SCREENWRITER PAYING TAXES (OR CLAIMING LOSSES!)

The time has come -- the annual trip into the books, receipts, shoe box, however you do it. I put thousands of people into business in my art school, and one of my favorite parts was telling students how to pay taxes, or moreso, how not to.

Disclaimer: no cheating, I won't tell you to cheat, just how to get what's allowed, if you push the numbers or facts it's you and the IRS, don't refer to this screenwriting blog in that convo!!

*Do your own taxes -- it's common sense, saves money, and is easier than ever, namely with Turbo Tax Home and Business from any Office Max for less than $100. It's YOUR money, you need to understand taxes. Tons of dummies in small business have a full-time accountant, which would compare to me having a full-time chef! You need to check their work, therefore, save money and just do it yourself! Plus, the CD is a write-off!

*Not rocket science -- everyone has to send in a 1040, EZ or long. To cash in, all you need with that is a 1040C, Profit or Loss From a Small Business. With that comes Form SE, which means self-employment, the half your employer used to pay, now you pay all of your social security. That's it!

*1040C Business -- Simple, your gross is at the top, if you made a dime, and all of your expenses are added below, then subtracted, lowering your taxable income. Easy!

*Deductions -- big NOTE here -- deductions are not dollar for dollar, you have to spend about three bucks to save a dollar. This means buy only what you need, quality stuff, but don't go overboard unless you really raked it in that year, which puts you in a screenwriting minority!

Paper, brads, ink, business cards, internet fees, bank fees if that account is specific to your craft, the movie poster you had made, Final Draft or whatever program you use -- pile up those receipts and enter into the appropriate box. Paid $60 to be on Inktip.com? Put that in the "advertising" box.

*What not to deduct -- clothes, unless it is a uniform. You can bet that "Tronguy" writes off his weird suit and batteries if it's a business! Lunches, unless you're dining with John August and you flip for the bill, even for his Austrian White wine, but neither I nor the IRS will believe you -- perpetual nice guy John would insist on paying. Entertainment is a surefire red flag for a deduction, don't go there. If you insist on writing off movie tickets and your Netflix subscription, as long as they are for your education and profession, you might want to enter that in a box other than "Entertainment"... but that is pushing it, and don't dare write off the popcorn!

Remember "risk vs reward" on deductions, if you push the envelope an audit is going to take up a lot of your nerves, time, and money... plus maybe add some "cell time".

*Vehicle -- a big deduction, yet so often misunderstood. If you drive for a coffee, it's not deductible. If I drive from here to California and back for a look around, not deductible. If I have a home office as my primary workspace, then drive to speak with the newspaper editor about my column -- fully deductible! What does this mean -- consider claiming a "home office" as a deduction, which I will cover later.

Example -- from your home office to Office Depot to get paper, and back -- deductible. From home, to O.D., to Starbucks to screw off and drink coffee -- only deduct the miles to O.D. and back. Creativity rules, meaning use your head, try to separate your "work" missions from your "screwing off" ventures, you need to do that more in life anyway!

You'll deduct actual mileage or cost, meaning gas and such... this is a blog so I'll skip the details, just follow the software prompts. AND, never claim more than 50% business use of a vehicle, especially as a screenwriter, unless that sucker has a logo with "Buy My Screenplay" on it and you only drive it for meetings and material runs!

*Home Office -- your primary workplace, right? Really rough example here -- say 100 sqft of your 1000 sqft apartment, home, trailer, etc. is your "home office". You're about to deduct 10% of your rent, mortage, utilities, etc., plus the cost of improvements, like painting the room! YEAH! Warning -- this can effect taxation on the resale of your space, but who cares, you need the money NOW! Do read all of the details in the software but I'm not kidding about how this well-deserved deduction can save your ass in a time of need!

By now you're getting the point -- if you need it for biz, it's deductible. The 1040C figures into your regular 1040, and if you have a "regular" job it is going to probably lower that taxable income... unless you're in the minority of well-paid screenwriters.

You need to understand your taxes, to read the program inside and out, to hit the IRS website -- even if you have an accountant, because on two occasions their errors almost cost me a few thousand bucks. Hey, you're a screenwriter, you like to read, and most of the regs are written better than the average script, so you'll enjoy it!

Next post, I will give you tips on planning for the year -- when to buy a new house, whether or not you are a first-time buyer. How to plan your move to L.A. so you can deduct it. Why you should get married! Yep, get over it screenwriter, once you read that you'll be making a beeline for the altar!

FADE OUT!