When it comes to business expenses, document everything and keep good records. That was the advice of Debbie Brown, an Enrolled Agent and Licensed Tax Consultant who joined ASJA Pacific Northwest’s regular Zoom meeting in November to talk taxes.
Good records are important not only to be prepared for an IRS audit, she said, but to ensure all eligible deductions are being claimed.
Writers and other small businesses can deduct anything that is “ordinary and necessary” for their work, including office supplies, equipment, dues, subscriptions, internet service and business phone. Debbie recommended having a business bank account or credit card to keep business and personal expenses separate.
IRS audits, in her experience, focus on a specific expense, rather than an entire tax return, and are generally triggered by an item or expense that looks unusual or has changed dramatically from past years.
She mentioned automobile expenses and meals and entertainment as categories that are frequently audited. Writers who use their automobile for business should keep a detailed mileage log, including the purpose of each trip, and can claim either a set mileage expense or a percentage of their total automobile expenses, based on the percent of business use.
Traveling to a conference or seminar? Keep records of when and where you went. And if you tag on a personal holiday, pro-rate the expense so you deduct only the business portion.
Writers can deduct home office expenses, providing their office is used exclusively for business and no other space is being used as an office. Eligible expenses include a portion of mortgage interest or rent, insurance, utilities and repairs.
Debbie also discussed rules related to charitable deductions, retirement savings plans, and health savings accounts.
She stressed the importance of paying estimated taxes every quarter to avoid paying a penalty.
Debbie Brown, who has her own business (All Pro Accounting and Tax, Inc.) in Oregon City, has been doing taxes since 2001 and works mainly with sole proprietors and small businesses. She also provides payroll and bookkeeping services.
ASJA members attending the November 16th meeting: Maxine Cass, Fred Gebhart, Catherine Kolonko, Christina Leimer, M. Carolyn Miller, Joanna Nesbit, Randy Stapilus, Darlene West, Minda Zetlin.