Ask the Professional – Year-end Tax Planning from Ann Etter

Hey everyone! We decided to try out the wheels on a new series of blogs called Ask the Professional. We’ll feature advice on tricky issues that authors face as part of the business of being a writer. First up, we’re joined by accounting guru Ann Etter. Today she’s doling out some general tax advice. If you have any topics you’d like her to cover, drop a comment in the section below. She’s promised to hang out with us for as long as she has something to say. So, ask your questions and give her lots to talk about.

Year-end Tax Planning from Ann Etter

So I made a helpful little tax comment on Facebook and the next thing you know I’m writing a few blog posts on taxes and tax planning. Be forewarned: what I am giving here is general tax information. Your situation is unique to you. As with anything technical, please check in with your CPA or EA as to how this applies to your specific situation. Those who enjoy tax regulations can find the instructions for any tax form at http://www.irs.gov. If you like that reading, the world could use more CPAs…and the summer and fall are slow seasons, plenty of time for writing .

I’ll start with year-end tax planning for the self-employed. If you have topics you would like to see, please let Jove or me know and I will address them in a future blog.

End-of-year strategies to reduce both self-employment tax and income tax:

  1. First be sure that you actually need some deductions. If you already have more business expenses than income, don’t spend any more this year, try to push purchases into 2016.
  2. Do you need any new office equipment? Since your tax savings is only a percentage of what you spend, it doesn’t make sense to buy something new every year. If this has been a good year, look around and see what needs replacing in the next twelve months.
  3. Tally up your business travel (research trips, conferences, etc.). You can take a meals per diem for the days you were there, if meals weren’t provided.
  4. Do you have a 100% business use, definable space that you use as a home office? If so, take a moment to define and document it. I will talk in another blog about the pros and cons of the home office deduction.
  5. Did you keep a log of all your mileage for the year? If not, start today. Get those last miles of this year, and get a good start on next year. Even a small number of miles can have a big effect on your tax burden.
  6. Do you pay editors, proofreaders, etc.? Make sure those are paid by the end of the year. (A note: if you do pay others, make sure they get a 1099).
  7. Was this an especially good year and is next year looking slow? Buy extra office supplies this year.

End-of-year strategies to reduce income tax only:

  1. Open a SEP IRA. You can make tax-deductible contributions to a SEP IRA any time before the due date of the return (with extensions).
  2. If you have another job as an employee, or if your spouse does, increase the contribution to the 401(k) or 403(b) with the company.
  3. Contribute to your Health Savings Account (HSA), if you have one. It’s too late this year to start one, but open one for 2016 if you qualify.
  4. If you itemize deductions, make contributions to your favorite organizations.
  5. If you are a US citizen living abroad permanently or for more than 330 days in a given 12 month period, talk to a CPA about excluding foreign income.

Here’s a picture of my favorite tax deduction!IMG_6568

I am happy to answer quick, general questions gratis; contact me at the email listed below- or ask in the comment section. If you are looking for consulting or tax preparation, you can certainly email me about that, too. I work with clients all over the US and abroad. If I can’t help you, I can point in the direction of someone who can. Most state CPA organizations have referral pages- in MN it is http://www.CPAmeASAP.com.


Ann Etter, CPA, MBA, is a partner in the accounting firm Goodney & Associates, PA and a member of MNCPA. She specializes in personal income tax, and small business (sole proprietors) and non-profit income tax and consulting, including Quickbooks. She’s also handy with ex-pat and other returns involving foreign tax issues. When not filling out tax forms, Ann can usually be found reading or volunteering, sometimes both at the same time. She can be reached at aetter@leotagoodneycpa.com.

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5 thoughts on “Ask the Professional – Year-end Tax Planning from Ann Etter

  1. OMG, this is a kick in the pants exactly when I need it. I’m still procrastinating madly.

    Two things though – as a US citizen living abroad, my understanding is you can’t exclude foreign income from your US return, however most countries have a dual taxation agreement in place and so you can avoid double paying (don’t get me started on the Big Brother forms demanding information about your bank accounts overseas — only the US and Nigeria requires this of its citizens).

    And secondly, I read somewhere recently, that book purchases are deductible for a writer. Please tell me this is true. 😀

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    1. Cheyenne- It depends on the book- and how well you can argue the business purpose of the book to the IRS agent in the event you are audited. Certainly any books that are about the craft of writing are easily deductible; you use them to educate yourself to write better books to make more money- all good. It’s harder to justify fiction- although a romance writer might buy and write off the award winning romances (or maybe the worst romances, for what not to do) with the argument that she is reading them to improve her craft. Tax law is grey. With most things: if it is for pleasure/personal use, then it isn’t deductible; if there is a clear business purpose, then it is deductible. If you bought it for business and it turns out to be fun, it’s still deductible. GCLS attendance is deductible for writers/editors/publishers… If you bought it for fun and it turns out to be business, it is still not deductible (so the trip to FL to visit your cousin that inspired your next novel is not deductible even though you made money off it).

      Foreign income- you can exclude your foreign earned income from regular income tax if you meet the bona fide resident or the 330 day rule. You cannot, however, exclude your self-employment income from self-employment taxes (there are a couple of weird exceptions so it pays to check on specifics with a professional every few years if you are in that situation). Use Form 2555 to exclude foreign income from US income taxes. You do have to report the income on the proper line, then exclude it via the Form 2555 and line 21. There is an upper limit that is adjusted each year- it is currently about $100,000.

      Yes- the FinCen114 is frustrating.

      I hope I didn’t add to the confusion…

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      1. Oh, you are GOOD. Thank you for your most informative reply. That was very helpful. I’m going to buy a few romance novels for my Kindle right now. 🙂

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