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book review |
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Question: how annoyed can one man get at the IRS during an audit? Answer: so annoyed that he learns all the ins and outs of tax law, switches his career from nuclear engineer to tax practitioner, and writes a series of straight-talking guides that help others meet their taxation obligations without shelling out any more money than necessary. Meet Holmes F. Crouch. From the full-page head shot that begins Being Self-Employed, Crouch may not look like the tax terminator he proves himself to be in the next 224 pages. Indeed, he looks more like a kindly grandfather, complete with snow-white hair, horn-rimmed glasses, and white hankie tucked carefully in his breast pocket. He plays the part, too: in Being Self-Employed, a relatively slim addition to the All-Year tax guide series, Crouch treats his readers to a gold mine of accounting tips like an indulgent grandfather spoiling his grandkids with sweets. Well aware that tax books hold low priority on the average person's reading list, Crouch makes his medicine easy-to-swallow by dissecting the confusing text found on tax forms and translating it into plain language. The result is a tax guide that can significantly reduce the time you spend doing your taxes come April. Being Self-Employed is designed to be read in less than eight hours. For those truly pressed for time, Crouch says, even 30 minutes of skimming will teach you something helpful. There's real meat here, though, be assured of that. Even if you consider yourself well-informed on tax matters, give this guide a few hours if you can. After all, at $20 a pop for the paperback version ($16.96 from Amazon.com), it's not the cheapest guide out there. But it pays for itself by providing solutions to some of the most perplexing financial conundrums. Take the matter of working out of your home, for example. As Crouch explains in chapter 4, "Business Use of Home," the IRS is picky about deductions claimed for housing expenses. The key to claiming deductions that the IRS won't challenge is to be specific. Guessing about square footage and then going through dubious calculations to determine the percentage of office space in your home won't fly with Uncle Sam. Crouch's advice? Get out your tape measure, take exact measurements, and then draw a sketch of your home, shading in all areas used as "regular and exclusive" office spaces. Don't forget to indicate clearly on your drawing (which does not need to be to scale) the total square footage of your office space as well as the total area of the residence. Attach this drawing to your tax return and -- here's the clincher -- make sure you've been reasonable! That's right, no deductions for areas that aren't truly used for business purposes. You cannot (read should not), for example, take deductions for partial areas of the kitchen simply because you sometimes serve refreshments to clients in your home. Here's another hint from Crouch: business-use percentages that turn out to be less than 5% are generally unacceptable to the IRS. So are percentages that turn out to be more than 30%. Make sure you fall somewhere in this range, or prepare to be challenged by the IRS. Plain and Simple Some of the most helpful sections in Being Self-Employed are Crouch's translations of certain tax laws. The laws are often so dense as to be incomprehensible. Not for Crouch. of course.
On the tricky subject of how to treat taxable income from business partnerships involving married or unmarried persons, Crouch pulls sub-section 1402(a)(5)(B) from the tax law books. First, he prints the original law written by the IRS. Directly beneath it, he prints his own. "In any portion of a partner's distributive share of the ordinary income or loss from a trade or business carried on by a partnership is community income or loss under the community property laws applicable to such share, all such distributive share shall be included in computing the net earnings from self-employment of such partner, and no part of such share shall be taken into account in computing the net earnings from self-employment of such partner, and no part of such share shall be taken into account in computing the net earnings from self-employment of the spouse of such partner." Compare this to Crouch's version. "In other words, each member of a partnership, whether married or unmarried, whether in a community property or separate property state, shall regard his/her distributive share (of the partnership income or loss) as his/her separate self-employment net earnings." Neither version rolls off the tongue, but Crouch's is clearly more accessible. He takes 63 fewer words to make his point -- an advantage for IPs who don't have the time or patience to wrestle with full-bore legalese. Readers can further cut down the time spent with this book by concentrating on the chapters relevant to their particular circumstances (not all the sections apply to all IPs). Truly Strapped for Time? The truly taxophobic, those who put aside their 1040s until April 14th and then find a formidable task staring them in the face, should at a minimum read Chapters 1-4 and 8-10. The first four chapters cover all the basics from an explanation and illustrated diagram of a 1040 form to instructions on how to IRS-proof your records. Chapters 8, 9, and 10 are required reading as well. These sections discuss the IRS's tendency to view self-employed individuals with suspicion, as well as about reporting net profit or loss, calculating and prepaying estimated taxes, and other critical matters of taxation. The remaining five chapters are interest-specific. For instance, IPs engaged in the selling or re-selling of what Crouch calls "tangible" products, such as handicrafts, should take special note of chapter 5, "Direct-Cost Items." Those who have received notice of an impending audit should waste no time in proceeding directly to chapters 8 and 11, "Surveillance Matters" and "The Audit Strike," respectively. (The audited should take heart in the knowledge that the author understands their hardships from first-hand experience.) And if the audit escalates into penalties and (gulp) tax suits, Holmes F. Crouch will be there every step of the way. Just pick up the appropriate volume of the other guides in the All-Year tax series: Winning Your Audit, Disagreeing with the IRS, Contesting IRS Penalties, and Going into Tax Court. |
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May 1, 2000 Edited by Eric Gershon Production by Fletcher Moore |
We'd love to hear your comments about this article! Tina Pamintuan is a freelance writer who lives in Washington, D.C. If you like, we'd be happy to put you in touch with her, or with any of the other IPs named in this article. |
Being Self-Employed 
