Not upholding the laws of manhood will get you cockblocked, as “Guy Code” has explained again and again. Equally important, not upholding the laws of the U.S. Treasury Department will get you in a cellblock — and good luck meeting women in there. That’s why every dude needs to know some income tax basics before April 15, even if you’re still in college and/or coasting on your parents’ dime.
But that sh*t is super, super confusing. So we called up accountant (and ex-comedian) Rus Garofalo of Brass Taxes to explain the most common IRS situations for guys in their 20s — plus why shortchanging the IRS will cause you more pain than shortchanging a bartender ever could.
What’s the biggest tax mistake you see young guys making?
I think the issue that people aren’t comprehending — or getting taught during college — is, if you work a waiter or bartending job, you owe tax on those tips at the end of the year. Their salary is really low and they work really off tips, and the tips are reported by the establishment, especially if it’s on a credit card. Stuff like that catches them off-guard and can blow up in their face.
For people in the service industry, if it’s over 25% of your income and you don’t report it, it’s tax evasion — a lot of people who wouldn’t commit a felony would commit this felony. If you’re only making $10,000 a year, not reporting $2,500 puts you in tax evasion territory. People get the idea that tax evasion is some multimillion-dollar thing, but it’s just a straight percentage.
What do guys need to know as they begin doing their own taxes, instead of their parents filing it for them?
One thing I see often is parents putting stocks in kids’ names, so young people earn [very little at part-time jobs] but have stock sales totaling $13,000. They owe this big tax bill. It’s weird because our parents can do this stuff without us knowing — if they’re doing it, they should be paying the taxes too, and maybe even paying you to prepare your taxes.
I think the time it’s most fruitful not to have your parents do your taxes is once you’re making an income as an actor, writer, graphic designer, anything where you’re handed untaxed money. Contracting has gotten a lot more popular just in our generation — your parents probably don’t have a great understanding of what all the rules are, because they’ve been doing employee taxes all their life. If you’re trying to be a recording artist, the music you’re listening to is a write-off — that feels totally bullsh*tty if you tell your parents to write off your iTunes.
If you want to be a rapper, your music downloads are a deduction?
If it influences you and informs you. You list them as “research” — that’s a category of how you stay in touch with what’s going on in your industry. It is case-specific. If you want to make money in hip-hop, you have to listen to hip-hop; you can’t listen to no music and expect to be a successful artist, so that’s a reasonable expense — but why would your parents know that?
Also, your website hosting and domain, little stuff like that, where people don’t really think about the money they’re spending. I spend a lot of time with my clients trying to explain systems that just make that easier — counting up all your receipts is really f*cking annoying, so [some people] don’t keep them.
How about a basement recording studio? Would that count as a home office deduction?
The test for a home office is that it’s exclusively used for business — it can’t also be the living room or the place you watch TV. The square footage only exists to make money. If that’s a recording studio, it needs to look like a recording studio — there’s nothing there except stuff to make music.
Some people feel they can write off three-quarters of their rent as a home office. For awhile that was a red flag — everybody abused it. Not a good thing to bullsh*t, but if it’s real, it’s a good deduction.
What are some other potential red flags?
Your clothes are never deductible, basically — it doesn’t matter if you buy a suit for work. Your giant gold chain is not going to be a deduction, even if you only wear it in the music video.
Everyone tries to cheat in the exact same way, everybody tries to write off too much stuff in all the same places — clothes, travel, meals and entertainment — using the same rationalizations, and they’re almost all wrong. We’re told things in a bar by a friend about what we can write off, so we take their advice. Who knows where they got their information — probably from somebody else in a bar.
What do you say to people who think they can get away with cheating?
One thing I notice about people, the way they talk about what they would do if they ever got asked, is just stuff like, “Well, maybe my girlfriend pays for everything” or “maybe I have a sugar daddy.” They’re still stuck in this world where if something can’t be immediately disproved as false, then you’re all good. It’s a little kid mentality, as if the IRS will give up out of disinterest. This isn’t an assistant principal — you’re talking to a really smart detective who’s been lied to every way you can imagine.
Nobody in prison will think you’re a badass for lying on your 1040.
You’re not the cool guy. The white-collar crime guy is never respected. They’re in the top tier of who’s hated, versus somebody who was selling pot.
Image Credit: Warner Bros.