Tax Advice: How to Write-Off Your Donated Events

Jason Hewlett of JHETraining.com for Speakers & Entertainers,

 

It is that exciting time of year!  Tax Time!  Hope you’re ready, because it’s creeping up fast.

We begin with the saddest tax story a performer ever told:

“A few years into my career I was being asked to do so many donated performances and speeches that I finally realized I could just write them all off for a tax deduction!

Excitedly, I told my wife of my plan and we found this to be a great way to not only still be in front of people on stages but to also tell my CPA come tax time all of the good deeds I had done in order to write it off.

The day came to meet with the CPA.  So proud of myself I presented him with a calendar of all the dates I had donated and the amount I would have charged, but instead had done as a donation for needy clients.

I’ll never forget the look on his face when he asked, “Where is the paper trail?  Did any money change hands?  If you didn’t get it in writing from them, if you didn’t actually put money down for the donation, then the IRS considers it not having happened.”

I had thought I was about to get over 6 figures in write-offs that year on my taxes, and as my heart sank realized I had nothing to show for it other than blessings in a cloud up in heaven above, which unfortunately doesn’t count to the IRS.

My CPA said, “This is a good lesson to learn now, because you didn’t make that much this year anyway so you didn’t lose much by not being able to write these off.”

“What do I need to do moving forward?” I pleaded?

He then taught me the donation strategy for money changing hands.

In essence it is this:

Client wants you to speak or perform for an event.  They have no money.  You are willing to do the event but on one condition: I will send you an invoice for my full fee, you then trust me enough to send me my full fee in a check, mail it to me, and I will rewrite the check back to you in full.

To me this sounded crazy.

To clients we recommended it to, that weren’t familiar with it, they thought we were writing the script for a Martin Scorsese movie, probably with the same outcome for doing shady business.

But as we learned this is a legitimate way to write off what has been rendered.

The next year I arrived at the CPA’s office with a few invoices, check stubs, and proof of my donations.

We had a very good year financially, and an even better year in giving back our services to those who couldn’t pay for it, and the IRS was fine with the proof.”

Yes friends, this was me in 2004, the toughest lesson I’ve learned, when it comes to taxes, in my career.

I share this story as it happened over a decade ago.  Perhaps the laws, options, rules have changed since then?

However, I hope it helps you to think through the best ways to donate performances and hopefully receive some tax benefits.  Maybe you already know of this, but I didn’t until I learned the hard way.

Just remember to talk with your CPA about it, and if advised to do this or something similar, you will be grateful come tax time.