Deductive Reasoning for the Modern Taxpayer
It’s tax time, and every year I
think to myself that I should be deducting everything. Really. All my income
comes from freelance writing, and since there’s almost nothing in my life that
I don’t write about, maybe I can deduct everything.
A Taxing Woman
After years of thinking I should
do this but not really doing it, I finally took action. I talked about my
deduction plan with Anne-Marie Fisher, director of tax services for CBIZ.
Here’s a transcript of our
conversation:
Me: "I spent a lot of money
on expensive eye cream so that I looked
good for my Yahoo! photo. Can I deduct that?"
Anne: "They don’t like
cosmetics or clothing that they say you could use outside of your
article."
Me: "But I wouldn’t have
had to look that good if I didn’t take the photo."
Anne: "But you looked good
after the photo. The IRS is really tough on things that help your
appearance."
Me: "What if the cream made
me look bad?"
Anne: "That’s a very
aggressive position." (This is tax-preparer speak for "No! Don’t do
it!")
Me: "OK. Forget the cream.
What about moving. I wrote a lot about how I moved from New York City to Madison, Wisconsin."
Anne: "That’s a fine
deduction. Just document that you did if for a job."
Me: "But I didn’t. I can
work anywhere. I did it because I was going to die if I had to live in a
500-square-foot apartment for one more minute."
Anne: "Do you have more
business opportunities in Madison?"
Me: "Well, there are a lot
of writers in New York City and very few in Madison, so I’m more unique being
from Madison and editors like unique."
Anne: "That’s good."
Me: "I write a lot about
how you’ll have more career opportunities if you keep your rent low. The new American Dream is about having a lot of time, not
owning a house. Can I deduct my rent?"
Anne: "That’s very
creative." (That’s CPA-speak for "You’re out of your mind.")
Me: "Here’s something I
did. I went through all my expenses last year looking for some that are big and
don’t seem to be deductible. I saw that my son’s violin lessons are really
expensive. And you know, violin teaches self-discipline, and self-discipline is
important for workplace success. I could write that. Then could I deduct the
lessons?"
Anne: "He’s still getting a
lot of benefit from the lessons, though."
Me: "What if I write that
he hates them?"
Anne: "Well, if he hates
violin and you put him in the classes specifically to write your column, maybe
you could prove that he was really upset by you taking pictures of him."
Me: [Silence. Obvious
disappointment.]
Anne [in a perky, helpful
voice]: "How about meals. Do you deduct those?"
Me: "Of course. But what
about my brother? He guest blogs on my blog. Can I deduct meals with
him?"
Anne: "Sure. As a way to
thank him."
Me: "What about the plane
flight?"
Anne: "To go see him? Well,
things like this are always worth asking about. It’s like gambling. Some people
just never want the IRS to talk to them."
A Roll of the
Dice
At this point I decide I’m a
gambler, so I call another CPA. Larry
Rice, director of strategic consulting at Rodman & Rodman. I cut right
to the chase:
Me: "What can I write in my
column about toys so that I can deduct the toys I buy for my kids?"
Larry: "Maybe if you had a
regular feature where you review toys. But you’d have to throw them out. If you
kept them, the IRS would assume your kids got personal enjoyment from
them."
Me: "Could I throw them out
later?"
Larry: "No, that wouldn’t
work because there was personal enjoyment. The IRS lets you deduct only 50
percent of meals, for example, because while they’re for business, you still
get personal enjoyment."
Me: "Can I deduct 100
percent of the meals I had with people I hate?"
Larry: [Pause.] "When you
deal with your taxes, you’re presumed guilty until proven innocent. You need to
prove why you have the right to take the deduction."
Me: "OK. How about the
coffee shop I write in. I’m there every day and I don’t have a home office. Can
I deduct my lattes?"
Larry: "The IRS has a term
– ‘ordinary and necessary.’ You have to show that what you’re doing is
ordinary and necessary for your business."
Me: "OK, there’s an
article about how my generation loves to work out of coffee shops and many
of us don’t have home offices. We just have a backpack. So how about I send
this to the IRS and tell them it’s a new day and they have to get with the
program and large latte bills are ordinary and necessary for writers?"
Larry: "Maybe you could do
it if you met with people related to your business regularly. The IRS publishes
a 30-page
book to help people determine if their home office deduction is legal, and
it has very tight requirements."
Me: [Long, dejected silence.]
A New Hope
Larry gives me a good idea. He
says that IRS agents receive audit guides that tell them what deductions they should
expect from a person in a given field, such as 10 percent of a writer’s income
is spent on travel.
So I can get one of those
guides, and at least make sure I hit the top levels in all those areas. It’s a
new approach, and I have new hope.
Finally, a note to my mom:
Please don’t call me to say the IRS is going to read this column and come after
me. I know you’re going to worry. But you don’t need to. In fact, now that I’ve
written about you worrying, the next time I have lunch with you and you worry
about me, I think I’ll deduct it.
