Tips for Content Producer Expenses: Tax Year 2006

In all the excitement of the holiday season which includes great opportunities for free lance writers, it is also the end of tax year 2006. Free lance writers may be a sole proprietorship or a professional corporations. This article addresses some IRS publications that may be helpful to many CP free lancers as the tax year closes out on December 31.

Generally speaking all free lance writers should keep track of all the work performed during the tax year. Some people use Excel and others find versions of Quicken for small businesses useful. Others, who may only produce free lance work on the side as a hobby or additional income should keep track of income and expenses of their work. Associated Content has a great feature that allows all content producers to review payments on their account. Each content producer may have other free lance income or income from covered employment. Whatever your circumstances may be these general tips from the IRS are helpful.

The IRS has on-line tax information concerning the type of expenses allowable for independent contractors and businesses. The publication 535 for 2005 is currently on line and has some notes on possible changes for 2006. The publication and fact section is useful in determining whether your expense is a personal one or a business expense. It also gives guidance on combined uses of the product. As an example a car may be used partly for business and partly for pleasure. The cost of running your business may involve mileage, supplies, workshops, association fees, repair of capital equipment, internet services and in some cases a portion of your rent or mortgage for a specific area of your home that is used solely for business.

For more professional free lance writers who do copy writing for a living other expenses arise. The initial cost of purchasing computers is a capital expenditure as well as cell phones, monthly cell fees and mobile gadgets. The cost of attending events like trade shows, and other events that are "required," for you to write the article. As an example if you take an assignment to cover "Bling, Bling Items of 2006," all the hotel rooms, travel, and normal expenses you incur are business expenses which offset whatever income you derive from the free lance assignment.

The best way to keep these expenses from getting lost is to keep receipts and immediately enter them in some form of an expense report. There are day planners sold by many stationary companies and there are electronic day planners. Each time you use your credit card, write a check or pay in cash, get a receipt and enter into your on going expense report. If you keep your expenses current for each month, you are able to enter into a tax program at the end of the year. Also, another benefit is to see on a monthly basis whether you are making any money.

I provided some services some years ago that were on an independent contractor basis and as it turns out my expenses far exceeded what I earned. It was on an interesting subject and I learned a lot, but the assignment was if anything a hobby. This can happen when you first start out doing contract work. The original agreement to do a project has unexpected twists, but with experience
you learn to bid the project in such a way that you are not completely donating your time.

As many people know who get involved in free lance work, sometimes you do not get paid at all. Someone puts out a call for an article or project and you incur expenses and your time, but the article is rejected or something just happens and you are not paid. These guidelines from the IRS are helpful, but other web sites for writers have practical advice for freelance writers. There is a great article by Jessica Ramirez called Tax Answers for Freelance Writers. She is a journalist that provides a newsletter for freelance writers.

Another really interesting biog. is Gina's Tax Articles. Gina Gwodz is a certified public accountant who writes great articles on various tax issues including free lance writing. She has links to other web sites and blogs concerning the tax issues involved in free lance writing.

There are many sources that discuss tax issues for the free lance writer or you may elect to talk to your local tax preparer or bookkeeper for advice on your specific tax issues. I would say the best advice in a general way is to keep good records of your business activities.