Several times a year I am interviewed for articles and radio pod-casts. (Nobody has had the guts (or fool-hardiness) to throw my face on the screen). During tax season, freelance writers are looking for the latest and greatest tax tips. The article 5 Tips for Freelance Writers by Kylie Jane Wakefield, set out to give a few tips to freelance writers. But frankly, the tips do not differ much to any other struggling entrepreneur who is trying to fulfill a dream while working a day job.
The main point only slightly stressed is that your tax planning starts at the completion of your last year’s tax return. Don’t wait until March of the following year to tax plan for the previous year. That is like trying to put in the drain plug in a speed boat after you have launched it into the ocean. For example, when I clean out my garage, I lay everything out in the driveway that I am taking to Goodwill. I then take multiple photographs. I also usually list what I have to donate. When I arrive at the Goodwill drop off, I copy the list onto the Goodwill receipt and get it signed. At home, I print out the pictures (nothing special, just on regular paper) and staple the pictures to the receipt. I stick the whole package in a big tax envelope and forget about it until I prepare my tax returns. Simple planning, simple result.
You can use the same method for any business expense paid by cash. Always take a receipt and throw it into the tax envelope to be resurrected again during the preparation of your tax return next year.
However, no financial decision should be made on the basis of tax savings. The first concern for any decision should be whether it makes good business sense. Remember, you are only getting about 1/3 benefit, from a tax deduction. So, if you spend $100 solely on the basis that you will get “to write it off,” you may be making a bad business decision. The decision will ultimately cost you $70 ($100 less taxes returned into your pocket.)
Plan and understand you tax situation and you will be more informed and maybe more satisfied come April 15.