Top 5 Tax Write-Offs and Deductions for Freelancers

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When you are a freelancer every cent counts, especially when it’s going towards tax payments. Knowing which expenses are deductible and which aren’t can mean the difference between owing the IRS money and getting a juicy refund.

The trouble is that unless you work as freelance accountant you are probably no expert in tax law. You may worry so much about the consequences of claiming for a deduction you are not entitled to that you decide to play it safe and forget altogether about a perfectly-good write-off.

Home Office

A classic example of this is the write-off of your home office as a deduction. This is potentially a huge write-off many freelancers shy away from. Granted, the IRS does require you to work for it. For instance, you may, among other things, have to calculate the area of your office and represent it as a percentage of your home’s total area (see reference 1). Yet, even if your office is only 10 percent of your home’s total area, you can deduct 10 percent of your mortgage, property tax, insurance, repairs, and utility and services bills. Just this well-known write-off could save you thousands of dollars. By most standards, that is a lot of moolah. Imagine what you could save when you start looking into the more esoteric write-offs most freelancers either don’t know about or prefer to give a wide berth.

Depreciation of Your Work Tools

The minute you drive your new car off the dealership’s lot it loses, on average, 11 percent of its value, and after 5 years it is only worth 37 percent of what you paid for it. (See reference 2). Things lose value, and fast. The good news for freelancers is that this painful phenomenon, technically called depreciation, can become your ally when it comes to tax season.
You can deduct the depreciation of any tangible property as long as you use it in your business and it has a useful life of more than one year. Stuff that lasts less than a year you can usually deduct as a business expense.

However, not all property depreciates at the same rate, and you must follow IRS rules strictly or risk your getting your deduction shot down if your business is audited. The IRS uses the Modified Accelerated Cost Recovery System, MACRS, which assigns a depreciation rate on property depending on its estimated useful-life expectancy and how old it is. Cars, computers, cell phones, cameras and office machinery are considered 5-year properties, while office furniture is a 7-year property. Once you know what category the property you are claiming for falls in, it is simply a matter of multiplying its purchase value by its depreciation rate in an MACRS table.

For example, if you buy a new computer for $1,000, you can deduct 20 percent in the first year, 32 percent in the second year, 19.2 percent in the third year and so on. (See reference 3)

Health Insurance

This is a new one. Until 2010, self-employed workers, which represent 78 percent of all small business in the United States (see reference 4), could not claim their health insurance costs when calculating their taxes. Now you can claim 100 percent of your health costs. This means you can save up to 15 percent of your health insurance tax, if you deduct it from you self employed tax. With self-employed workers paying an average of $10,880 in health insurance bills, this translates into a whopping yearly tax saving of $1,664. (See reference 6)

Unpaid Invoices

Banks are not the only ones who have to worry about bad debts. As with all businesses, freelancers have to face clients who don’t want to, or can’t, pay their invoices. If you use the accrual accounting method to calculate your taxes, you can deduct unpaid invoices from your self-employed tax.

The accrual accounting method reports income when you earn it as opposed to when you are paid for it. If you use this method, you could end up paying taxes on income you never receive. Not a good habit if you want your business to be profitable.  Most self-employed workers use the cash method, which only reports income you have already received. However, some self-employed workers are required by law to use the accrual method and open themselves up to huge tax bills if they don’t keep tabs on unpaid invoices. (See reference 7)

Payments to Subcontractors

As your business grows you may find you have more work than you can handle by yourself. One option is to share the work with another company or freelancer as a subcontractor.  Although sharing the load with others is an excellent way to take on more work and make more money, it can become a huge tax burden if you report as income payments you make to subcontractors.

The solution is to make sure you declare every payment to a subcontractor as a business expense. For this to work, you need to be anal with your record keeping and have a formal contract agreement you can use to prove your business relationship is of contractor and subcontractor and not employer and employee. This is important, because if the IRS decides you are employing a worker instead of hiring a subcontractor, you could be liable to all kinds of extra taxes and fees. (See reference #8 )

References and Resources

Reference 1: IRS Publication 587 Home Office Deductions.
Reference 2: Edmunds: How Fast Does A New Car Lose Value Infographic.
Reference 3: IRS Publication 946: How to Depreciate Property.
Reference 4: National Association for the Self-Employed
Reference 5: IRS: Tax Changes for Small Businesses
Reference 6: National Business Association Lower Health Insurance Costs for Self-Employed
Reference 7: IRS Business Bad Debts
Reference 8: Independent Contractor or Employee?

About the Author: Andrew Latham started working as a freelance journalist while working as a volunteer teacher in Nicaragua. It started as a way to pay the bills and put his bachelors degree in English to work, but has now become his new career. He had previously worked as an assistant editor for a print real estate magazine and as a project manager for a construction contractor. That experience has been invaluable in creating a niche for himself as a copywriter in the real estate, construction and mortgage finance industry.

Overcoming Writer’s Block

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Jack London once said, “you can’t wait for inspiration; you have to go after it with a club.” In some ways, I agree with him. After all, professional freelance writers don’t have the luxury of waiting out writer’s block; they often have to work through it to meet deadlines. But at the same time, sometimes the harder you work at something, the more frustrated you get.

Here are five tips for overcoming writer’s block.

1.      Email a friend.
If you can’t find the words to describe that restaurant you’re reviewing or that scientist you interviewed, start composing an email to a friend and give your inner editor a break. Explain it to your friend in laymen’s terms. Don’t worry about searching for the exact right word or finding a smarty-pants way to explain a scientific concept. Just start writing simply and honestly and let the words flow out of you. That can help you get started, and you can refine later as needed.

2.      Skip ahead.
Beginnings and endings are tricky because you want to capture your readers’ attention and leave them with a memorable conclusion. It’s easy to get stuck working and reworking and wracking your brain for the introductory paragraph, so write a quick placeholder, then move onto the meat of your article or essay and return to the introduction later. Sometimes working on later paragraphs will help you think up a killer beginning, too.

3.      Shift gears.
The beauty of freelance writing is that you often have several projects running at once. I can’t afford to stall for too long, so if I find that my article or essay just isn’t gelling, I’ll move onto a different assignment and return back to the original assignment later. Sitting at your computer staring at a blank screen and beating yourself up over your inability to write is not productive, so if switching projects doesn’t work, consider spending a few hours on mindless administrative tasks instead. Those tasks have to get done anyway, so might as well do them when you’re feeling uncreative and use your bursts of creativity for real creative work.

4.      Try out a tech tool.
Maybe the problem isn’t that you’re blocked but you’re too distracted by Facebook or Twitter. Several computer tools are designed to help writers block out distractions and break through writer’s block. Try WriteorDie.com, which offers online and desktop versions with various modes encouraging you to get writing instead of censoring yourself (in Kamikaze mode it will actually start deleting words if you don’t type fast enough!). For a simple, distraction-free space, consider Dark Room for PCs or WriteRoom for Macs.

5.      Take a hike.
Sometimes stepping away from your computer is the best way to deal with writer’s block. I usually find that a nice power walk helps me clear my head and think through things. When I was struggling to find a poignant ending for a personal essay I was writing, I took a walk along the Charles River and the perfect little button of an ending popped into my head while I was out.

How to Become an Environmental Reporter

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You’ve taken your pulse, read tons of articles on ecological issues, you’re concerned about food policy with all the genetically modified organisms sneaking into our food chain and what about the Mississippi River flooding over its banks with more floods on the way.

Ecological issues abound in the world today and they aren’t going to disappear any time soon.

Here are a number of strategies that will make becoming an environmental reporter a smooth sail:

1) Offer your writing skills to a non-profit dedicated to improving the environment in an area of your interest. Learn what they know, meet people who work in your interest field, and rack up good deed hours–you can even ask some fellow article writers to tag along! Plus, once you are established these are people to revisit to write for pay. Another plus, with the organization’s name on your resume you get instant recognition and value. (Caution: Time is money in the freelance world and there’s no reward for long haul servitude).

2) Learn scientific basics across disciplines. Environmental science isn’t an isolated field of its own, but an intersection where biology, chemistry, physics, and earth science converge. Big stories bring these fields together. Take an environmental course online or at a university. Take the environmental science course offered by the Annenberg Foundation that won a AAAS award.

3) Hook up with social networks. Join LinkedIn and the various environmental subgroups available. Sign up for an account on Twitter and follow as many green, ecological and environmental peeps as you can handle. Once up to speed post motivating environmental dispatches to get like-minded peeps to follow you. Mondays are known as EcoMonday on Twitter. With each environmental post include the hash tag #EcoMonday at the end of the post.

4) Get focused. Environmental issues are broad ranging and limitless. Discover as you go what aspect of the environmental story attracts your passion. Focus that energy around your interest, as it will ignite the story you write allowing it to come alive to your audience.

5) Understand the scientific method by reading as much as possible in the areas you want to write about. Read the Daily Climate , Environmental Health News, Science magazine, Yale Environment 360 and the Open Notebook

6) Attend seminars and conferences for environmental writers. There’s plenty to choose from including Society of Environmental Journalist (SEJ), The American Association for the Advancement of Science (AAAS) and the American Geophysical Union (AGU). Conferences are great places to meet editors of green publications. Join these organizations

7) Kick-start your fund of knowledge, stock up on environmental books. Some of the best ones can be found at the Society of Environmental Journalists. Invest in a high-quality environmental science textbook. And, when you need to expand your mind, tune into the Ted Talks and Ted Conversations.

8.) Apply for an environmental fellowship. Check out Environment America, Multicultural Environmental Leadership Development Initiative and the Society of Environmental Journalists

9) Take a course in multi-media skills. The articles you write will come to life with video or slideshow.

10) Join an environmental writer’s association. A good one is the Society of Environmental Journalists (SEJ) with 1,500 members who are journalists, academics and students working in every type of news media in the United States, Canada and at least 26 other countries. To join go to the Web site for more information

A belief in yourself, the ability to talk yourself through tough times and a positive attitude go a long way to overcoming any obstacles on your path to becoming an environmental reporter.

Oh, and you might need to put your impatience on ice for awhile because you becoming an environmental reporter might not happen overnight, but it will happen at the exact moment when you are ready.

 

 

 

 

How To Make Your Pitches Perfect

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As a freelance writer, you have to be a strong salesperson. Maybe the strongest salesperson of all—because you are selling yourself. When pitching an editor, you need to sell not only your story idea, but yourself and your work.

Editors are often bombarded with queries and manuscripts, and they don’t have much time to spare. You need to be able to catch their attention quickly, and get them interested in your story idea. The best way to do this is to have the perfect pitch letter.

I’ve been on both sides of the editor-freelancer relationship. I’ve freelanced for several publications, both in print and online. I was also the managing editor of a print, monthly magazine for college students in Southern California. I received pitches daily, and while some were solid and caught my eye immediately, many were rambling or not right for my publication.

When sending a query letter to an editor, there are several do’s and don’ts to make your pitch as powerful as possible.

What Works:
1.Know Your Target

Before pitching to a publication, you need to read that publication and become familiar with its message and voice. Your query letter should accurately reflect this voice. For example, don’t write for a teen audience if you’re pitching to Time Magazine. You also need to explain in your pitch letter why this story would be of interest to this publication’s readers.

2. Personalize
Figure out who the editor of the publication is, and make sure you contact the correct editor. Your letter should not start with “To Whom It May Concern” or “Dear Editor.” Direct the letter to a specific person and use his or her name. When the first words of a query were “Dear Mr. Editor,” I was not only annoyed, but I was definitely not going to be accepting that pitch.

Even if you are pitching the same idea to several outlets, you need to make your pitch letters specific to the publication. As an editor, I received pitch letters that had the names of other publications instead of mine. Of course, I stopped reading those letters at that point. Tell the editor why this story is a fit for this specific publication.

3. Make An Entrance
Your intro needs to be strong or the editor is going to stop reading. Pique the editor’s curiosity, and then get to the point quickly. Editors are often short on time (and therefore patience), so you need to get to the point before he or she loses interest. Reread your letter looking for dull words and replace them with more vibrant ones. Make every word count.

4. Keep It Short
You need to be thorough, but your pitch letter is not your entire piece. It should be shorter than one page because no editor wants to read more than that. The basic outline for your query should be: a strong intro, the basics of your story, why it’s a good fit for the publication, what section of the publication it could possibly fit into, and your qualifications as a writer. A short query letter proves that as a writer, you can edit your own work, which is a valuable quality to an editor.

5. Know Your Material
If the editor is interested in your pitch, he or she may follow up with more questions. You should try to anticipate any blanks that were left in your original pitch. Since your pitch isn’t the whole pie, you should be ready to provide the rest of the ingredients in case the editor has more questions.

What Doesn’t Work:

1. A Lack of Self Confidence

Whether you’re new to pitching or a pro, you need to have confidence. Because I worked with younger writers when I was an editor, I got quite a few pitch letters that started out with “I’m not sure if this is something that would work.” Well, you should be sure! If you’re pitching a publication, you should be confident without being cocky. You should feel that your story is a right fit for this specific publication, and that you have the knowledge and skills to get the piece done.

2. Been There, Done That Pitches
Some ideas are pitched over and over again to a publication. At my magazine for college students, writers would pitch the same ideas repeatedly: “How to Lose the Freshman Fifteen,” “Studying Abroad, ” etc. While no editor expects you to have read all the previous pieces in a publication, you should have some idea of what’s been done (and done and done) before. Try to look for new angles to old stories, or more time-sensitive pieces.

3. Vague Pitches
“I want to write about golf” is not a pitch. Your pitches need to be very specific. It needs to be an actual story idea, not a story subject area. Coming up with a unique story is what is going to catch the editor’s eye.

4. Spelling Mistakes and Typos
You’re a writer. If you can’t write a one-page pitch letter without spelling mistakes, how would you write an entire piece? Read that pitch letter over and over—your livelihood depends on it.

5. An Invisible Writer
You need to make sure that you explain your own credentials as a writer, and what makes you qualified to cover this story. List some of the other publications you’ve written for, and explain any expertise you may have on the subject you would be covering. If it’s a travel story on Hawaii, and you wrote about Hawaii for three other publications and lived there for four years, you need to mention that.

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