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Taxes for Freelancers
Continued from page 2

Profit vs. loss

Like any new business, your freelance business isn't expected to show a profit in its first few years. So, at least in theory, you can file Schedule C and take business deductions even if you haven't sold your first manuscript or obtained an assignment. Two caveats apply, however:

  • You should be engaged in a type of writing that has the potential to be remunerative (e.g., screenwriting or book writing rather than poetry or family history).
  • The IRS may question your deductions (and losses) if you don't make a profit in three years out of five.

Easing the pain of preparation

Figuring out what's deductible, and how to fill out your tax forms, can be a nightmare for the uninitiated. Even if you go to a professional tax preparer, you need to know what questions are likely to be asked before you can sort through your shoeboxes of receipts and extract the information needed to submit your return.

Fortunately, there's an easy solution: Income-tax software. Today's tax programs take you through a step-by-step "interview," then process your answers and generate all the necessary tax forms.

I use TurboTax, but any tax program is an improvement over the slow and error-prone manual method. Take my word for it: If you're filing a tax return as a writer, a program like Turbotax is your most important software investment after a word processor.

- Durant Imboden

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