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TheDynamo
02-25-2008, 11:30 PM
First a little information, I am a motion graphic designer working full-time for an ad agency here in Portland, Or. Many folks I work with in the design department write off their cable bill, DVD Rental bill and broadband internet access bills as a work expense. Since we do work in all of those fields, I can see their arguement that they are legitimate job expenses.

Onto the question. Since I also perform these tasks as part of my job description and freelance work I feel that I and the majority of you folks out there are able to take these deductions as well. What say you?

-Dyn

parm
02-25-2008, 11:42 PM
I think you're best course. Would be to seek advice, from the Inland Revenue Service directly.

The actual rules regarding this. May not tally, with what forum members deem to be fair game.

SplineGod
02-26-2008, 12:44 AM
Theres a lot of good entertainment industry accountants out here in Los Angeles. Ive been able to write off movie tickets, action figures, DVDs, Books, Film, computers, trips to usergroup meetings, trade shows etc etc.
I would recommend finding a good accountant. :)

Mr Rid
02-26-2008, 02:13 AM
Ive researched this topic a great deal and handled my own taxes for many years. Income tax law is really one big fat grey area on purpose. Most taxes like sales tax or gambling tax have straightforward laws accompanied by the term 'mandatory' in regards to paying them. But income tax laws are extremely complicated and surprisingly covered in the term 'voluntary.' There is much controversy over this, but myself and plenty of others have been unable to find any law that clearly states 'payment of income tax is mandatory' as with other forms of tax. What is mandatory is that you must file a return. But the point is that the laws allow some room for 'creative accounting' so that those who make the laws (fat corporations) can benefit as needed. But other professionals in the know may also take legal advantage.

Income tax can be a maze of chutes and ladders (if you are familiar with the game). What one person gets away with, another gets in trouble over. The IRS comes up with new rules for 'sole proprietors' and 'independent contractors' (and pay particular scrutiny to the entertainment industry) every year as both sides maneuver for leverage. Its one big constantly shifting game of them trying to get more and you trying to pay less.

I find that within each range of income, different amounts of writeoffs are allowable within certain areas (office expense, home office rental, entertainment, etc) before a 'red flag' may pop up. But a decent accountant, particularly one used to dealing with the entertainment biz, can save you a lot of time and money while avoiding an audit. But Ive seen there are no guarantees. Ive seen many people getting away with little 'white lie' writeoffs, and others get audited and penalized for legitimate writeoffs when the IRS just feels like being a pain in a certain situation.

Writing off dvd rentals, comic books and plasma screens that may not entirely be related to work;) will probably never raise suspicion if managed modestly.

This may be a surprise, but years ago, I once went from $1400/wk as a freelancer with no withholding to a $1600/wk employee but I made less money because withholding gouges as much as 23%, vs writing off all my expenses as a contractor where I also consequently wind up with more fun (and legitimately work related) toys as writeoffs. I do not regard any withholding as money that is ever mine. It only amounts to a fee that my employer pays directly to the IRS for the right to employ me. It never passes thru my hands. Realize this when negotiating a salary.

But a smaller animation company could actually save a lot of money by paying all the animators less money as contractors, and those artists would actually make more money if they properly gauged writeoffs and have more fun work-related toys. But the company would have to play by different employer rules. For instance, artists would supply their own workstations (saving the company even more money), and they could not be told precisely when to come and leave. This may sound messy, but this type of situation has worked very well in situations that myself and others have worked in.

Steamthrower
02-26-2008, 06:45 AM
The amount of taxes I pay increases proportionately to how hard I work. The Fed basically fines me for the level of productivity I have.

Get all the money back that you can. It's not theirs in the first place, why let them have more?

Tzan
02-26-2008, 08:34 AM
When self employed the IRS will allow a deduction if its 100% work related.
So if you have 2 cable tv lines you can deduct 1. If you buy a computer you can deduct it if its used 100% for work only.

If you want to deduct stuff that is 50/50 then you are taking a chance. Its up to you how much of a risk you want to take.

I work at home 100% and use the same space for work and personal stuff so I dont declare a home office deduction.

Those voluntary tax people go to prison when they get caught.

I hope that I have to pay 1 million a year in taxes :)

Steamthrower
02-26-2008, 08:43 AM
I hope that I have to pay 1 million a year in taxes :)

Naturally. I would to. ;) Because that would mean my total revenue would be pretty darn high.

I'd rather be safe than sorry, especially if I had dependents. But when practical, why not deduct what you can? For me this would include all computers, software, and electronics like recording equipment, cameras, lenses, etc.

Tzan
02-26-2008, 09:06 AM
Naturally. I would to. ;) Because that would mean my total revenue would be pretty darn high.

Exactly :)
Whenever someone says they want to pay less taxes, I say I want to pay more.




I'd rather be safe than sorry, especially if I had dependents. But when practical, why not deduct what you can? For me this would include all computers, software, and electronics like recording equipment, cameras, lenses, etc.

Oh dont get me wrong, I deduct all sorts of stuff including the Cannon XTi I got last year. Lucky for me I really dont do personal photography so its all business use. I deduct mileage and record it in a book, lightwave, dwg->pdf converter software etc...

TheDynamo
02-26-2008, 09:43 AM
Heh right now Mr. Turbotax is doing the work on the 1040. Ironically, through the years of working on broadcast. I've noticed more of my attention being drawn to special effects, show opens and motion graphics on television than the content of the show itself.

I think ironically, the use of an accountant would eliminate the amount of money he/she would be able to free up for me. I know I can justify that half of the resources dedicated towards those staples are for professional purposes.

-Dyn

theo
02-26-2008, 10:58 AM
Ask your CPA about this. If you don't have one-get one.

There are many legal ways to manage your tax burden and a seasoned CPA will pay for themselves many times over.

Avoiding overpayment of taxes is excellent business.

Leave overpayment to the financial masochists.

Jim_C
02-26-2008, 11:12 AM
<snip> But income tax laws are extremely complicated and surprisingly covered in the term 'voluntary.' There is much controversy over this, but myself and plenty of others have been unable to find any law that clearly states 'payment of income tax is mandatory' as with other forms of tax.<snip>

Yea isn't it something like there IS a provision that US citizens must pay taxes on income from OTHER countries bit there is no official provision stating that we must pay for income from within this country...(?)

So since no provision officialy states we MUST, we don't HAVE to....

I say Bring On the Fair Tax!!!!

___

Back to the OP, I use TurboTax small business also, then I have a buddy accountant glance over it during a nice dinner I take him to.
He's always really impressed with the thouroughness of the T.Tax and usually has little to say about the return per say.

T.tax will analyze your business, it's size, income etc against your deductions and let you know if any red flags are raised.

One thing my buddy mentioned is that it's best NOT to try to wade in the partial use for business department.
Meaning don't write off things that are 40% business, 60% home. this supposedly perks up the ears of the auditors.
If you don't use it 100% (or can't justify it's 100% use) don't write it off.


Of course, he is a nobody to all of you and I am just a guy on the internet sooo... see an accountant or CPA... :)

Andyjaggy
02-26-2008, 12:27 PM
Be aggressive but fair. Use the system but don't abuse it.

JeffrySG
02-26-2008, 12:38 PM
Theres a lot of good entertainment industry accountants out here in Los Angeles. Ive been able to write off movie tickets, action figures, DVDs, Books, Film, computers, trips to usergroup meetings, trade shows etc etc.
I would recommend finding a good accountant. :)
:agree:

digefxgrp
02-26-2008, 01:38 PM
Interesting question regarding the deduction of your cable bill, so I asked my Tax agent. She said the only way the IRS would allow that as a deduction is:
if you were required to view a program that's directly related to a current project you're involved with AND said programming was not able to be viewed any other way... or if your employer required you to watch a program that was not able to be viewed any other way and was directly related to a current project/client.

For example: say your providing x number or hours of educational programming for the public access channels and you need to verify the content is being used in the manner contracted…then it would be a proper deduction.

Best rule to remember is it’s what the IRS sees as a deduction…not your co-workers. If you have any doubt, just call the IRS office in the Federal Bld downtown (I also live in Portland). They've help me in the past and it's free!

Steamthrower
02-26-2008, 02:20 PM
if you were required to view a program that's directly related to a current project you're involved with AND said programming was not able to be viewed any other way... or if your employer required you to watch a program that was not able to be viewed any other way and was directly related to a current project/client.

I see your point but that's kind of like saying you can write off a business lunch ONLY if it's directly related to a project AND there was no other way you could meet with your customer....or if your boss REQUIRED that you take the customer out to lunch and NOT to a trade show, for example.

theo
02-26-2008, 03:16 PM
If you have any doubt, just call the IRS office in the Federal Bld downtown (I also live in Portland). They've help me in the past and it's free!

The IRS sucks. Use a CPA.

I trust IRS agents as much as they trust me...not much!

Steamthrower
02-26-2008, 03:30 PM
IRS stands for the Irate, Retarded and Senile. It is a charitable organization that forcibly takes donations from citizens and passes it on to people who like to camp out on the La-Z-Boy in front of the TV.

IMI
02-26-2008, 03:41 PM
IRS stands for the Irate, Retarded and Senile. It is a charitable organization that forcibly takes donations from citizens and passes it on to people who like to camp out on the La-Z-Boy in front of the TV.


We should each be allowed to pick one random Lazy-Boy Sitter to claim as a dependent. :D

Mr. Rid, I never noticed it before, or maybe you just recently put it in your signature line, but that's a really impressive demo reel. :)

Stooch
02-26-2008, 03:50 PM
i have a pretty hefty amount of 1099 work in addition to my tax returns, do you generally find it worth the savings to hire an accountant or would you try to do the writeoffs yourselves? i have about 18k of 1099s that i have to minimize damage on. But i have never written off stuff like computer hardware before (i did buy a nice computer last year and various software such as modo, etc) what would you do in my shoes, accountant or elbow grease?

any ideas on accountant prices.

Jim_C
02-26-2008, 03:58 PM
i have a pretty hefty amount of 1099 work in addition to my tax returns, do you generally find it worth the savings to hire an accountant or would you try to do the writeoffs yourselves? i have about 18k of 1099s that i have to minimize damage on. But i have never written off stuff like computer hardware before (i did buy a nice computer last year and various software such as modo, etc) what would you do in my shoes, accountant or elbow grease?

any ideas on accountant prices.


Whether you go with a CPA or a do it yourself like Turbo Tax.. write that junk off!! The law allows you to (when done legally of course) so use it to your advantage.

My buddy the CPA, actually a tax attorney also is $150 an hour for tax stuff.
Not sure if that was a special price for me, but that's what he said he would charge me if I wasn't taking him to dinner.

The TurboTax for small business program was 90 bucks (can be written off) and downloadable. It is certainly NOT a well trained person at a table, but it does a real nice job of asking questions pertaining to your career and guiding you to things you might miss. You can also hire someone to help you thru the software.

Steamthrower
02-26-2008, 04:04 PM
You can also hire someone to help you thru the software.
Aw, come on, anyone who can open up a model in Lightwave and export it again can figure out TurboTax. I bet your grandmother uses TurboTax.

Andyjaggy
02-26-2008, 04:05 PM
i have a pretty hefty amount of 1099 work in addition to my tax returns, do you generally find it worth the savings to hire an accountant or would you try to do the writeoffs yourselves? i have about 18k of 1099s that i have to minimize damage on. But i have never written off stuff like computer hardware before (i did buy a nice computer last year and various software such as modo, etc) what would you do in my shoes, accountant or elbow grease?

any ideas on accountant prices.

Write it off. It adds up and is definitely worth doing. Take advantage of it. I am lucky to have a family friend that is an accountant, so it was an easy choice for me. I went from owing to getting 1k back after deductions :D

Stooch
02-26-2008, 04:05 PM
well i use turbo tax but generally give up on writeoffs and just bit the bullet. but now with the amount of 1099s i have racked up, i really would like to reduce the pain a little bit. lol im actually dong more 1099 work right now in anticipation of the pillaging, lol its a never ending cycle.

Tzan
02-26-2008, 04:16 PM
Stooch: You can write off all that stuff. Its the cable TV bill I dont agree with.

I used TurboTax for the first time last year and will use it again this year.

Before I started making real money I just did my own taxes. Then after I actually had more money and bigger expenses I used HRBlock. Those people are idiots, I knew more than they did because I had been RTFM for years. Even people who claimed 6 years experience at HRBlock got simple stuff wrong and I had to correct them. I even got a full refund of their fee one year, $300.

I used them because I wanted to deduct my computer correctly. I didnt know if I could do it all at once or needed to spread it out over years. Still not sure because I dont trust them now, but we did it all in one year.

If you've never done self employment stuff before you've got some reading to do. I guess its a matter of time vs money. If you dont mind spend 5-10+ hours doing background research before even touching the actual taxes, go for it. If you dont have the time, then pay someone.

Andyjaggy
02-26-2008, 04:23 PM
I'm pretty sure you can deduct it all in one big chunk. The only catch is that you have to figure out what percentage of the computer use is for business and for personal. I think you also have to factor in what month you bought the computer in, not sure on that one though.

digefxgrp
02-26-2008, 05:30 PM
Stooch-
Never give up on write-offs. Any hardware and software that you use in the business is a write off. Self-employment insurance is a write off. Of course all business related utilities can be written off and if you work at home, a percentage of your home utilities can be deducted. In my house I have two rooms as well as the garage solely dedicated as studio space and the IRS allows me to deduct a percentage of my household utilities based on that square footage. Mileage is also a good one. I think this year it’s been bumped up to 50 cents per mile. Make sure you keep a log of where you going and the starting/stopping odometer readings for each trip.
IRA and other retirement accounts can provide deductions as long as you’re not reporting a “loss” of income.
Interest-paid on business-based loans can also be deducted.

With hardware, there’s two ways of deducting it. The IRS prefers you to amortize the depreciation and they’ll list the length in the tax publications. There’s also a one-time “full deduction” (I think it’s section 179) for things that don’t fall under the standard expense listing on schedule C. For harware I've use both methods, but over the last few years have slid it in as a "full-deduction" for that given year and so far the IRS hasn't flagged me.

Stooch
02-26-2008, 05:35 PM
thanks for all the help. a co worker is going to hook me up with his accountess. so well see how much pillaging she can save me from.

ted
02-26-2008, 10:46 PM
I wrote a long post about how jacked up the tax system is.
Then I decided, since Americans keep asking the Government to spend more money, I was just wasting my FRICKING time.
And they are wasting my FRICKING money.
Nuff said. :thumbsdow

prospector
02-26-2008, 11:21 PM
:D :agree: :D :agree: :D :agree:
Now THAT WAS FUNNY
:D :D

Tzan
02-27-2008, 09:04 AM
I wrote a long post about how jacked up the tax system is.
Then I decided, since Americans keep asking the Government to spend more money, I was just wasting my FRICKING time.
And they are wasting my FRICKING money.
Nuff said. :thumbsdow

I agree with your summary :)

TheDynamo
02-28-2008, 10:06 PM
I suppose you can join the Willie Nelson/Wesley Snipes tax avoidance club :) I hear the membership fee is pretty steep though.

-Dyn

Andyjaggy
02-29-2008, 08:12 AM
Despite all the arguments that income tax is unconstitutional there is still no way to avoid paying it, besides being filthy rich and being able to afford hiring a really good tax guy that will set up all sorts of crazy stuff and find all the loop holes. Even then the IRS has started to focus a lot more of their attention on the super rich, since they pay the large majority of the taxes.

I don't believe there is any case of someone avoiding taxes and winning their case in court.

CreatvGnius
02-29-2008, 08:46 AM
I suppose you can join the Willie Nelson/Wesley Snipes tax avoidance club :) I hear the membership fee is pretty steep though.

-Dyn Not fair statement. Wesley has reportedly demonstrated to have been acting in good faith, all the while, the IRS had wrongly targeted him for tax evasion, relentlessly attempting to give the appearance that he wasn't in compliance with tax law. 'Twas in the news last week, but you apparently missed it.
-PeterG

Steamthrower
02-29-2008, 09:05 AM
Despite all the arguments that income tax is unconstitutional there is still no way to avoid paying it, besides being filthy rich and being able to afford hiring a really good tax guy that will set up all sorts of crazy stuff and find all the loop holes. Even then the IRS has started to focus a lot more of their attention on the super rich, since they pay the large majority of the taxes.

I don't believe there is any case of someone avoiding taxes and winning their case in court.

Some people go to the extent of buying a place in Costa Rica and spending six weeks there a year and basically paying no income tax, "because they're not American."

I digress with this because I think it's right to pay taxes (I mean, without taxes there is no government and without government there is anarchy). But it's the amount and type of taxes that is ridiculous. There should be a "flatter" tax, so people bumming out on the couch on welfare or so-called "disability" payments have to actually pay something, and the millionaire entrepreneurs don't have to be, literally, fined for how innovative and productive they are.

But then again, if the US dropped healthcare and education then the government would have all the freaking money it would need. People would be taxed less, enabling them to send their children to private schools, and pay for their own healthcare. If we went back to a gold standard the economy wouldn't drop out of the bottom of the bucket, and everyone would do better...I say leave it to private institutions and charity to help out the poor and disabled. Let the government concentrate on things it's really meant for, like building an actual army, or dedicating more time to actually emplacing competent police forces, and if there's some money left over then they should conquest space or something.

I hate corporatism and monopoly and Big Brotherism. If the government didn't try to be a Jack Of All Trades and fix things that aren't broken, normal people like us could get along fine.

If every bread-getter in the country paid an even $5,000 annually, then that would be $750,000,000,000 or so in taxes. That's almost a trillion dollars, more than enough to run a country.

Andyjaggy
02-29-2008, 09:12 AM
It all comes down to what role you think the government should play. If you want the government to fund health care be prepared to pay a lot more taxes. I think we should go back to a completely free market society. Get rid of all these socialist programs that are chewing up money are resources.

TheDynamo
02-29-2008, 02:01 PM
Not fair statement. Wesley has reportedly demonstrated to have been acting in good faith, all the while, the IRS had wrongly targeted him for tax evasion, relentlessly attempting to give the appearance that he wasn't in compliance with tax law. 'Twas in the news last week, but you apparently missed it.
-PeterG
You would be correct in that assumption that I missed that story. Good for Mr. Snipes. I have had no exposure to television aside from taking about 20 minutes of the day to check the stock market and whatever weird story the local channels are yapping about at the moment.

CreatvGnius
02-29-2008, 03:00 PM
You would be correct in that assumption that I missed that story. Good for Mr. Snipes. I have had no exposure to television aside from taking about 20 minutes of the day to check the stock market and whatever weird story the local channels are yapping about at the moment. Appreciate your humble and gentlemanly response, there, Dyn.
-PeterG

TheDynamo
02-29-2008, 03:44 PM
Appreciate your humble and gentlemanly response, there, Dyn.
-PeterG
I try ;) there was no intention of causing any hurt in that previous post. I get enough hurt come tax time to more than fit that bill.

-Dyn

GATOR
02-29-2008, 05:23 PM
All very fun reading.

For the past few years, I've used TurboTax. I get all my 1099s in by early February and ignore tax stuff till March (tomorrow!).

Then I go through my credit card statements for the year (I use a single credit card to buy business stuff) and add up all my expenses.

And then I open all the 1099s.

And then I get out all my charity (mostly Goodwill and food banks and assorted cancer causes).

And then I pull out my box of utility bills for the past year.

Fire up Turbotax and do it all in less than an hour.

I have had many accountants in my past, some good, some bad. But I've simplified my life so all I have to deal with is the above. And once you've done it the first time, all the data is saved so when you do the next year, half your work is finished already. It's just 1099s, expenses and donations. Half your time is telling the program what you didn't have. Did you have any farm losses in 2007? No. Did you serve in the military in 2007? No. Etc.

The only high-speed internet access where I live is through cable. To have the service you need to have basic cable. I write it all off. Always have. The home studio is used for 100% of the income, so I write off that percentage of my home utility bills and mortgage interest. My cell phone, 100%. All my internet accounts. All my supplies. All the software and hardware for that year (I don't depreciate anything). If I have a good year, you KNOW I'm buying a new computer before New Years, as well as any software I might want in the next year. Load it up, baby.

After personal deductions and family deductions, I've found if I put 25% of every payment that comes in into a 'tax' savings account, I'm covered. Each quarter the estimated tax payment goes out to the IRS.

My biggest concern used to be the alternative minimum tax, getting hit with that sucked. But the rules changed this year, so I'll be interested in seeing how things pan out. In theory, the baseline moved higher and it's on it's way to being phased out.

I've paid accountants anywhere from $150 to $500 to do my taxes. If I had a lot of foreign income and royalties and rent income, I don't mind paying them to do it. But if your income is simple, doing yourself is brainless. As someone else noted, it's a lot easier than learning to use Lightwave.

I have absolutely no problem in paying my taxes. Between my wife and I, we joke that we pay enough in taxes to cover the salary of a middle-class government bureaucrat... and he never writes. This is a great country (USA) and the benefits we reap from our taxes give us a stable country that hosts one of the oldest continuous governments in the world.

When you work up an estimate, just make sure you factor taxes into your budget, so you don't mind doing that bank transfer when the check is deposited.

One artist's opinion.

ted
02-29-2008, 07:42 PM
Inigo07, You said it perfectly.:thumbsup:
Most people don't mind paying taxes. Military, Police, Fire, Roads and infrastructure. Done.

All social programs need to be supported by the local community.
We're not mean, but I shouldn't be mandated to fund the hundreds of programs that the Government has been LOBBIED to support, with my taxes.

I coached Soccer 2 years, Hockey 3 years, Little League 7 years, assistant Scout Master 5 years and on and on. Involvement with your community is important. If people aren’t willing to support a “cause”, it’s probably not important enough for my tax dollars.

Social Programs should be funded by the local churches and community. That used to work for generations!
My taxes should be the same percentage as the guy making $100 per year or $1,000,000,000 per year.

As I said earlier, I better quit before I frustrate myself and you guys know how much I hate the amount of taxes I MUST pay because everyone has a GREAT IDEA how to spend MY MONEY!

Steamthrower
02-29-2008, 09:24 PM
Ted. How uncaring. Now the local school can't afford to install Dance Dance Revolution arcades to keep the fat kids in shape. :D

Lamont
03-03-2008, 10:18 AM
I deal with someone who KNOWS about the work I do and understands it WELL. That's what you need because there were things that I didn't know I could deduct and things that I never should have. She's really good.

Also, if you don't have the invoice for it, DON'T CLAIM IT!! Because you can't prove you bought it.

theo
03-03-2008, 10:38 AM
Also, if you don't have the invoice for it, DON'T CLAIM IT!! Because you can't prove you bought it.

Employ a business credit card... all the way.

Extremely efficient at tracking business expense. Been using'em for years to supreme advantage.

Lamont
03-03-2008, 09:04 PM
Employ a business credit card... all the way.

Extremely efficient at tracking business expense. Been using'em for years to supreme advantage.That's what I use. It puts everything in order and all I have to do is DL a file.

evolross
03-14-2008, 03:57 PM
If you're completely honest and not deducting things you shouldn't be or making anything up, what's the harm if you do get audited?

I figure they just come out to the house and you show them all your documentation right?

I guess I'm not sure I get the universal FEAR of the audit?

Philbert
03-14-2008, 04:14 PM
A couple years ago I went to H&R Block because I had done some retail work as well as freelance so it was a little confusing for me to do on my own. I'll tell ya, they deducted everything! I told them I take my Laptop to Starbucks to work for a while most days. She asked how many miles away it is and deducted the gas. How much do I usually spend there? Deducted that. Of course if you've bought any new hardware of software to work with, deduct that. I've also been told if you have a room in your apartment that you use only for work, you can right off your rent. Student loans are also a write off. The trip the H&R Block cost me $300, but they knocked $1500 off of my tax bill. Not to mention they guarantee their work. Last year I used H&R Blocks software with the "deduction maximizer" and it was very easy to use. The Gov. kept sending me tax return checks for a few months lol

BTW do your taxes this year, even if nobody owes anything to anyone. This year they're giving everyone a free $600.

ted
03-14-2008, 04:45 PM
The way I understand it, if you have a room at your residence dedicated for work, you can only deduct the percentage of space that room represents of your entire residence. i.e. If the room is 10% of your residence, that's the portion of the rent/mortgage you can deduct.

I used H&R Block many years ago and they were not as attentive. Like any company, insurance, real estate, etc. it's more about your agent then the company. The fact that the Government kept sending you checks is likely because H&R didn’t credit you with what you should have gotten in the first place. But it’s always nice to get those surprises!

I got audited about 15 years ago when I was doing weddings. The guy was great and as he asked me questions, before he let me answer, he would tell me the consequences of what answer I gave him. I never felt like he was trying to trick me. I did have to pay a couple hundred more, but I was relieved it wasn’t as bad as I’ve heard! Again, the agent you work with has everything to do with your satisfaction.

Philbert
03-14-2008, 04:58 PM
The only thing that really worries me about this year is that I worked for one studio doing freelance for almost 6 months, near the end of that job I asked if he was going to send me tax stuff and he says "Oh yeah I'm not doing taxes for you guys this year, so don't worry about it". I just wonder if I don't report any of that and they happen to look at my bank or something and wonder about all the money I was depositing and spending.

Mr Rid
03-14-2008, 05:01 PM
If you're completely honest and not deducting things you shouldn't be or making anything up, what's the harm if you do get audited?

I figure they just come out to the house and you show them all your documentation right?

I guess I'm not sure I get the universal FEAR of the audit?

Tax laws can be very grey. The precise rule in a given situation can be open to anyone's interpretation. I know a couple of animators who had an honest accountant and were writing off items like Cinefex and industry journals and DVDs that were legitimately related to research for specific projects, but an IRS auditor didnt care and jammed a heavy penalty on them for that among other things. That agent was not sympathetic in the least. It just depends on who you deal with. I know plenty of other people writing way more than they should but get away with it every year. The difference is whether or not a 'red flag' is raised about your return. Knowing where the red flags are is the real game. I see that all writeoffs can be questioned and leave room for fudging. A good accountant essentially fudges writeoffs in your favor while avoiding the red flags.

Mr Rid
03-14-2008, 05:06 PM
The way I understand it, if you have a room at your residence dedicated for work, you can only deduct the percentage of space that room represents of your entire residence. i.e. If the room is 10% of your residence, that's the portion of the rent/mortgage you can deduct.

You may also writeoff a percentage of utilities appropriate to that home space used for business. But technically it has to be used a certain percentage of time only related to business. There are defining rules about these situations that change each year. It isnt that hard to figure out. Just read the instructions for the appropriate form.

TurboTax can make all this very easy to figure out. It just asks you questions and you answer them while it calculates everything and fills in all the appropriate forms based on your responses.

Mr Rid
03-14-2008, 05:10 PM
The only thing that really worries me about this year is that I worked for one studio doing freelance for almost 6 months, near the end of that job I asked if he was going to send me tax stuff and he says "Oh yeah I'm not doing taxes for you guys this year, so don't worry about it". I just wonder if I don't report any of that and they happen to look at my bank or something and wonder about all the money I was depositing and spending.

Have no idea what 'not doing taxes' means. If that employer meant that he is not reporting any payroll then I wouldnt worry about it. If you report the income, then he gets in trouble. If he reports it while you dont, then you get in trouble. Question is, how is he accounting for that money he paid freelancers in his accounting (?).

Philbert
03-14-2008, 06:33 PM
If that employer meant that he is not reporting any payroll then I wouldnt worry about it. If you report the income, then he gets in trouble. If he reports it while you dont, then you get in trouble.

I'm pretty sure that's what he meant, I forget the exact words he used


Question is, how is he accounting for that money he paid freelancers in his accounting (?).

Don't really care, not my problem. My friend and I stopped working for this guy because he was always late with payments, didn't respond to our phone calls or emails for a month, then finally got my friend some more work but didn't pay him, still owes him $4k. So we both moved on.

SplineGod
03-14-2008, 07:15 PM
Ive been audited before because of the amount of mileage I deducted to travel to jobs where I worked freelance at some studios, mileage to seminars, user group meets, trade shows etc.. The auditor was EXTREMELY nice, patient etc. She showed up in Jeans and was more interested in talking about 3d animation because her son was interested. She never once looked at my records and seemed about as interested in auditing me as I was in being audited. Maybe I got a nice one but the whole thing lasted under an hour.

evolross
03-15-2008, 10:42 AM
I think if you're honest and not "pushing" it too much, hey, bring on the audit.

I asked another friend of mine who did say that if you get a huge return check and you really did fudge it a lot and write of a bunch of stuff, your audit can come up to two or three years later, and then the IRS can ask for all their money back.... with interest. And that's like the big "scare", is that you'll have to pay back 1) all the money you scammed and 2) interest penalties.

Another question to the freelancers and sole proprietors... what do you recommend for a percentage of your income to pay for your quarterly tax payments?

Tzan
03-15-2008, 11:42 AM
. what do you recommend for a percentage of your income to pay for your quarterly tax payments?


Thats a good question, here is how I do it.

I made an Excel speadsheet that I can input:

estimated years regular income
estimated years self employed income based on how much I got so far
SE taxes, with deduction
interest income
an estimate of business expences/ car milage deduction

regular exemptions/deductions

run the taxable income thru the tax table, which requires some "if" statements in the formulas.

divide by 4, round up a bit so that you dont owe money.

I once did this by hand til I got smart. You can do lots of estimating this way since the calcs happen automatically.

My taxes are very simple, but if you know what you need just add it in there.
My entire Fed and State fit on one screen. Print to one page, so its really simple.

sbrandt
03-15-2008, 12:11 PM
PHILBERT SAID: "A couple years ago... I'll tell ya, they deducted everything!..."

This is true. My wife's an IRS agent and she's hounded me for years to to save EVERY receipt.

She takes it all. Think about the little things too.
...like LACES for the shoes you wear to work...

I ALWAYS get 2 or 3k back.

Mr Rid
03-15-2008, 03:35 PM
Don't really care, not my problem. ..

My point is that it is your problem how he reports where the money he paid you went. I have been paid 'under the table' for a past project, but I had to know how the employer was claiming where his money went for that project to know how to claim the money I received. It is all related. If that employer is audited for shifty expenses, then those he paid may come under audit. The IRS will want to know where that money went and why.

Mr Rid
03-15-2008, 03:41 PM
I think if you're honest and not "pushing" it too much, hey, bring on the audit.

Yes, that's about it.




Another question to the freelancers and sole proprietors... what do you recommend for a percentage of your income to pay for your quarterly tax payments?

And that is the bottom line. Figure out what percentage of writeoffs you need for the year in relation to your income. If I make X, then I just need to make sure I spend Y on work related stuff to avoid owing tax at year's end. There are many variables with each individual situation, so that is where the appropriate accountant can be a big help.

theo
03-15-2008, 03:43 PM
I know a couple of animators who had an honest accountant and were writing off items like Cinefex and industry journals and DVDs that were legitimately related to research for specific projects, but an IRS auditor didnt care and jammed a heavy penalty on them for that among other things.

This should have been taken to tax court. I've never heard of an industry journal not being deductible. This auditor has been soaking in god-juice for far too long and a legal jerk-up would have been in order.

sbrandt
03-15-2008, 04:27 PM
Mr Rid,

The wife has claimed my lynda.com and totaltraining.com accounts as training material with zero problems for the last three years. She didn't even think about it, it just went on the return. If I subscribed to industry specific publications, she'd take that too...no doubt.

If that story's true your animator friends needed to contact another agent and get a realistic opinion.

(She trains other IRS agents and has been the shop steward for Revenue employees in Denver for a very long time...I think she knows what she's talking about. [even if she can't cook])

evolross
03-17-2008, 07:35 AM
Well I worked up my taxes on my own and got to a number that I liked. 2007 was the first year that I actually started working for myself and now in 2008 I am working for myself full time.

Based on some referrals from family and friends I decided to use and pay for a CPA for 2007 to see if he/she actually gets me more money. This CPA is supposed to be pretty good, per what my referrals said. It should be interesting because I think I thought of almost everything I could honestly deduct.

I figure I'd try a CPA once to see if it's worth it. It was bugging me not to know if I was missing out on some secret deduction that I hadn't thought of. If the CPA doesn't end up helping me out very much, at least I'll know and I'll have only paid for one year.

I'll report back here if the CPA ends up being worth their payment, which is probably going to be $100 to $200 since it involves a small business, property ownership, and some investments.

I consider myself pretty savvy with taxes. I even have other family members that have paid me to do theirs for them.

ted
03-17-2008, 10:22 AM
I know it's different for everyone, but personally, I couldn't even begin to do my own taxes any more. I'd rather spend my time doing video and know if I get audited, I just say talk to my accountant! :thumbsup:
And my accountant doesn't do video. :)

evolross
03-31-2008, 06:55 AM
I'm here to report back about going to the CPA.

He ended up making me more money. :D

We talked for about an hour and he actually found some things I honestly screwed up that reduced my deductions a little, but then he found some things I hadn't thought of.

As I thought, he didn't turn over any magical tax credits or think of anything too outside of the box, but he did end up paying for himself. He charged $130. It was basically free, minus my time. So I was happy and now if I were to get audited, the auditors mess with the CPA people first before they would come to me.

RollerJesus
03-31-2008, 08:03 AM
This year I decided to go to one of the big accounting firms for my taxes. I sat with the woman for about an hour and it was mostly self explanatory, but luckily she informed me about writing off any loses from a "casualty".

Last year, I was in a car accident in which my car was a total loss. Unfortunately, I bought a 2006 model just as the 2007 models came out and totalled it just as the 2008 models came out and according to the insurance company, that makes it a 3 year old car, even though it was only 14 months old and had 6,500 miles on it.

Factor in that I had put about $7000 into the car for aftermarket products that weren't covered and the other driver, who was at fault, was uninsured, I lost a lot of dough on the deal.

Thanks to me getting professional help with my taxes this year, I was able to get back close to $6000 that I lost last year. Now, this may have been obvious to some, but I'm completely in the dark when it comes to taxes, so the $200 I had to give them was far more than offset.

but damn, I miss that car...

*Pete*
03-31-2008, 01:27 PM
but damn, I miss that car...

hmm...lets see, the red marks on your car could be blood, right?...but whats with the brown marks? :question: (notice that the smiley tastes it with finger to find out...)

RollerJesus
03-31-2008, 01:39 PM
hmm...lets see, the red marks on your car could be blood, right?...but whats with the brown marks?

Nope, the red was the paint, the brown is the rust from the frame of the pickup truck.

it all tastes like chicken anyways...

Steamthrower
03-31-2008, 02:03 PM
Hmm, Audi...the car I plan on buying as soon as my ancient Benz bites the dust...too bad. This was judgment being meted upon thee, for living in Tampa.

RollerJesus
03-31-2008, 02:19 PM
This was judgment being meted upon thee, for living in Tampa.

I find it quite odd how people have such a negative perception of Florida. I"m not from here, but I've never been one to trash it... I've met some bad people here, but I've also met some really great people here.

To each their own I guess... even if they're from Little Rock.

Steamthrower
03-31-2008, 02:30 PM
Oh, I was just digging it. Florida's nice...though you do get the tourists in FL, and I hate tourism. I hate being a tourist and I hate meeting tourists.

Trust me, you'd have known my statement was in jest if you've ever lived in Little Rock. We're not exactly the center of Western culture, let's just put it that way.

RollerJesus
03-31-2008, 02:41 PM
I hate tourism

Agreed. Although it does drive the economy of Florida...

Lately, most of the tourism has been of the european variety and those English folks seems to be much more respectful of the world around them than the normal snowbirds.

But man, I met some kids in the Mac store the other day from England and they were just giddy because they were buying Macbook Pro's for "half price"...

Damn the dollar!

Steamthrower
03-31-2008, 03:03 PM
Yeah. A co-worker's sister-in-law is British. She has him buy expensive clothes and shoes and ship them back to her...even with the shipping she's still saving half the price. It's not "damn the dollar" so much as "may all those idiots in charge of disseminating false currency be damned to eternal flames in a hell full of molten gold standard.

Philbert
03-31-2008, 11:37 PM
Oh, I was just digging it. Florida's nice...though you do get the tourists in FL, and I hate tourism. I hate being a tourist and I hate meeting tourists.



I lived in Orlando for a year, right around the corner from Universal, well, around the corner and a mile down the road. But you'd be surprised how little I ran into tourists. Of course aside from the time I spent inside Universal every day. Aside from that I almost never saw anyone who was an obvious tourist. I did feel like Orlando had no culture though, everything you saw was aimed at the tourists.

RollerJesus
04-01-2008, 07:57 AM
But you'd be surprised how little I ran into tourists.

You must have not spent too much time in a car then...

Philbert
04-01-2008, 09:33 AM
Haha No I actually didn't have a car down there, I biked everywhere. So most of my time there was spent at home, school/universal (same difference), and at the Starbucks in a shopping center near Universal. I had a few cars nearly run into me though.

bluerider
04-01-2008, 11:02 AM
I had a few cars nearly run into me though.

car with legs, very surreal, did the cars wear jogging shoes.

Jim_C
04-24-2008, 06:45 PM
Not fair statement. Wesley has reportedly demonstrated to have been acting in good faith, all the while, the IRS had wrongly targeted him for tax evasion, relentlessly attempting to give the appearance that he wasn't in compliance with tax law. 'Twas in the news last week, but you apparently missed it.
-PeterG

http://www.cnn.com/2008/CRIME/04/24/snipes.sentencing/index.html

That's a pretty hard spanking for being in compliance.