Mari Ramirez’s 5 Most Forgotten Tax Tips for Freelancers: March Meeting Recap

Tax day is April 18 this year. Even if you’ve already filed, CPA Mari Ramirez undoubtedly shared something you didn’t know at the March Freelance Austin meeting, including these five frequently forgotten items on our personal and/or business returns.

#1. “You ain’t giving away right!”

When you drop off a trunk load at Goodwill, The Caring Place or another charity, do you estimate the value of every item?

Take 10 minutes before you leave home to take a photo of your donation en masse for documentation, then spend no more than 10 minutes – on the whole pile – estimating the value of each item. You can find a ready-made spreadsheet to make it easier at donationcalculator.com.

“As long as you have some basic evidence like this, I’ve never had an issue in an audit,” Ramirez said.

#2. Reconsider paying estimated taxes.

By paying estimated quarterly taxes, you’re allowing the IRS to use your money, Ramirez said – and you may be paying more than you’d be required to on Tax Day. Instead, she recommends saving 20 percent of your income from every job specifically for taxes.

#3. Take a class for your business and deduct it!

When you take a class for your business, 100% of the tuition and fees are deductible. For other types of classes – you or your child’s – the deduction is lower, but there’s still a deduction, so talk to your accountant.

Remember, in the spirit of saving paper and postage, the 1098-T tuition tax form isn’t mailed to you anymore. Print it from the school’s website.

#4. Travel and deduct.

If you’re spending all your working time traveling within the U.S., then your expenses are 100-percent deductible (minus meals and entertainment, which are at 50 percent).

When you’re abroad for seven days or less, you can deduct 100 percent of your transportation costs as long as you’re working for part of the time. Don’t try to deduct meals and entertainment, though, unless they’re an integral part of the working.

Abroad more than seven days? Spend more than 75 percent of your time on business, and your transportation and living expenses are 100-percent deductible.

Cover yourself in case of an audit, though: Keep track of where you’re working on your electronic calendar and save it. Talk about your worksite on social media, with pictures. In other words, be able to document your whereabouts!

#5. Bring the food.

If you bring food to a meeting, the goodies are 100-percent deductible. If you go out for a meeting, the meals and entertainment are only 50-percent deductible. Oh, and don’t give your clients “gifts” – distribute “promotional items.” (They’re much more deductible.)

One last word of caution for us late filers: The weekend before the tax deadline this year is when Easter falls, so you may not want to depend on your accountant being available then.

Freelance Austin does not intend this to be tax advice; each individual is encouraged to seek the counsel of their own accountant or financial advisor.

 

Mari Ramirez, CPA, has been in public accounting for more than 10 years and is the owner of Mari Ramirez CPA, with clients in Austin and surrounding areas. She’s worked in a wide range of industries from tech startups and real estate to nonprofits, retail stores and service industries. She is proficient in all types of software and considers herself a software nerd. She received the 2005 Humanitarian of The Year award from Texas A&M International University for educating high school students on the political process. She is president of Georgetown Art Works, treasurer for the Foundation for Learning and Youth Travel Education, and an advisory member of Cedar Ridge High School.

Cindy Dashnaw

Cindy Dashnaw is a seasoned copywriter who produces compelling content to support your objectives and brand. With a solid background in public relations, she’s adept at identifying potential challenges and opportunities, and great at keeping a project focused on the audience. Her special interests are nonprofits, feature writing, and fundraising solicitations and support.

Comments

  1. Tip #2 about estimated taxes makes me a little uncomfortable. It could cost people a penalty for not paying in a timely manner. Knowing the total amount you will owe is not sufficient. The IRS demands that estimated tax payments be made quarterly. As a result, once you know the total amount of estimated tax payments you’ll have to make during the year, you need to compute the dollar amount you must pay for each quarter. And don’t forget that self-employment taxes are part of this calculation. You might pay an underpayment penalty if both of these apply: 1) You don’t make estimated tax payments during the year, and 2) The amount you’ve withheld from other income is less than 90% of your tax bill.

  2. Hi, Cindy. I disagree with the accountant’s tip on estimated taxes. If all your income is from freelancing, that means you are responsible for paying your income and FICA taxes. And that means those income and self-employment taxes must be made in large part via quarterly estimated tax payments.

    The IRS specifically notes on its estimated taxes synopsis page (https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes) that:

    “If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.”

    As a long-time freelancer, I know cash flow is an issue when it comes to estimated taxes, but there’s a way to deal with that. Instead of calculating/guesstimating what your tax bill will be and then, as the IRS prefers, paying the amount in four equal installments, pay only the estimated tax that’s due for the quarter on the money was earned in those months. This means you’ll have to do some more tax work when you file your annual taxes (specifically filing Form 2210), but it will help you by not having to pay tax throughout the year on money you didn’t earn in a particular estimated tax filing period.

    I apologize for the tax lecture, but taxes are a major consideration for independent contractors like freelancers, and I’d hate to have someone get in trouble with the IRS because they didn’t pay their estimated taxes. Plus, this is fresh in my mind because I just posted an overview of estimated taxes (http://www.dontmesswithtaxes.com/2017/04/estimated-tax-primer.html) at my own blog.

    I thought you/Freelance Austin might want to give your speaker a chance to revisit this issue.

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