How To Handle More Than One Indie Business

In my book Self-employed Tax Solutions and on this blog I have said:

Define your business as broadly as you honestly can.The more multi-faceted and inclusive your field of endeavor the more wide-ranging your expenses and thereby the less taxes you’ll end up paying!

• A photojournalist can deduct a more extensive variety of expenses than can a wedding photographer.

• A technological consultant’s expenses will be more diverse than those of a computer repair person.

• A generalist writer – someone who might write about anything – has more assorted expenses than a sports writer.

Not only does a legitimately broadly defined business allow you more deductions it also simplifies your recordkeeping. By using a broad definition you may be able to combine two or more of your indie ventures into one.

If you have two separate and distinct indie businesses you must keep separate records for each business. That means you need to split phone costs, a trip to OficeArsenal for supplies must be allocated, same with computer use. A hassle, I'm sure you agree. But what kinds of businesses may you treat as one? Here are some questions on that from your fellow indies. Let my answers -- in red -- be your guide. I've highlighted the various professions each wishes to combine.


Hi June,
I know you say to define your business as broadly as possible -- but what about this: I do mostly editing and writing. Some layout, book design, this-and-that. Could call it all "communications." This past year, I've begun developing a photographic print sideline (yet to produce income, but generating expenses), and experimenting with monetizing a blog/website--well, maybe communications still applies to all that. June says: yes, this all fits as "communications."

But (what with the awful economy and all) I've also made about 40% of this year's income doing interior house painting. (Rolling on wall paint equals communicating with my client's future guests? I think not.) Also a little animal care and cleaning on the side. The truth is, I've really been scrambling to make ends meet.... June says: These could be combined into their own business, something like "home care services" but cannot be part of your communications business.

When it comes time to do my 2009 taxes I'm going to have to figure out how many businesses I "am" and how to handle that. Do I do multiple form Cs, Yes, two. one form SE? Only one. Separate out my expenses for each? Yes, for your two businesses: Communications & Home Care Services

I've pulled out your Self-employed Tax Solutions book but I don't see advice about running multiple, disparate lines of business as a sole proprietor. AND I'd bet I'm not the only Indie among your fans who has made ends meet this year by using other skills -- maybe older skills or lower-paying or less preferred skills -- and offering them as an independent professional. You are so right. I've received many emails on this topic. Maybe this could be a topic for your blog? And here it is.

Wishing you all the best,
Martha
Evanston, IL


June --
I've worked full time as a radio creative services director since '95 (W2). I freelance on the side... I have a parent company that consists of voice-overs and sound design, online advertising, and DJ/MC entertainment. I am trying to be as broad as possible by having these "sub-companies" all under one sole proprietorship / EIN. They're all related in the sense that I'm a Marketing and Entertainment Solutions company with various divisions. June says: They all fit very well as one business.

I'm also planning on being involved as a real estate investor - which I know would be a "separate" venture. Correct.

I've been freelancing part-time since 2002. I'm in the process of getting a new tax preparer (possibly CPA for the first time). "CPA" doesn't mean he or she is indie-savvy. Read these posts tax pros - tax prep fees - tax returns .

For many years, I relied on a guy who handles tax returns for a lot of media people and freelancers and got some ideas from him... Usually anytime I travel, I "talk business" part of the time - so I deduct a portion of air, hotel, food, etc - just not sure what specific portion I can deduct. Whoa. Talking business does not make it a travel expense. Read these posts expenses -- travel .

Also, before going in to work everyday I go to the Post Office to pick up mail so I count this as biz miles. Allowed if you are leaving your home office and picking up or dropping off your business mail.

Appreciate your advice - just purchased your CD and Book.

Thanks!
Jamie
Baltimore, MD


Hi June,
I love your book, Self-employed Tax Solutions, your site, and your super-helpful emails. June says: Thank you!

I've been pursuing (i.e. not getting paid) a career in journalism for the last, oh, 8 years. I have finally been getting paid semi-regularly for the last 2 years. For my journalism work, I do assignments and contribute to stories for radio programs.

During the time I wasn't getting paid and to-date, I have simultaneously pursued a career as a personal assistant As a PA, I do personal shopping, make suggestions for restaurants, resorts and hotels, manage and produce parties, and manage properties and household staffs around the country. I am a PA both to develop contacts for my career in journalism and to pay expenses. June says: Massage therapy also develops contacts but you couldn't combine it as part of your journalism business.

My question is whether I can lump both of my positions together into one business? No you cannot.

Both positions require me up-to-date on news, current events, what's in style, and basically any and everything else. Same for a hair stylist or a realtor. Do you think you could combine either of those with your journalism venture? You are stretching things too far.

1) Can I legitimately call myself a "Lifestyle and Multimedia Consultant" or "Lifestyle and Multimedia Producer"? No.

Do you have a better idea? You have two businesses.

Thank you!!
Briana San Francisco,

Many New Tax Savings for 2009 Returns: Ask your tax pro about the Making Work Pay tax credit

As you indies probably know, I do not encourage self-employeds to prepare their own tax returns. And I don’t explain tax forms on my blog. However, I don’t want you to miss out on this goodly amount of money so I’m breaking my own rule and am giving you a little tax preparation alert.

Among the many new tax advantages that have been served up for 2009 is one called the Making Work Pay Tax Credit. Many of you have been asking about it and its form Schedule M of Form 1040.

The most important question from you: Does it apply to self-employeds as well as employees? The answer is yes.

The credit is available to any person who has made any income while working, whether as an indie or an employee, or both. You may not be eligible, however, if your income is too high.

The Making Work Pay Tax Credit is a refundable tax credit. That means it is a dollar for dollar deduction against any tax liability you have. And if you owe no tax then the credit becomes your refund.

If you are single, the credit is $400.

If you are married filing jointly the total credit for you and your spouse is $800.

Singles will not get the credit if adjusted gross income is $95,000 or more.

Married people filing jointly will not be eligible for the credit if adjusted gross income is $190,000 or more.

What’s adjusted gross income? it is line 37 of your 2009 Form 1040 page 1 and is a combination of income and subtractions called adjustments. It is the sum of all your income, such as: wages; net self-employed income; interest; dividends; perhaps some of your social security; alimony received; stock gains; pension; and more. From that total you subtract adjustments, such as: health insurance premiums for indies; ½ SE tax for indies; moving expenses; certain expenses for artists; and the list goes on.

Eligibility depends on other particulars as well. Be sure to look into it to see if you qualify for the credit.

And, here again my encouragement, or warning: There are many new credits and deductions available for middle- and lower-income taxpayers, whether freelancer or employee. Good tax pros keep up with these changes. There’s a good chance you will save money by taking advantage of a tax pro’s knowledge. Have an indie-savvy tax pro prepare your return.

1099-MISC is a requirement.

Hi June,

I am a self-employed web designer from PA.

I've been "indie" for 6 or so years and up until now, have never been asked to fill out a w-9 form and frankly, don't like sending my social security number to my (house painter)client, who will then give it so some accountant.

The client just emailed me and said his accountant wanted me to fill it out to be on "record". This is for a job that I completed 6-8 months ago and was paid for in full by his business check (a little over $700) made out to my name, as i have no business identity. I will pay income tax on what i made from him - and i don't understand why he can't write off my expense as a advertisement expense.

So do i have to give these people my social security number? And what are they going to do with it?

thanks for any info you could provide!

Amy
PA


Hello Amy,

Your painter client is correct and so is his accountant. You were supposed to have been receiving 1099s for "the last 6 or so years." 1099s W2s W4s W9s

Anyone who hires you is supposed to give you a W-9 to fill out so that he may have your name, address and social security # in order to send you a 1099-MISC a year-end.

Whether you are paid in cash or check or chickens if it's $600 or more you are supposed to receive a 1099-MISC.

Not wanting to give your social security # to someone for whom you work could be construed as paranoia or careful business practice.

If it's paranoia: Get over it. If it's careful business practice get a federal ID # and use that # instead of your social security #. EIN-employer identification #

Read all the posts in the links above and you will feel much better because you will understand that this is a required by the IRS.

-- June

Improperly prepared tax returns can impact the Social Security you receive later in life.

Hello June,

Your site has a wealth of information, thank you.

I have a small Internet business on the side with my main job as an employee of an engineering firm. I get and file the w-2 from them and I pay that self employment tax as well. The IRS sends me a statement about what I can expect in monthly payments as a retired person and they list my taxable income amounts going back to when I was a lad.

But I have noticed that the taxable income amount they show only reflects what my employer has paid me and not the other income on the side. I file jointly with wife. I just fill out a Profit/Loss from business form and pay the total 15% for the Internet business. I feel like I'm not getting credit for this. Any thoughts?

Thanks, Joe
CLEVELAND, OH


Hello Joe,

You are welcome. Glad to provide wealth in the form of information.

You say "on the side income." By that I assume you mean your self-employed business.

I also assume that you are preparing your own tax return. I also assume the problem might lie in your tax returns.You say that you paid 15% SE Tax. But on self-employed income you must also pay income tax. Perhaps your returns were not prepared correctly.

Social Security calculations regarding how much you will get when you are old and living the sweet life of retirement are based on your income as an employee and your income from self-employment.

After April 15 take your returns to a tax pro or to H&R Block and ask if the self-employment income was handled properly. This can be done without a costly complete review of your tax returns. If the answer is yes, then take your returns to the Social Security office and get an explanation.

If your returns were not done correctly then you need to hire a tax pro and file amended returns.

-- June

Recordkeeping and Receipts for Items Paid by Check

Hi,

I've been reading your book Self-employed Tax Solutions and I get your email. Thank you for what you do.

I'm wondering if the growth of online banking movement has changed your thoughts about having a checking account that returns your cancelled checks to you. I pay some of my bills directly out of my account and don't even write checks. I don't have any cancelled checks from last year and should I change banks to find one that will send me my checks back for this year? I'm thinking the IRS might have adjusted in the past 5 years. What is the current thinking on this?

I am a psychotherapist in private practice. Not a lot of transactions in a month, maybe 25 outflows at the most and about 3,000.00 inflow per month.

Thanks,
Kim


Dear Kim,

You are welcome. And, thank you for letting me know you appreciate the output. Indies do need as much clear, accurate info as they can get.

You must have proof of just about all business expense deductions. The most simple way is through cancelled check and credit card receipts. And if you follow my Most Simple System you must have backup for every dollar you spend.

Even though few banks return cancelled checks anymore most banks do provide photocopies of all checks written. You may cut them out, or copy and then cut them out. Treat them just as you would a cancelled check. A psychologist client in NJ urged her bank to provide a second, larger photocopy of her checks each moth. The bank wanted to keep her as a client so they obliged.

If your checking account is through your brokerage house you probably get a list not copies of checks. In that case I would suggest you use a local bank for your regular check writing.

If you pay bills directly you must still have something that tells you how much to pay. Print it out. For instance, if ATT emails your monthly bill print out the first page and note the date and from which account it was paid. That is your proof. And not only is it proof for taxes, it's proof if ATT says you didn't pay the bill.

Whenever possible get a paper invoice or bill for whatever you are paying by check. If you pay by check for an item purchased online, printout the purchase info. Note the check # and date paid on the printout. [BTW -- I suggest putting those kind of orders in a "waiting" bin. Pull them from the waiting bin when you actually receive the item. We are all so busy it's easy to forget about a one in the morning online purchase.]

Whenever you pay a bill by check, write the check number and the date paid on the invoice. For example, if you paid your cable bill on March 14 with check number 607, you would write √ #607 3/14/11 $234.56

File the receipts consecutively, by check number, in a folder labeled: 2011 CHECK BACKUP.

This and a complete method of manual recordkeeping is explained in my new petite publication, The Confident Indie: Five Easy Steps. It also includes worksheets for your 2010 tax return.

Best,
June

revised 1/30/11

Good Records = More Deductions

Hi June,

I'm a jewelry artist -- three years.

I've decided to take the plunge and start applying to do outdoor art festivals. I have to buy a camper shell for my truck to haul all the required paraphernalia (protect from weather and thieves!). Since the truck is also for personal use, I can't figure out if there's any way to deduct/depreciate part of the cost of the topper? It's not feasible to take it off when not being used for shows. Is there anything I can do? These things aren't cheap!

thanks,
zee
Tallahassee, FL

p.s. my New Year resolution is to reread your book and keep better records!!!



Hi zee,

I'm going to start with your PS. The better your records the more you can deduct. I should put a"generally" into that statement, however, I have found it to always be the case.

If you keep good records then you look more like a business to the IRS and the IRS is more likely to accept an untypical deduction.

So, with not so good records, I would deduct the cost of the shell based on the portion of business use of the truck. The IRS could not argue with that.

With really good records -- which would include photos of the truck in the rain at shows -- I would use the entire cost as a business deduction. And even with that, I am not sure the IRS would accept it.

Of course, if you removed the shell when using the truck for personal use you cold deduct the entire cost.

You might want to take a look at my new petite publication The Confident Indie: Five Easy Steps -- easy recordkeeping as well as my worksheets for your 2010 tax return.

I wish you success at the festivals!
June

More Truth About Income

June --

Here's one for you! I do self employed consulting work in Ashland, Oregon, and have done so for several years. I have an LLC client who is paying me with state tax credits. They are a direct deduction in state taxes due, as good as cash to me. The question is: do they need to send me a 1099? Do I need to pay self employment tax on the value of these as if they were cash? I'm guessing yes, but not sure this small LLC knows that!

Many thanks for any help, Jeff


Jeff --

Your guess is correct. Yes it is self-employed income to you.

Yes, if the value is $600 or more, the LLC should send you a 1099-MISC.

And, yes, it is income to you even if you do not receive a 1099. Read An Inconvenient Truth: It's income. below.

-- June

An Inconvenient Truth: It's income.

June --

I am a Freelance Violinist and Violin Teacher.

Does the rule of not factoring the first $600 of the income from a given "employer" apply to self-employed people?

For example, if I teach a student and had only $599 income from him during a year do I factor that money in anyway?

I realize you've mentioned that indies do not have "employers" but I noticed some of the contractors I played for in recent years did not send me 1099 if the combined income from the gigs did not exceed $600. I would really appreciate clarification in this matter!

Great blog - very helpful.

Unfortunately makes me realize how little I know about the taxes I should be paying... Dominika
Houston, TX


Hello Dominika,

I assume "factoring" is your euphemism for "should I include it as income?

Yes, you should. Any money -- in any form -- that you receive for services performed is income. Intentionally not including income is fraud.

Your students are not your employers. They are your clients or customers to whom you sell your services. If you taught in a school and received a salary from the school, then the school would be your employer.

Anyone who pays an indie $600 or more is supposed to send the indie a 1099-MISC stating the amount of money paid. A lot of people neglect to send any 1099s.

If because your income is under $600 a client doesn't send you a 1099 it is still income. Think of it this way: If you had 100 clients, all of whom paid you $599, you would have earned $59,900. Would you claim zero income?

Dominika, you really need information. I suggest you read these posts 1099s W2s W4s W9s.

You might want to pass on what you learn to alert your fellow musicians. Bands and many music groups tend to get paid in cash and then pay the musicians in cash. The leader then doesn't know or forgets to send 1099s. The band members then conveniently forget that they are supposed to include the cash as income.The inconvenient truth is that all income must be claimed on your tax return.

You can offset that inconvenience by knowing more about legitimate deductions. Check out my book at the library or buy it at a sale price here: Self-employed Tax Solutions . It will give you a basic understanding of indie taxes. It is written like my blog -- which you say you like, THANKS! -- in a clear easy-to-understand style. Educate yourself. You'll feel good about it. It will give you indie-business confidence.

Cheers,
June

Confusion abounds: LLCs & Employee vs Self-employed

Hi June--Great website!!!

I am the sole owner of my business--it is a LLC--I do have a salary which my business pays me on a monthly basis.

My question actually has nothing to do with taxes, but rather what do I put down on a HELOC [home equity line of credit] loan application--Employee or Self-Employed(Indie)?

My friend told me--for the purposes of getting a loan--it is always better to be classified as an Employee rather than a Indie. Is this true?

Please help!
Thanks,
Ty


Hello Ty. Thanks, glad you like my site.

Your question came in about 2 months ago so you may have resolved your situation. However, the elements of your question make evident the kind of confusion typical for indies. Perhaps my response will help others.

As I hope or wish all of you would know by now -- if not read here business entity -- LLC -- an LLC is not a tax entity. It is a legal entity. You can be a sole proprietorship LLC. You can be a partnership LLC. You can be a corporation LLC [that would be really silly, tho.]

So, when you say you are an LLC there is no way for me -- or anyone else -- to know what kind of LLC you are.

Ty, you say you are " the sole owner of my business--it is a LLC." That would lead me to assume that you are an LLC structured as a sole proprietorship. In tax jargon that would be an LLC structured as a disregarded entity.

However, you then say that you "have a salary which my business pays me on a monthly basis."

A sole proprietor does not receive a salary.
A sole proprietor has either a profit or a loss from his or her business.
A sole proprietor is an independent contractor.
A sole proprietor is self-employed.
A sole proprietor is an independent professional.
A sole proprietor is an indie.

Only employees receive a salary.

And Ty, you ask "what do I put down on a HELOC loan application--Employee or Self-Employed(Indie)?" Well, you must put what you actually are. If you don't you are submitting a fraudulent document. Not good. I can't tell you what to put because I don't know what you are. And I gather from your question that you may not know either.

You need to talk with the pro who set you up as an LLC. FInd out what kind of LLC you are.

If you formed your LLC online with no professional guidance, well, you have a situation that must be resolved.

-- June

Drive: The Surprising Truth About What Motivates Us

Indies, I would like to bring to your attention "Drive" a new book by Dan Pink.

In Drive: The Surprising Truth About What Motivates Us, Pink argues that the best workplace motivation is internal, the desire to excel and improve, rather than external, based on rewards and punishments, carrots and sticks. He cites scientific experimentation, largely ignored by the big business model corporations, that provides convincing evidence of this psychological/economic truth.

Dan's work follows in the tradition of his earlier books, Free Agent Nation and A Whole New Mind, which also take a fresh approach to the changing 21st century workplace.

Much of what Dan, who has been a client for several years, says about the workplace is related to businesses like BestBuy and Google, but it also has wide application to the indie life, where fulfilling one’s potential has long been a principal motivating force (yes, of course, making a living rates up there as well).

Please take a look at Drive. I think you will find it valuable, especially in these difficult financial times when indies need to harness the power of their internal motivation.

-- June

Good Questions About Income, Expenses & Audits

Hi June,

Just finished listening to your CD and I thought it was good but rather short. I had hoped it would have been more of a version of your book less the worksheets. I much prefer an audiobook since as an indie I spend most of my time in the car and like to use the time to learn.

You have a great reading voice and may want to consider a more extensive audiobook version.

I do have a question I hope you may be able to answer. When one receives large amounts of cash as a gift at various times of the year how can you deposit this and make sure it is seen as personal? With a large immediate and extended family this can add up to thousands of dollars and I am not comfortable asking family to write notes saying they were nice enough to give me and the kids generous gifts.

Also, when I quote a job I include all expenses and there may be many varied expenses to complete the job ranging from nails to build a set to nail polish for a model sitting in the set.

I keep a docket for the jobs but an auditor who did not understand my indie lifestyle seemed to think the invoice should have had every nail and screw on the invoice and if I bought lunch for those at the shoot I should have the client and those around sign a meal log.

There is no indication in the code that this needs to be done and in the end I won in the appeal but the blood, sweat and tears only made me resent the CRA/IRS more.

The other issue I had was with unique gifts I give clients as a thank you for the work. If a client tells me they love hockey I will send an expensive stick to them and so on. What I have learned from an audit is if you think some accountants don't understand the work of an indie it pales in comparison to a government auditor.

Last question is if an indie is audited do you suggest they go it alone or get a representative to deal with the government. I understand if you can not answer all or any of my questions but they may make for good blog posts for you.

All the best,
Cliff


Dear Cliff,

I am trying to catch up with a huge backlog of emailed questions and some of this I may have dealt with already. But, a refresher never hurts.

First of all, thank you so much for your comments on my CD -- and my reading voice. I cannot do a CD of my book -- publisher constraints and the like. I do have additional CDs in the works but time is limited and client work comes first. I do have a new petite publication -- 75+ pages -- coming out very very soon -- The Confident Indie: Five Easy Steps. More about it soon.

On to your questions ...

Family gift money coming in: Make copies of the checks. Keep a list with specifics -- from whom, why, date -- of gifts by check or cash. Get pictures of family members. Make copies. Staple the family member's photo to the copy of the check. Save the birthday cards or anything that would help you prove where the money came from. And, I'm sure you always send a thank you note -- mom brought you up right! Well, copy the thank you note, or keep the dated emailed thank you. If the money was not a gift and not income, then send an acknowledgement of receipt of the money and keep a copy. That way you don't have to request anything from the giver.

If you are asking about reimbursed expenses, there's a lot on this blog about reimbursed expenses -- expenses -- reimbursed . If you are asking about expenses in general: Save receipts, of course. Photos do wonders as proof. Take a picture of the model with the polished nails sitting on the thing that was built with nails. Make notations -- including the date -- on the photo. Keep it with your receipts. Use your creativity in your recordkeeping.

No matter how much you spend on a hockey stick you may deduct only $25 as a business expense.

In an audit it depends on the tax pro and the taxpayer as to which one, or both, should handle the audit. I've had some clients who, with my coaching, did great by themselves. Other clients I would not let near the IRS. Years ago a client went to her own audit. She told the IRS auditor that she paid more in taxes in a year than the IRS auditor earned in a year. That audit did not fly well.

-- June

Reimbursed Meal & Entertainment Expenses

June --

I am not a tax professional but I believe there is an issue that would cost a taxpayer money on the federal return if the 1099 he/she receives includes expenses... You cannot deduct dollar-for-dollar some meal and T&E expenses on your federal return...therefore if those expenses are reimbursed at 100% and included on the 1099 you can only deduct the allowable percentage on your return...so it behooves the corporation providing the 1099 to include the expenses on it but it is to your disadvantage...correct?

Herb


Incorrect, Herb. First, so that we are all on the same page: It's not "meal and T&E." I assume you mean by "T" travel expenses. It's M&E for meals and entertainment. M&E expenses are deductible at 50% by the indie or corporation that incurred the expense. [There are exceptions which I will not go into here. You may read a lot more M&E here expenses -- meals and entertainment.]

That means that if Victor Visual takes a client out for a business dinner and he spends $200, he may deduct only $100 on as a business M&E deduction. The same would apply were Callous Corporation to take out a client for dinner.

Callous Corp engages Victor for a design project and will pay Victor $3,000. In doing that project Victor must wine and dine some folks at a cost -- to the corporation -- of $500. Victor bills the corporation $3500. $3000 for his fee as well as $500 to reimburse him for expenses. Same way he would get reimbursed were he to have had $500 in printing costs for Callous.

Callous pays Victor the $3500 and is allowed to deduct the entire fee of $3000. However, Callous may deduct only $250 for the M&E. It was Callous's expense not Victor's.

Of course, if Victor's arrangement with Callous said that his fee covered all expenses, he would not be reimbursed and he would deduct only 50% of his M&E expenses.

Many payers, Like Callous Corp, include M&E expenses on the 1099 in order to cheat the IRS. That is Callous's and the IRS's problem, not yours. As long as you have proof of your arrangement with Callous and receipts to prove the reimbursement arrangement you take 100% of the deduction.

Here are more posts on expenses -- reimbursed .

You said you are not an accountant, but I am going to give you some accounting jargon here anyway. Just in case you want to pass it on to Sammy Segar CPA who doesn't agree.

I've often explained in my seminars and writing that I take the tax code and put it into language that my talented indie readers will understand. Here's a short example, already simplified from the tax code verbiage but I think you'll get the idea. By the way, the interpretation from employee to indie that applies to indies is in red:

Where meal and/or entertainment expenses incurred in connection with the performance of services are reimbursed, the directly-related-to and associated-with tests for the deductibility of the expenses are applied to the taxpayer who actually claims the expenditure as a deduction. Similar rules apply for the Code Sec. 274(n) percentage limitation on the deduction (the 50% limit) [S Rept No. 99-313 (PL 99-514) p. 71]. Specifically, the 50% limit doesn't apply to expenses described by Code Sec. 274(e)(3) which are expenses incurred in connection with performing services under a reimbursement or other expense allowance arrangement for an employer, if the expense isn't treated as compensation, or for a person other than an employer, if the taxpayer adequately accounts to that person for those expenses [Code Sec. 274(n)(2)(A)]

Similarly, a nonemployee service provider (e.g., an independent contractor) that provides the required substantiation to and is reimbursed by the service-recipient for meal and entertainment expenses incurred on the latter's behalf isn't subject to the percentage reduction rule. The rule applies to the service-recipient, who can deduct only 50% of the reimbursement. Notice 87-23].

Once again thanks to NATP for research help.

-- June

How Long To Keep Records

June --

Can you please tell me how long I need to keep my recorded things for tax purposes. I'm a contractor on my own.

Thank you, your site is very helpful.
Jim


Hello Jim,

You're welcome. Glad my site is helpful.

Here's a quick reference. And for more info visit here on my website.

IRS Allows Cheaper & Better Travel Deductions

Hello June!

Thank you for shipping your book that fast.

I began reading it and had a question on lodging expenses. I have a computer programming contract in NYC and travel there every week from Philadelphia. On weekends I usually go back home. At the beginning I stayed at the hotel but later I found that renting an apartment was more convenient and a bit cheaper alternative. So, I rented the apartment on the month to month basis but now not sure on how (if it is possible at all) to deduct the rent expense? Should I calculate the average price per day and deduct days I go back home from the total number of days?... Any ideas?...

For my meals, I am planning to use per diem and I calculate by multiplying on days I am actually there in NYC. Per www.gsa.gov site for Manhattan, it is $64 for full days and $48 for the first and last days.

Thank you.
Dmitriy


Dear Dmitriy,

Good question. And this situation is not covered in my book Self-employed Tax Solutions.

We know the IRS regs don't always make sense but just because it's cheaper and better doesn't rule out a deduction. Assuming you are allowed the travel expense deductions, then as long as the rent is equal to or less than the hotel, you are not staying there longer than you need to for business, and you are not sub-letting it to someone when you are not there you may deduct the entire cost of rent as travel lodging.

And, yes you may use the government per diem for meals & incidentals.

-- June