Taxpayer asks:
While putting together a new group of guest posters for my site, a tax question hit me! Is the time I spend guest posting on other blogs for promotional purposes tax deductible? i.e. I don’t get paid for the post – my only compensation is the link back. But I could be getting paid for the post… so is the amount I charge for that service a marketing business expense?
If it is – I’m sure you have many readers that would be interested!
Thanks so much!
Taxgirl says:
Gosh, I sure wish it was – since I spend so much time writing for other publications and blogs – but it’s not. The IRS likes to match items of deduction with items of income. If they allowed a deduction for the cost of your time, then they’d require you to value the same for purposes of attributing income (the “value” of the article). But they don’t. Since there’s no income component, there’s no deduction.
Even though it feels odd, this is consistent with the IRS’ position on the treatment of services when there’s no compensation throughout the Tax Code. You can’t deduct your time for volunteering, even though it’s valuable, or time spent on services for which you didn’t get paid because you were “stiffed” by a client (hey tax geeks, most of my readers are cash based so no need to write in to tell me how this isn’t *quite* true for accrual based taxpayers).
I do have one piece of good news, though. Any out of pocket expenses related to the piece (i.e. money spent on paid art, research and the like) can be deducted as promotional expenses. So all is not lost!
Thanks for writing in – and good luck with the blog! Guest posting is a great way to promote your blog or services. I’m always happy to accept ideas for guest posts at taxgirl – just drop me a note!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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Taxpayer asks:
I’m a recent college grad working 2 full-time jobs and doing some free-lance work on the side. I have recently been asked to provide a w-9 for a $300.00 invoice I sent to a client, who happens to be my old boss. I was wondering, how much money should I withhold to pay my taxes? Also, do I have to file quarterly, or can I wait until the end of the year?
Thanks so much!
Taxgirl says:
To the extent that you have proper withholding on your full time jobs, you won’t need to worry about estimated payments for income related to those.
However, with respect to your freelance job, you may need to make estimated payments. The general rule is that you need to make estimated payments if you expect to owe more than $1,000 in tax and you expect your total withholding and credits for 2009 to be less than the smaller of:
- 90% of the tax to be shown on your 2009 tax return or
- 100% of the tax shown on your 2008 tax return.
There is an exception, which I’ll point out especially since you note that you’re a recent college grad: You do not have to pay estimated tax for 2009 if you had no tax liability for the full 2008 tax year (partial tax years don’t count). You had no tax liability for 2008 if your total tax was zero or you did not have to file an income tax return.
With respect to the timing of the payments, you should pay in four equal installments:
Note that you don’t have to make that 4th payment in January if you file your 2009 return by February 1, 2010, and pay your total tax with that return.
To figure out how much to pay, you have a couple of options:
- Estimate your tax due for the year 2009 and pay at least 90% of the tax – just divide 90% of your estimated tax liability into four equal installments.
- Pay 100% of prior year tax, or 110% if your prior year adjusted gross income over $150,000.
You can figure how much to pay using the estimated tax worksheet found on the form 1040-ES (downloadable here as a pdf). You can also use a software package like TurboTax to figure the tax for you (I highly recommend this option). The form 1040-ES also explains where to send your payments.
If all of this seems much too complicated, you can always ask your employer to simply withhold a little more on your paycheck so long as the numbers work out.
One more note: There is a quirky provision in the 2009 stimulus bill that provides some relief for those who have to pay estimated tax. If your 2008 AGI shows that at least 50% of your income came from a “small business” (fewer than 500 employees) and your AGI is less than $500,000, you can pay just 90% of your prior year’s tax to avoid a penalty instead of 100% – the 90% also applies to the those with AGI more than $150,000 (meaning that you can pay 90% instead of 110%).
Estimated payments can be tricky but don’t panic. There are lots of opportunities during the year to “fix” any bad estimates (for example, if you’re making lots more than you planned) and safe harbors apply for those taxpayers subject to the estimated tax for the first time. Once you start making estimated payments, it’s pretty easy to figure it out for the next year: usually the first year is the most difficult (that’s why they have the safe harbors!).
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
Taxpayer asks:
After a string of robberies in my neighborhood, I decided to install an alarm system. I paid a flat fee for installation plus I pay an amount each month. Is any of this deductible on my taxes?
Taxgirl says:
If the property that you alarmed was your home, the answer is no. There is no tax deduction for installing an alarm system at your home. On the plus side, however, it’s possible that your insurance rates will go down!
If the property that you alarmed was a rental or commercial property, the answer is yes. Both the installation and the monthly fees are deductible as the cost of doing business on those types of property.
There is one more consideration: what if your home is also your place of business? If you take the home office deduction, then you may claim the pro rata portion of the alarm system on your taxes, just as you do with other home office expenses. However, the portion attributable to the non-office portion of your home is still not deductible.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
Taxpayer asks:
Hello,
I am an independent contractor and work with teachers. If I purchase gift cards to award those that completed required assessments by the deadline given. Can I deduct the cost of these gift cards?
I would appreciate any information you can provide.
Many thanks,
Taxgirl says:
I love this question because it’s an example of how the specific facts really shape the answer!
In your case, I say yes. And I also believe that it’s not taxable to the teachers. Here’s why:
If an employer gives a gift or award to an employee, the IRS generally considers it compensation and not a gift. There’s an exception for de minimis gifts – you know, gift baskets, boxes of chocolate, those inexplicable little inspirational crystal trophies… Those are considered to have such little value that they are not taxable to the recipient as compensation and the value of the items is generally deductible to the employer as part of the cost of doing business.
There is a specific exception to the exception (don’t you just love tax law!) for gift cards. Gift cards are easy to value and are treated just like cash for tax purposes. They are never considered de minimis which means they are taxable to the employee.
Head spinning yet?
But wait. You’re not the employer here. And they’re not your employees. You have an independent contractor relationship, right? This means that the cards should not be taxable to the recipients as income and they are deductible to you as part of the cost of doing business. Unless, of course, you’re giving the gift cards with the expectation of future services – but that doesn’t sound like the case here.
Whew. Got that?
For specific information on holiday gifts and bonuses, see my prior post on the subject.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
