2005 was my first year as a web entrepeneur (Yes, that’s what those folder tabs up above represent, so feel free to click them :)). Thus, it also marked the first time I’d have to represent such on my tax return. Most years, my taxes are finished in 10 minutes, but this year began as something altogether new and scary.
You see, I did some reading and learned that outside of the people who do bad math on their return, a great percentage of IRS tax audits fall down on independent artists, musicians and entertainers. As a result, I did the fearful ‘gulp’ noise after Tom stuffs Jerry in the top of a shaken seltzer water bottle.
Then I took a good look at my situation. I saved all of my 2005 receipts, either physicially or in e-mails. I had all of my needed W-2’s and 1099’s. Additionally, I learned that as a self-proprietor, I didn’t have to itemize; I just had to fill in all of my business expenses in a form called a Schedule C. As long as I didn’t count any expenses that I don’t have receipts for, I had nothing to worry about.
So, using the TurboTax program and guides, it was actually quite simple in the end (minus a few questions I simply had never encountered before). Sure, I had to do a little math on my end, but the big worry of being a targeted artist was quite silly. If the IRS comes knocking, I have my paperwork ready to be x-rayed.
I think it just boiled down to the fact that I knew I was due a healthy refund from the government. Part of it is my own devise though. Every year, I get an extra fee taken out of my paycheck. One year, a tax preparer told me, “You know, you don’t have to have this taken out of your paycheck every month.” But I knew the bigger picture. You see, if I get an extra $40 a paycheck, I’m likely to spend that on the monthly bills. However, if I get an extra $960 dollars back at tax time, I deposit it into my money market account to help me buy a home one day.
The other reason I had a high refund, and I’m not afraid to admit it, was because my business has yet to make up the intial investment of getting off the ground. While I’m not happy about this, I’d be a fool not to take advantage of the tax benefits if that’s how the government wants to run the show. But I’m not here to get pity cash for 3 years (until these endeavors are legally declared ‘hobbies’). I want to make something of my creativity, and not sit in a cubicle until I’m grey-haired and wrinkly.
Therefore, I’m making it a goal to break even in 2006, and turn a profit for 2007. I owe my art and my life that much. If that means I have to pay Uncle Sam back in 2008, then so be it. Nothing matters more than living the dream. Peace.