Lots Of Travel Expense Info

Katie had requested my Self-employed Business Expenses list. On the request form I ask: Where do you get most of your tax advice? Katie's response was "I don't... :( "

My response: "Please don't say 'I don't ...?' Your homework: Read my site or blog 15 minutes a day!"

I advise that to any indie who doesn't get any simple and accurate tax or recordkeeping advice.

Katie sent the following:
Thank you so much for all the information you have provided me! I've been reading your site everyday for a good 15 mins... or more!

I'm still confused on travel expenses for my field of work. As a free lance stage manager, I often go to other cities for weeks at a time. (Mobile, AL for 4 weeks, Tulsa, OK for 9 weeks, etc.). They often house me, but I drive there and around the city as well as provide my own meals when out of town. There usually is not much or no kitchen available to me and I end up eating out most of my time there. Can I deduct my mileage while I am there and driving around? Also, am I allowed to take the IRS per diem? I was unclear what exactly I am able to deduct while I'm out of town.

Thanks for any help that you could provide! (I'm working on getting your book at the library and look forward to reading it!)

Katie
Shawnee, KS


Dear Katie,

Take a look at these posts expenses expenses -- travel (17) and these expenses -- travel-per diem-temporary worksite (10) . I think you'll find you answers there. If not please let me know.

-- June

Writers, beware: A royalty is different than a royalty.

June,

Thank you for your wonderful book. It has been a useful resource in the past year since I purchased it.

I am writing to you with a question I hope you can answer. Early this year, I published my first book. I am receiving royalty checks for the book this year. I am also working on another book (no advance or payment for the text--I'll just get royalties for that one too).

I have been an indie for many years first as a performer and more recently running a martial arts school, but writing is new for me.

I am quite puzzled about how to report royalty income. The IRS schedule E is for reporting income from royalties. However, there is a single sentence in the instructions that says "if you are self-employed as a writer, report your royalty income on a schedule C instead." My question is, what standard does the IRS use to determine if I am self-employed as a writer? On the one hand, it seems that anyone who is receiving royalty income from a book is, sort of by definition, self-employed as a writer. Is the difference whether or not I write off my writing expenses as business expenses? Is the difference whether I have another stream of income? This point has me quite confused, and it seems likely that it could make a difference of hundreds if not thousands of dollars in my tax liability, since schedule C income then gets reported on a schedule SE, whereas schedule E income does not. Any feedback you have on this would be most welcome. I welcome your comment.

Jonathan
Saint Paul, MN


Hello Jonathan,

Congratulations on getting published!

My "wonderful book." Oh, how I love to hear that. Thank you.

I don't usually get into tax preparation and tax forms on my blog but because so many accountants screw up on just the question you ask I want to address it here and alert writers to know at least this much about the actual preparation of their tax returns. So here goes:

How much income you make, whether you have other income, whether you write off expenses -- none of those come into play regarding the classification of royalty income. Read these two examples.

With a very little amount of money a regular Jon or Jane could invest in an oil well. Many do through their investment brokers. Many who do don't even know that they've invested in an oil well. At year end they get a Form K-1 from the oil company that says, hey Jon, you made $700 in royalty income. That royalty income goes on federal Schedule E. John didn't do anything to get that $700 other than invest some money.

With a whole lot of blood, sweat and tears Jon writes a book. It is published. Jon's publisher receives the money from the sales of the book. Then the publisher pays Jon his portion of that sale income. At year-end Jon receives a Form 1099 saying that Jon made $700 from the sales of his book. That income goes on federal Schedule C. Because Jon worked his butt off for two years writing the book that royalty is self-employed income and Jon will pay self-employment tax on whatever is left of that income after business expenses are deducted.

Royalty income from a publisher is the same kind of income as a fee for writing a magazine piece or a column for a blog.

The same applies to musicians who get a royalty on their compositions.

It's all self-employed income. Be sure your tax pro treats it as such.

Best,
June

Actors

Hello June -

I am writing for my son who is nine and has been an actor for 4 1/2 years. I read your answer regarding W-2's not being allowed as "self-employed" income, as there is not a self-employed business. Understood.

You mentioned that you can possibly write off the expenses as an "adjustment to income" on the front page of the tax return depending on the income and expenses. What are the "depending on income and expenses" and if he meets that, how do I let my accountant in on this big secret!!

We are having a fight with Social Security regarding his income and it seems your answer may be a big help!

Thank you and I look forward to hearing from you.

PS
If I sign a W-9, not a W-4 for every job he takes with a production company, be it commercials or screen, why does he receive only W-2's and is there anyway to insist that they send 1099"s? I am enjoying the information on your site, my husband is self-employed also and your recommendations are right on!!

Thanks again ---

Veronica
Springfield, MA

Dear Veronica,

I have been so busy with clients that I have not been able to answer questions from readers as quickly as they and I would like. I hope you and others who are awaiting answers have filed an extension for your 2007 tax return to give you more time to sort things out.

All actors are paid as employees. My former husband, an actor, received numerous W-2s, often with piddling amounts on them. All my actor clients have the same situation. I assume it is a union regulation. You might want to ask the Screen Actors Guild [SAG].

On your specific questions regarding income, I am sorry to disappoint, however, it is my policy not to provide tax preparation instruction online. If your accountant is not aware that actors can deduct expenses on the front of the return, you need to find a tax pro who is. It's not a "secret." It's pretty basic staff. Contact the SAG office and ask them to recommend a tax pro or call several local accounting offices and ask if anyone is familiar with tax returns for actors.

You don't say what is your fight with Social Security, but I wish you success.

There is more info on indie business expenses in my book Self-employed Tax Solutions .

Best,
June

Undergarments as a business expense?

June --

I'm from Minneapolis, MN, and I am both a writer and a yoga/writing instructor. I've been an indie for 12 years. My husband is a dancer/actor/performer.

We have a two questions about business expenses. As a yoga instructor, I have specific yoga clothes and undergarments that I purchase for teaching. Deductible, right?

And, my husband has a closet of clothes that he keeps for modeling that he doesn't wear any other time, except for auditions and shoots. Deductible?

And, he has regular chiropractic and bodywork for body maintenance.

Deductible? He isn't being treated for a specific injury, he is treated for his posture, and to keep his "instrument" in good working order.

Thanks! Josie


Hi Josie,

The rule on clothes: If you can wear them as normal streetwear they are not deductible. Women wear tights as everyday clothes, so there goes that deduction. A sports bra, yes. Regular undergarments, no.

Your husband cannot deduct the clothes he buys for modeling.

Here's another way to look at it. A housewife and mom sends her third child off to school, becomes a realtor and buys an entire business wardrobe because the ripped jeans and tank tops won't do. No deduction.

The freelance writer gets a writing gig for an uppity insurance company and must buy a suit. No deduction. [That actually happened to my husband many years ago when he did a freelance project for Chubb insurance.]

A tuxedo or an evening dress for an awards ceremony are deductible.

Chiropractic and bodywork to keep your guy fit are not deductible. Same would be true for the construction worker who has to stay in shape so he doesn't fall off the scaffold or the waitress who gets a foot massage once a month to enable her to stay on her feet 10 hours a day.

Good try!
-- June