Deductive reasoning for the modern taxpayer

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It’s tax time, and every year I think to myself that I should be deducting everything. Really. All my income comes from freelance writing, and since there’s almost nothing in my life that I don’t write about, maybe I can deduct everything.

After years of thinking I should do this but not really doing it, I finally took action. I talked about my deduction plan with Anne-Marie Fisher, director of tax services for CBIZ.

Here’s a transcript of our conversation:

Me: “I spent a lot of money on expensive eye cream so that I looked good for my Yahoo! photo. Can I deduct that?”

Anne: “They don’t like cosmetics or clothing that they say you could use outside of your article.”

Me: “But I wouldn’t have had to look that good if I didn’t take the photo.”

Anne: “But you looked good after the photo. The IRS is really tough on things that help your appearance.”

Me: “What if the cream made me look bad?”

Anne: “That’s a very aggressive position.” (This is tax-preparer speak for “No! Don’t do it!”)

Me: “OK. Forget the cream. What about moving. I wrote a lot about how I moved from New York City to Madison, Wisconsin.”

Anne: “That’s a fine deduction. Just document that you did if for a job.”

Me: “But I didn’t. I can work anywhere. I did it because I was going to die if I had to live in a 500-square-foot apartment for one more minute.”

Anne: “Do you have more business opportunities in Madison?”

Me: “Well, there are a lot of writers in New York City and very few in Madison, so I’m more unique being from Madison and editors like unique.”

Anne: “That’s good.”

Me: “I write a lot about how you’ll have more career opportunities if you keep your rent low. The new American Dream is about having a lot of time, not owning a house. Can I deduct my rent?”

Anne: “That’s very creative.” (That’s CPA-speak for “You’re out of your mind.”)

Me: “Here’s something I did. I went through all my expenses last year looking for some that are big and don’t seem to be deductible. I saw that my son’s violin lessons are really expensive. And you know, violin teaches self-discipline, and self-discipline is important for workplace success. I could write that. Then could I deduct the lessons?”

Anne: “He’s still getting a lot of benefit from the lessons, though.”

Me: “What if I write that he hates them?”

Anne: “Well, if he hates violin and you put him in the classes specifically to write your column, maybe you could prove that he was really upset by you taking pictures of him.”

Me: [Silence. Obvious disappointment.]

Anne [in a perky, helpful voice]: “How about meals. Do you deduct those?”

Me: “Of course. But what about my brother? He guest blogs on my blog. Can I deduct meals with him?”

Anne: “Sure. As a way to thank him.”

Me: “What about the plane flight?”

Anne: “To go see him? Well, things like this are always worth asking about. It’s like gambling. Some people just never want the IRS to talk to them.”

A Roll of the Dice

At this point I decide I’m a gambler, so I call another CPA. Larry Rice, director of strategic consulting at Rodman & Rodman. I cut right to the chase:

Me: “What can I write in my column about toys so that I can deduct the toys I buy for my kids?”

Larry: “Maybe if you had a regular feature where you review toys. But you’d have to throw them out. If you kept them, the IRS would assume your kids got personal enjoyment from them.”

Me: “Could I throw them out later?”

Larry: “No, that wouldn’t work because there was personal enjoyment. The IRS lets you deduct only 50 percent of meals, for example, because while they’re for business, you still get personal enjoyment.”

Me: “Can I deduct 100 percent of the meals I had with people I hate?”

Larry: [Pause.] “When you deal with your taxes, you’re presumed guilty until proven innocent. You need to prove why you have the right to take the deduction.”

Me: “OK. How about the coffee shop I write in. I’m there every day and I don’t have a home office. Can I deduct my lattes?”

Larry: “The IRS has a term — ‘ordinary and necessary.’ You have to show that what you’re doing is ordinary and necessary for your business.”

Me: “OK, there’s an article about how my generation loves to work out of coffee shops and many of us don’t have home offices. We just have a backpack. So how about I send this to the IRS and tell them it’s a new day and they have to get with the program and large latte bills are ordinary and necessary for writers?”

Larry: “Maybe you could do it if you met with people related to your business regularly. The IRS publishes a 30-page book to help people determine if their home office deduction is legal, and it has very tight requirements.”

Me: [Long, dejected silence.]

A New Hope

Larry gives me a good idea. He says that IRS agents receive audit guides that tell them what deductions they should expect from a person in a given field, such as 10 percent of a writer’s income is spent on travel.

So I can get one of those guides, and at least make sure I hit the top levels in all those areas. It’s a new approach, and I have new hope.

Finally, a note to my mom: Please don’t call me to say the IRS is going to read this column and come after me. I know you’re going to worry. But you don’t need to. In fact, now that I’ve written about you worrying, the next time I have lunch with you and you worry about me, I think I’ll deduct it.

 

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Test the waters of self-employment without jumping in

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The odds are that you will probably consider self-employment at some point: Eighty-nine percent of people in the United States who make more than $50,000 a year are self-employed, according to Entrepreneur magazine.

As with all decision points, the way to make the best choice is to know yourself. If you get bored easily, do a lot of different jobs. If you are a type-A hyperachiever, do one business really, really well. If you have a small tolerance for risk, keep a full-time job while you explore other options. All are great ways to make the shift to working for yourself.

One of the most interesting recipes for self-employment comes from self-employment evangelist Barbara Winter. Winter says that it’s easier to have five jobs that generate $10,000 a year than it is to have one job that generates $50,000 a year — the perfect scenario for opening an eBay business, renting out a room in your condo, writing press releases for your friend’s startup, etc.

This is, essentially, juggling five jobs, but Winter’s book describes ways of making it seem manageable: “The juggler walks out on the stage with ten sticks and ten plates, but doesn’t begin spinning them all at once. Methodically, the juggler positions the first plate on a stick and gets it into motion. Once done, the juggler moves on to the next, then the next, and so forth. Eventually, all ten of the plates are spinning away, each with its own momentum.” (This is how I feel about blogging — it’s like throwing another plate in the air for me.)

If you have spent some time in the workforce, consider becoming a consultant, which essentially is making a single, focused business out of yourself. “You should have at least five years of workplace experience before you go on your own,” says Laurie Young, founder of Flexible Resources, “because you are offering your experience.” Also, you need marketing skills to sell yourself. It takes a certain kind of talent “to show people you have skills they can use.”

Find a market niche that you can dominate. Otherwise there is no way to distinguish yourself from all the other consultants, no way to stand out. (Two good books on this: Small is the New Big, and The Long Tail.) Young did this herself, as a recruiter. She is a headhunter for people who want flexible jobs (she herself job shares the CEO position at Flexible Resources). If she were a more typical headhunter, she would not stand out above the crowd as well.

Alexandra Levit worked in public relations for Computer Associates and then struck out on her own, as a consultant in publicity and marketing communications. In terms of making the transition, Levit advises that you “try lining up a few jobs that you can have before you take the leap,” and be prepared to spend “about 30% of your time marketing yourself.”

Levit provides a snapshot of reality for all entrepreneurs when she says, “Don’t expect the drawbacks to be only financial. You need a lot of self-discipline to sit down in your home office and work without any external pressure. Working for yourself means you’re responsible for every aspect of the business,” and this means, ironically, even some of the annoying tasks you were trying to avoid by working for yourself.

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The portfolio career: To find fulfillment try simultaneous careers

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Recently, Aaron Karo performed stand-up comedy in a string of sold-out shows. He also bills himself as an author, a public speaker, and a sitcom actor. Karo has always juggled a few careers. After college, he went to work for an investment bank. But he was also writing a weekly newsletter that had tens of thousands of subscribers. And he wrote a book.

About ten years ago, British management guru Charles Handy predicted that people would replace the idea of one, full-time job, with several different part-time occupations. He called this the “portfolio career,” and Karo provides a good example of how this trend is taking shape.

A portfolio career is not the same thing as holding down three bad jobs and wishing you could figure out what to do with yourself. Rather, it is a scheme you pursue purposefully and positively, as a way to achieve financial or personal goals or a mixture of both. This new type of career choice can include several highly skilled, professional posts, often mixing employment with self-employment, and volunteer work or learning work with fee-based work.

While there has been scattered adoption of the portfolio career among baby boomers, the idea is gaining a lot of traction among younger workers, even though they never use the term. As members of Generation X entered the workforce; two-thirds of them were looking for an alternative to full-time employment as a more efficient path to self-discovery and finding the right career. For people in their twenties and early thirties, a portfolio career is a means of getting to know oneself, hedging one’s bets, and protecting their quality of life.

Most people have skills that cross into more than one profession. And if you take any one of the popular personality tests offered by web sites and career counselors you will find that peoples’ personalities do not fit neatly into one type of profession either.

So the idea of having to choose one single profession is frequently unappealing. Ezra Zuckerman, associate professor at the MIT Sloan School of Management, told me, “A lot of people feel alienated when thy feel there is more to themselves that they have not shown [in their work].” Young people are particularly drawn to the idea of a career as a vehicle to fulfillment and self-actualization, so they are less apt than Handy’s generation to settle into one, narrow career.

The arguments for a portfolio career at the beginning of one’s adult life are clear. Professor of psychology at Harvard, Daniel Gilbert, told me that the best way to figure out what will make you happy is to try it. A portfolio career gives you the opportunity to try three or four types of work at the same time, and to keep switching out choices until you come up with a portfolio that you like.

Karo, for example, dropped the banking career when he stopped liking the daily suit-and-tie routine. And when I ask him when his next book is coming out, he hems and haws and it’s clear that the career as an author is not so appealing — at least right now.

The trick in all career decisions is to figure out the intersection of your skills and your passions. This is an ongoing process, not a final destination, so a portfolio of part-time careers is more conducive to this path of discovery than a single, eight-hours-every-day career. Andrew Zacharakis, professor at Babson College told me, “Passion is something you have to look for every day of your life. Your passion is likely to change over time but finding your passion is good practice. Part of the search for you passion should be a search to know what your skill set is. Ask parents, mentors, and friends. Try to mach skills you have with your passion.”

The problem with a portfolio career is that you run the risk being a jack-of-all-trades and a master of none — a problem in terms of both money and fulfillment.

“The most secure portfolio careers are with people who have a fairly solid skill base that people will pay for,” says Ian Christie, career coach and author of the Bold Career blog. “You have to hang your hat on something. Either a functional skill, like accounting and you can be, say, a personal trainer at home. Or you need to find a market niche and provide a lot of services, such as training, development, outsource contracting, etcetera.

And you probably need a creative outlet in your portfolio. “When we are involved in creativity we feel that we are living more fully than in the rest of life,” says, Mihaly Csikszentmihalyi, professor of psychology at the University of Chicago. Any work can include creative thinking, but, he told me, “if you want to be creative then you must learn to do something well,” To excel at something requires you to challenge yourself continually. Achieving high skill level at something is an important step toward fulfillment because, “most people want to think they have explored the limits of their potential.”

Karo says he receives a lot of email from people asking how they can follow their creative dreams. And his advice is, appropriately, the Instant-message-length version of Handy’s book-length theory: “You’ve gotta do it on the side. Diversify your revenue streams. Do what you’re passionate about.”

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Is it the weekend if the week never ends?

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A friend told me that most professional bloggers don’t blog on the weekend. I didn’t realize this, because every piece of advice on blogging that I’ve read says you have to blog very regularly to blog effectively as part of your business.

So last night — Friday — instead of blogging, I read blogs looking for weekend posts. I found it is generally true that big ones don’t post on the weekend. So I thought, okay, I’ll take a break. And I settled into the sofa to I spend a night reading blogs leisurely, with no pressure to post.

Then I came across Seth Godin’s list How to get traffic for your blog, and No. 43 was “post on the weekend because there are fewer new posts.” (No. 1 was “write lists.”) So here I am, posting on the weekend, to test out the rule.

It’s actually no big deal for me because I work forty hours a week spread over seven days, reflecting my love for uninterrupted routine. But I like the idea that the new frontier of work — the blog — has a large following of people who refuse to work nonstop.

I am a big fan of sitting around doing nothing. (As one who obsesses over routines, I build this into my daily schedule.) If you feel guilt over taking a break, check out Doing Nothing: A History of Loafers, Loungers, Slackers and Bums in America by Tom Lutz. Wait, no, instead of reading the book, read the review of it by the most hilarious columnist ever, Dave Barry, who wrote a very funny but true homage to the act of thinking titled, Inaction Heroes.

That’s all for today’s post. It is, after all, the weekend.

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Sticking to routine

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Happy Memorial Day. I am working today. I used to think it was lame to work on a holiday. I used to think it was a sign of poor boundaries when I would go into an office to catch up when the rest of the world was at a picnic.

But today I am working and I’m happy. It’s taken me a while, but I’ve learned that an insane work schedule to one person is a dream schedule to another. You just need one that’s good for you.

One of the perks about working for myself is that I can set my own hours. And what I really love is routine, a schedule that never changes. I have set things up so that I work every morning, seven days a week, at a coffee shop by my apartment.

Today there are not a lot of people awake in my neighborhood at 7am. My regular coffee shop is closed and so is my backup coffee shop. But my gym is open, so I am working there, and I am happy to be doing my regular routine, even on Memorial Day. Besides, I never realized my gym had such a fast Internet connection.

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Organize your days around your goals

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Periodically, a college student sends an email to me asking if he or she can interview me for a term paper. I always say yes, and I always learn something about my work by answering student questions about my career.

Invariably, within the list of questions, there's a stumper. This week, the stumper was, “How do you spend a typical day as a journalist?”

I started to answer the question. But every time I started to write an answer, what I wrote sounded terrible. The truth is that I never set out to be a journalist, so I have never been particularly organized about my typical day.

I was a marketing executive who happened to have landed a column. The pay for the column was paltry compared to my corporate salary, and consequently, I devoted a paltry amount of time to the column —writing it during a sales meeting, on my way to an office picnic, or at my in-laws' home in between shopping and dinner.

Part of the reason for my cavalier attitude toward making time for the column is that initially I did not understand that having a nationally distributed column is a big deal; I was in a business where a big deal equaled a big paycheck. But after I left corporate life for a writer's life, I started to understand how lucky I was. So you'd think, after three years of writing full-time I'd have developed good work habits as a writer, but I haven't.

This is surprising to me because in my corporate life I had very good work habits. As I was climbing the corporate ladder, it became clear that you can only move up as fast as you can adjust your work habits to the next rung. For example, the move into management means you have to learn to finish your own work in a way that leaves room for you to help other people with their work. You have to restructure your workday to make other people a priority.

There were times when I distinctly remember changing my workday in order to accommodate a new position. For example, my boss told me that if I could offload all of my responsibilities as a marketing and software production manager, then I could take seed money from the company and start my own company. I realized that the faster I could reorganize my workload and delegate, the faster I could move on with my career. So I did that. Within weeks, and astounded even my boss with my speed.

Achieving long-term goals and tactical plans all depends on work habits. You need to devote time to getting short-term projects done, to managing long-term projects, and to thinking both strategically and creatively.

Each time I've wanted to make headway in my career the fastest path has been by changing how I spend my days; if nothing else, how you organize your days is one of the few things most people can really control.

Which brings me back to explaining to the college student about my work habits. It was untenable to have to confess to her how I was working. I was such a bad role model because in terms of organizing my day, I still treated my writing career like it's a sideshow.

I could accomplish so much more if I would get more organized. So I worked backwards. I said to myself, what kind of answer would I expect from a successful career columnist as to how she manages her days to make her career bloom?

I think it would look like time slots:
Writing email
Working on projects with deadlines
Thinking about long-term projects
Publicity
Networking

Once I started having days like this, there was immediate change — I accomplished more than usual and the work was higher quality because my days were organized around particular long and short-term goals.

I ended up confessing to the student that I started with sloppy work habits. But I told her that I was reforming myself. I told her about my carefully scheduled days and strategically organized weeks. Then I sat down to write this column, which I now have a special time each week to write. And I was just a little bit more calm than usual because having a detailed work plan in hand makes me feel like I really am going to meet the goals I have for myself.

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Interviewing idiots

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In case you've never noticed, I rarely interview anyone for this column. Most of my sources are family and unsuspecting friends who complain that I make everyone look bad. But it is not true. It is true that they THINK I make them look bad, but in fact, I could rip them apart in my column, and I do not, in the spirit of being invited back for Thanksgiving and Birthdays.

Recently, I have taken up columnist tasks that require me to interview strangers. And, like the courtesy I give to my family, I do not trash the people I interview. But I am at my breaking point. Some people are so incredibly stupid about their career that I actually struggle to make them seem intelligent during the interview.

So here are two interviews from smart people who are career idiots. (But first, a caveat: I am making the people anonymous. Many readers generously send stories from the field. And really, I love to hear from readers. I learn a lot. So you should know that if I think you're an idiot and decide to write about it, I will at least disguise your identity.)

Career idiot number one: The Apprentice. Not all of them. Just the unlucky one I interviewed. He really did not have a career, which was, undoubtedly, the cause of his ridiculous antics on the TV show that eventually got him fired. But he decided to make a career out of getting fired by becoming a public speaker.

Here are things you need to become a public speaker:
1. Something to say. This guy had nothing. Except to tell me that he was available for speaking.
2. You need an ability to answer questions from the press so that your name gets in the paper and people recognize you and hire you as a speaker. He did not answer my questions, which were all softballs. And he even asked to see the notes I was writing so he could edit them. I laughed.

The lesson from this career idiot is that if you must be a poser, pose carefully. When you first start being something new, (for him, a public speaker) you need to pretend you are that person so people hire you as that person. But do some research before you start pretending. At least learn the basics of how to conduct yourself, and what people will ask of you.

Career idiot number two: The painter whose identity I probably don't even need to hide because you don't know him because he's never sold a painting.

He makes a lot of money as VP of Something Big at his tech company and he gave notice six months before his wife quit work to have a baby. He is starting a career as a painter. He has no idea how to get his art to the market, or how many pieces he'll have to sell to support his family. But he says he has to be true to himself, and painting is his dream.

He says he feels trapped at his current job. This is the picture he paints of trapped: He wanted to move across country, so his large and generous company let him set up remote office in his new home. He hates the long hours of his lucrative job, and his company would let him go part time, but he doesn't ask for that because he doesn't want to like his job. He fears that if he liked his job he wouldn't quit to do his art.

Here is the lesson from career idiot number two: Take a big-picture look at what you have. It might be a lot better than you realize. Remember the first time you woke up next to the love of your life, and up close, in the morning, their face looked splotched and scruffy and gross? Well jobs are like people; they never look great up close so you need to pay attention to the big picture. This guy's big picture is that he has a great job for supporting his new family and painting on the side, and if he's really an artistic genius then he can make a bundle painting and quit his job.

I hate to be a buzz kill here. I'm not saying that I don't like dreamers. I do. I like people who reach for careers that are fulfilling but difficult. But just because the odds of success are low doesn't mean you have to make them lower with poor planning.

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