International Freelancers Day

If your life has been as hectic as mine over the last two months you may have missed the International Freelancers Day Conference. It was loaded with free, yes, free, information for indies.

Here's your final chance to check it out and listen to all the presentations. Really, at no cost. My fellow freelancer Ed Gandia of The Wealthy Freelancer reminds us that:

The presentation replays for "International Freelancers Day" are available for 4 more days only! They'll be pulled down on October 31.

You can access the presentations here: http://internationalfreelancersday.com/full-replay-access . Your password is: replay2010.

And... Just in case you thought that this whole thing was a once-a-year thing know that the teaching, training and learning of "International Freelancers Day" is going to continue - all year long - right up until next year's celebration!

After listening and learning, please also pay a visit to The Wealthy Freelancer . Let me know what you learned from the book. Here's my review of it: The Wealthy Freelancer .

Cheers,
June

Be damn sure you know what you're doing and why BEFORE you incorporate.

June --

I live in Columbia SC, I'm 68 years old and may never be able to retire but thankfully my health at this juncture is not an obstacle to working as a 100% commission salesman. Would you comment on a 1099 person incorporating as a business advantage and whether there is is any advantage to doing so in Wyoming or Nevada as websites in those states strongly suggest.

If there is a reference or a site that elaborates on this would you refer it to me.

John


Hi John,

I assume you are asking because of tax consideration not liability concerns. No matter in which state you incorporate the federal tax laws and regulations and requirements are the same.

States differ on laws and regulations and requirements. For instance, there may be no state tax, lower fees, and less oversight in some states.

Before considering incorporation you must first look at whether or not you are taking advantage of all the business expense and heath insurance deductions and pension contribution plans available to a sole proprietorship.

If you are taking full advantage of being an indie -- which, if you haven't read my book, Self-employed Tax Solutions, I assume you are not -- then you need to compare the cost of incorporation, the accountant fees for preparing corporate tax returns, the hassle and abundance of a more elaborate recordkeeping of finances as well as corporation activities against the amount of state taxes saved.

And, keep in mind: As states struggle in the current economy today's tax rates may not be tomorrow's rates.

If you are going to incorporate be damn sure you know what and why you are doing it. After you've spruced up your knowledge on indie taxes then read my posts on incorporating.

And a request of you and anyone else sending a question to me: Please send me the link or the source of your info.

Best,
June

Everybody's got to eat.

Hi June,

(Things are going well using your system, keeping everything organized for my indie tax preparer at year's end. Although I did break down and open a free business checking account because I didn't want to be paying vendors from the joint, home account. Still, I figure it's the tracking and not the checking account that is going to matter.)

Here's the question for the blog:
I'm confused on where to categorize costs for luncheons that I attend for service organizations (i.e., Kiwanis) and professional organizations. I know the memberships are deductible, but how to classify the weekly meeting costs?

Also, in general, can one categorize fees for attending any networking events - where meeting people for business leads is the objective - as an advertising expense?

Thanks - Ron in Long Beach, CA


Hi Ron,

Good. Happy to hear that you are following through with my recordkeeping system. I love success stories. And you are correct: It's the tracking not which checking account that matters.

When attending a business meeting where lunch is served you cannot deduct as a business expense the cost of your lunch. Were you to pay for the lunch of a a business colleague as well as for your own then you would be allowed to deduct the cost -- but only 50%.

The reasoning from the IRS: You'd be eating lunch anyway so the cost of your lunch is not really a cost of business.

Fees for any networking event can be categorized as advertising; or as dues if you pay a yearly fee. Remember to include transportation costs to and from the event.

I see from your site that your business works with local and community policy. You might want to take a look at the piece I wrote for New Mexico Business Weekly on deducting lobbying expenses.

Best,
June

To barter is to earn & spend.

Hi June,

I've been reading your newsletters. We are having a debate on whether I, as a sole proprietor, have to declare a barter.

I understand I cannot make a donation claim, but do I have to declare a trade on my state and federal taxes? Does it make any difference if I trade time vs trading a $$ amount?

Thank you in advance,
Susan


Hi Susan,

A barter, whether in time or service, is income. Whether you're a sole proprietor, partnership, or corp doesn't matter. I am not sure what you mane by "donation claim" but let me give you a little more info on bartering.

Self-employed income is compensation you receive for a service you have performed [your time]or a product you have provided. Does the source of the income matter? No; it could be paid by your sister or the Government of Egypt. Does the form of payment matter? No; it could be cash, or check, or you could be paid in camels.

Here's an example: Syd System receives two massages from Rob Rolf in exchange for setting up the massage therapist's computer. The fee generally charged by Rob the masseur, let's say $200, is the amount Syd the IT consultant reports as income.

Likewise, Rob shows $200 in income and also $200 computer expense.

Each of these transactions results in income for a self-employed person. Don't be fooled into thinking that because the payment you receive is out of the normal course of your business or is not in good ol’ American currency that it is non-income. However unorthodox, it is still self-employed income.

Rob had income equal to an expense, however, his gross income may be subject to state tax and so he must include it on his tax return. before the deduction of expenses.

Now you know the rule. End of debate.

June

Forced to incorporate is a quirk of the company.

Hi June,

I'm a New York City Indie Sound mixer for TV, 10 years. Thanks so much for your very informative web site.

I'm so confused this is the second company that has sent me an email with this content. "Hi Sheila, Helen forwarded your invoice and w-9 form to me – however, we cannot pay you via a w-9 form. Because you are not incorporated, we need to pay you via a w-4 and withhold payroll taxes. You will be issued a w2 for 2010 tax reporting purposes. We are obligated to follow the instructions of New York State Department of Labor. Please complete the attached, including a signature and a withholding exemption amount on line 5. You may email it back to me, mail, or fax." I have not sent a reply to this request.

I am wondering if i should incorporate (which you don't suggest). Some years ago I used a DBA. I could I use the name I used then to get a tax id number and set up a bank account and ask this company to issue me a 1099 to the DBA?

If all my vendors start doing this will I lose my ability to deduct.

I welcome your comment.
Sheila


Hi Sheila,

If you are legitimately self-employed then there is no New York state department of labor law that says you must incorporate or you must be an employee. That demand is a quirk of the company.

Here's my post with good overview of the requirements for self-employment: Employee vs. Self-employed. And here's a post of someone in a similar situation: Forced to be an employee!

If the company will accept a federal ID # or a DBA [doing-business-as meaning a name other than your own] or even an LLC then by all means do one of those rather than work as an employee or even more cumbersome and expensive, forming a corporation.

Would be great if you could get me a copy of the instructions of New York State Department of Labor that Helen says they are obligated to follow.

Pleased that my site is helpful. Thanks for letting me know.

-- June

Income is what you actually receive.

Hi June,

I have been a self employed massage therapist for three years. My question is, I just ran a promotion with a local company. The company sold vouchers of my services for 50% off my regular rate and I get 50% of the sales.

How do I write this off on my taxes at the end of the year?

Jessica
Boylston, MA


Hi Jessica,

Congratulations on setting up promotion.

This is a simple situation. The discount or coupon has no impact on how your income is taxed. If you generally charge $100 for a massage and instead, with the coupon, you now receive $50, then your income is $50.

-- June