track of all your receipts can be very time-consuming, and you can either put the work in as you go, or you can put them all in a box and just do it around tax time…which I do not recommend. With SHOEBOXED you just take a picture of your receipt (on your smartphone), and it uploads to their server and automattically extracts all the needed info like price, vendor, time, date, and it’ll even automatically categorize it for you. Oh ya…and it’s FREE, BITCHES.
This is another alternative to tracking your receipts and expenses, I actually prefer this one to SHOEBOXED, but unfortunately, EXPENSIFY doesn’t automatically sync with my accounting software like shoeboxed does, so that’s why shoeboxed wins out in this arena. But this one’s FREE TOO, BITCHES.
This is the life-saver–it’s a %100 FREE (BITCHES), online accounting solution. It integrates with SHOEBOXED as well as FRESHBOOKS (although WAVE also has an invoicing feature), and automatically imports all of your data from your bank accounts, credit cards, etc, so you can basically see where ALL OF YOUR ASSETS are coming from, going to, and you can also categorize everything so that frequent transactions of the same typ are automatically added to the correct category. This is my favorite one on this list.
This is another free alternative to WAVE, however, I find WAVE a little more user-friendly and more customizable, but OUTRIGHT does basically the same thing.
This is another website that’s totally free and is AMAZING for seeing all of your finances in one place, and the REALLY REALLY COOL thing about MINT.COM is that it also gives you financial advice (which is actually good advice) as well as helps you set goals for saving money, investing money, or have some money stored away for an emergency (important for freelancers…never know when that next drought is going to come).
SO, to recap: