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Columns by June Walker: IPs Face Unique Tax Challenges Tax Deductions Are There For The Taking You Say You're Self-Employed -- Will the IRS? Criteria for Self-Employment Do You Have a Business or a Hobby? Proving That You're a Business Keeping Records -- It's Not Just for Taxes Three Ways to Expand Your Business Deductions Can I Deduct Disneyland and Other Questions Mixing Business with Pleasure and Other Gray Areas Quicken for IPs Courses That Qualify Training You Can't Deduct Getting There is Half the Battle Taking Deductions on the Road Getting Credit and Taking Allowances Advertising: Do It, Then Deduct It The Subtle Art of Advertising Deductions Billy Bridesnapper's Start-up Saga Starting Up and Shutting Down Start-Up Wrap-Up Giving Gifts, Taking Deductions

Advertising: Do It, Then Deduct It What is advertising? It's anything you do to attract clients, or to show how your service beats the competition, or to remind the public that your business exists. Advertising experts may make important distinctions between advertising, marketing, and promotion, but for our purposes they are all the same thing. You put an advertisement in the paper. That's advertising. A public relations consultant whom you hired puts out a press release about your business. That's advertising. You give away pens with the name of your business printed on them. That's advertising. You call up people at night, pulling them away from the supper table to bombard them with your telemarketing pitch. That's advertising. So now you know what advertising is. So what? Well, whenever you promote or advertise yourself -- your business, your product, or service -- the costs are deductible. That's what. At one time the IRS insisted that deductions for advertising costs would have to be spread over several years because of the long-term effects of most advertising. But the IRS was taken to court on that, and lost. Now the IRS allows advertising to be deducted in the same year that the advertising funds are spent. The IRS says that you can generally deduct reasonable advertising expenses if they relate to your business activities. (Note: the IRS likes to insert a "generally" into just about every rule it makes as a hedge against exceptions. But the hedge doesn't get in the way of a clear view of advertising expenses that seem reasonable and business-related.) Let's Be Reasonable Some advertising costs are obviously reasonable and business-related deductions -- but still, it's good to know what they are. Business cards? Having them printed seems like a reasonable form of promotion. An advertisement in the Yellow Pages? That's clearly tied to business activities. So is a billboard. You get the picture. But what happens when things are less obvious? Soccer Mom's Advertising Goal Some marketing expenses are not quite as direct. Instead of producing some immediate monetary result, they foster a warm fuzzy feeling about your business -- a positive feeling that promotes your solo business on a long-term basis. For example, sponsoring your daughter's soccer team -- which might include paying for their uniforms or the cost of the away bus -- is an expense that you make as a form of promotion. To ensure that the IRS sees it as deductible, establish a clear connection to your business. See to it that the name of your business is on the uniforms and have a way of showing that the spectators' knowledge of your business will benefit your self-employed venture in some material way. The IRS Won't Buy it And then there are some expenses that will never make it past Uncle Sam. Every single person that Lorenzo Landscaper invited to his daughter's wedding was a business associate, client, or potential client. Can he deduct the cost of the wedding? No dice: that's a personal expense, not a promotional cost. What if "Astrid Astrologer Tells the Future" is painted in Day-Glo yellow on both sides of her car? Sure, that's a legitimate advertising expense and she can deduct it -- the cost of having the lettering done, that is. But Day-Glo paint doesn't change her personal car into a business vehicle. (It takes a lot more than that; please see a forthcoming column on business auto expenses.) Generally -- there's that word again -- you cannot deduct the cost of advertising to influence legislation. Not that most IPs are running around trying to influence politicians. One last note: if you plan to advertise on foreign radio, television, cable stations, or Web sites, check with your tax advisor before assuming they are deductible business costs -- they might not be. Stay Tuned Ready to learn more about the ins and outs of advertising expenses? Well, stay tuned -- this is just the beginning. My next column will focus on some of the trickier aspects of marketing and promotion. (c) 2000 June Walker. All rights reserved. We'd love to hear your feedback about this column, or put you in touch with June Walker if you like. You may also like to see her biography.