Part of me realizes this is a joke. I couldn’t find a definition of “money” – but there is no problem defining gross income or net income or taxable income or AGI…but seems like there’s not much out there I the way of definitions of “money.” If you find it in the IRS Code, please send it along. I found money laundering but not simple money, but then I’m dumb as a stone at times.
Still, Joke or Not, bureaucracies take themselves entirely seriously…so we respond in kind with a totally accurate tax form. It is, after all, only money.
Before you start, get all of your data (1040’s, 1099’s and so on) into a single file folder. Load up the right version of TurboTax or whatever you’re using.
We use TurboTax Home & Business 2015 Federal + State Taxes + Fed Efile Tax Preparation Software – PC/Mac Disc an d it sets us back $80 a year. It’s a deductible expense if I recall right.
But on the other side, TurboTax has an article here on eight things you maybe thought were deductible and which aren’t.
I won’t go into specifics of what we expense when traveling, but I do work everywhere I go, even on cruise ships. But things like cruise expenses don’t show up, and neither to hotels…even though I work at least four hours at each stop.
Sure, I could be more aggressive, but I don’t begrudge the government its due. So I don’t write off my hotel or anything for myself, or the cost of local newspapers in places like Phoenix or Las Vegas or wherever we happen to go. I’m more than reasonable in what’s claimed. Even though I have to work product in every city I lay my head down in. It’s the nature of being a writer for a national (and international) audience.
Wait..maybe I’m and idiot…my consigliore thinks I should claim much more than I do, but I always like to have an extra ace to play if it’s ever needed. No, I didn’t set the airplane up as a single-purpose LLc, either. We don’t use it enough to matter and I’m sure that could become contentious. I doubt my “need to travel but don’t want the government checking my junk…” as junk-checks are taxing in a way is an argument…but I digress. The plane is not a write-off in our case.
So stick with what’s only 100% safe so you never have to look back and regret anything later. You’ll sleep very well.
Just before you sit down to do the taxes, take whatever is in your folder and split it into two folders: One is INCOME and the other is EXPENSE.
Anything that came in as money to you (except credit card rewards) goes in the income file. IRS views most credit card cash backs as discounts. But you should review the video here as there’s more detail — isn’t there always?
Anything you write a check for, drivers license, car tabs, and so forth (government required, like property taxes) is generally deductible. But this is NOT TAX ADVICE.
Work on one folder at a time. Folder 2 will still be there when you get done with folder 1. But if you think of anything on expenses while working, that’s why we all keep 3×5 cards around or sticky notes.
If you file quarterly tax payments, this is when I print off images of the checks so there is a (front and back) hard copy in file.
There is no point trying to do an accurate tax filing unless you have spotless records.
There’s no problem being precise and let me tell you how I do it:
Step 0 was going out several years ago and getting the meanest, nastiest, fastest, more capable scanner I could find. It’s the Fujitsu ScanSnap iX500 Deluxe Bundle Scanner for PC (PA03656-B015). Yes, the bundle will set you back $440.
Now: when anything comes in that you need to write a check for, simply drop the invoice into the scanner and set up reasonable account categories where your bills can be filed in software so you can find things later if needed for audit.
You can see in the upper right there how I have the accounting portion of Ure’s life all neatly categorized. If someone needs a copy of an invoice, or whatever, like the TV commercial says “It’s in there…” And yes, friends tell me IRS will accept the PDF’s but if they don’t that’s why after everything is scanned it drops into the one big drawer – which goes into storage with a hard copy of the return, copy of the software and data files, and all the stuff including any spreadsheets used as worksheets.
As you go through the year, every time you write a check for a business expense, or something that is deductible, put a tick-mark by it in your register.
Come tax time, you can find all your deductions quickly and easily.
Really, that’s the bulk of it: Scan the hell out of everything and dump it into the right electronic filing cabinet. The tick-mark for every expense related items related to producing income.
Taxes for things like sales tax…whatever….tick-mark it. Scan and tick, scan and tick…
I start with income first.
As you go through the year make sure every dime either incoming or outgoing transits an electronic system. This makes accounting a piece of cake.
Most of the major brokerages have links to TurboTax…so the drudgery of stock trading is basically gone.
I always end up with some deductions here since some 1099 sources do hold out tax if you want them to.
Come the end of the year, if I want to know how much money I spent on office supplies there are only two places to look: My Amazon account and my bank account – both checking and the cards.
There are expenses associated with income. In the case of my personal income, I have kept track of PayPal expenses. If you sell something and have returns, don’t forget about refunds.
Anything you buy in order to make that which you sell is an expense against income as well.
Server hosting for us, communications costs, computers, software, and so on. Section 179 is a key thing to be aware of. Wikipedia describes it this way:
“Section 179 of the United States Internal Revenue Code (26 U.S.C. § 179), allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated. This property is generally limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business. Buildings were not eligible for section 179 deductions prior to the passage of the Small Business Jobs Act of 2010; however, qualified real property may be deducted now.
Depreciable property that is not eligible for a section 179 deduction is still deductible over a number of years through MACRS depreciation according to sections 167 and 168. The 179 election is optional, and the eligible property may be depreciated according to sections 167 and 168 if preferable for tax reasons. Further, the 179 election may be made only for the year the equipment is placed in use and is waived if not taken for that year. However, if the election is made, it is irrevocable unless special permission is given.
For regular depreciation deductions in the United States, see MACRS.
Another great source of information is the IRS information circular here. And don’t forget to visit http://www.section179.org/ because you will learn there that the cap on 179 deductions for tax year 2016 is $500,000. Hmmm…wonder if we could light up a Cray for Nostracodeus workings…
If you invested in home improvements or office expenses, line them all up ahead of time. That may seem obvious but if you wait for April to roll around and you find you need some docs, you won’t have time to send off for them.
Never run the clock. Anticipate everything in advance. Don’t play the 3-second shot clock with this stuff. It should be off your desk by the middle of March.
Set up one day to work on income and another one to work on expenses if your session gets to be more than a couple of hours in length. Take advantage of the data downloads from your broker because they will save you the trouble of wash sale software in most cases…which made our cost of doing taxes go down last year.
I like real coffee for this stuff and being totally sharp so you don’t make stupid mistakes.
Put everything away and come back and read the whole return with fresh eyes in a day or four.
If you can’t understand a line, go back and check your work. It’s easier than an IRS Gotcha.
One year I actually got a note saying they had corrected my return because their records *(from 1099’s and such) and mine were $10-bucks apart.
Print off copies and electronically file.
When you’re done, burn everything to a new master CD including a PDF of the return, all data and xls files and whatever notes. Then label it on all six sides of a storage box, toss it in, seal it up and done for another year.
Promise that you will look at owning a rental house or small fourplex of sixplex some time.
There are few better investments than a home near the urban core in a modest neighborhood.
A short story: I owned my first one bedroom, one bathroom home on Beacon Hill in Seattle back in about 1970, or so. Bought it from my parents for $7,500. They’d bought it a couple of years earlier for $6,500.
I looked it up on Trulia this week: $625,000!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! OMFG!!!!
I had sold it for about $10,000 in 1974 when I bought my first brand new home – which is also worth about $600,000 now.
See the lesson here?
Don’t chisel on taxes…make a few really good, long-term, stable decisions and bank on the government watering down money which will result in “apparent inflation.”
You’ll be really damn glad you did.
Remember too that since I sold my 930, I haven’t been the least bit interested in looking at police cars. Tax filings go in that same box.
People make a big deal out of taxes, but like so many things, it’s a matter of staying on top of things and never allowing yourself to get behind the eight-ball, If you want to go face-to with IRS have fun. We’ll be on a cruise.
Life’s too short to look for tails of the Beast to step on. Given that government has more time, money, and resource than you, the odds of an upset win are approximately what?
About those Odd Dreams
It was a blissfully dream-free night…quiet sleep and all. But the first thing this morning I went looking for data on the “airplane diversion, turn around.”
I can’t help but think that it may have been two dreams, wrapped into one.
You see, there was a Southwest flight out of Baltimore/Washington that did a “turnaround” and landing back at BWI yesterday because of a likely bird strike. That one would account for the plane “originating out west” as it did in the dream, and then going around, which it did.
When I look at the two stories as a pair of events, it really starts to make sense. But the main learning point from this is remember the route I described? From West to East in the dream. Now look at the psychological cartography of the dream in which the bus accident appeared – also oddly in Australia (South Melbourne.
Notice the orientation of the water in the dream and how in real-life, the orientation was almost 90-degrees counterclockwise?
Now apply the same mental process to the Virgin flight: Starts in the North, which would rotate 90 counterclockwise which would bring it to West(!!) and then when the “diversion” took place it would be to the northeast. Rotated, the flight plan would have looked west to east…
All of which gets me to a very cool point about psychological cartography. In my train dream, prior to the head-on smash-up in Germany a couple of weeks back, the sense was the train was heading north. Again, rotate the dream counterclockwise and the train would have been going West, which one of them was.
My intuition says there is something to learn here if you are going to be any good at taking material from dream worlds, or even remote viewing (which the bus crash with the bridge would be more akin to): Work on getting the offset of cartography right.
Where it comes from is anyone’s guess – but it’s a fascinating concept to ponder; namely that each of us has a built-in offset directionally in our heads. Whether it is from something simple (word usage) or whether it’s because of something more arcane – such as celestial planetary positions at the birth moment – (I need to ask our consulting astrologer about this one…M?) remains to be seen.
But if you were to ask me right now “George, what is your personal offset?” I would say counterclockwise between 75 and 90-degrees. So when I have the next weird dreams, I will correct for the offset when looking for fits.
Write when you break-even,