Monday, May 5, 2014

MAKING BUSINESS & TAXES EASY FOR AUTHORS

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Writers, whether published or unpublished, are engaged in operating a business, regardless of whether there is a profit or loss. I’m NOT an accountant or lawyer, so I’m not giving tax or legal advice—just sharing my experiences. I AM an author who is mildly OCD about keeping income and expense records for filing taxes and have always prepared my own taxes with my husband. I’ve also made the LLC or not decision AND whether to claim a home office or not choice which I’ll share also. Finally, I’ve posted my Excel spread sheet that runs my whole writing business on three pages of one spreadsheet. Maintain your records throughout the year, and kiss your tax worries goodbye.

WRITING AS A BUSINESS.  Even if you’re not published yet, if you are writing with the intent to publish for profit, you’re engaged in a business. Once you’ve made the decision that writing is a business, you are eligible to claim your expenses for operating a business. That decision has to be backed up by evidence of work on your part—documentation of writing efforts and submissions, maintaining a webpage, participating in or conducting career development or PR events etc.

KNOW YOUR LAW.  Employment and operating your business is covered by federal, state, and—sometimes—local laws. It is your responsibility to know what your federal, state, and local laws require. Federal publications are available that cover everything, in hard copies and online. (The main Federal Guide for Small Business is downloadable here (http://www.irs.gov/pub/irs-pdf/p334.pdf). Check with your state and local government offices for available publications and classes related to starting a business. As an aside, I attended a local class in my home town conducted by the state equivalent of the IRS. I received a manual and handouts which explained all of my responsibilities for the state and got to meet the local tax people.

LLC or NOT. Check your state laws (listed on your state’s .gov website – usually under the Secretary of State) and/or get legal advice, to determine what YOUR state’s requirements are. In my state, I had the choice of working through an LLC or not (There are also other choices, but I know about LLCs.) I initially decided to go the LLC route. Our family lawyer did everything which cost about $500. I also had to pay state and local fees and the annual Business Privilege Tax (BPT) of $100 each year AND file a BPT form annually with my individual state taxes. After a couple of years, I looked at what I was getting out of my LLC IN MY STATE that I couldn’t have otherwise. Since I didn’t have any employees, I shut it down. BTW, it’s not that difficult to start an LLC in my state and I could have saved a lot of money doing it myself with a kit. Shutting it down required a couple of forms and fees which I did myself.

THE DREADED SCHEDULE C MADE EASY. Authors who operate businesses complete the SCHEDULE C. This IRS form documents the expenses and income of a business to determine the profit or loss of a business and the tax liability of the business. Deductions are available for equipment, supplies, and other expenses needed to operate the business. Caution: the home office deduction is one of the biggest red flags for the IRS to trigger an audit. If you use your office for ANYTHING else, you can’t take the deduction. I don’t claim it or the mileage for my car because I don’t want to get involved with vehicle depreciation. I do claim supplies, equipment, webpage costs, legal fees and taxes, related memberships and meetings, books purchased/giveaways, and a percentage of my internet costs. Then, there’s the income from multiple sources. Remember, profits (income less allowable expenses) create additional taxes (estimated and self-employment taxes), which are due quarterly.

SHARING MY SCHEDULE C FILE. The attached blank Excel file keeps track of all the expenses by type and income. There are three sheets (8 1/2 x 11) which track my whole business for the year. The first two sheets list the types of expenses in columns. The author enters the date, the vendor, and the item purchased in the far left columns. Then, the cost is placed under the appropriate column of specific office, travel and professional, or publication by type. All the expenses are added by down by column and then added across for a final expense total (either ongoing or final for the year). Add rows as needed. On the third page, date, amount, and source of income are input individually. Expenses and Income add across the bottom to present and ongoing Profit or Loss.
2014 INCOME & EXPENSE TRACKER FOR SCHEDULE C for Authors Using Schedule C
SEEK PROFESSIONAL HELP BUT THE RESPONSIBILITY IS YOURS. Professional tax preparers are deductible and know how to do a return to keep you out of trouble. Tax software can do the work for you, if you have your numbers down. The decision is yours.

Hope this helps to make your business easier to operate, leaving you more time to write. Next Month, Maintaining Records to Document Your Business.



 
 


Visit Rita Bay at Rita Bay's Webpage & Blog
 
"Duchess in Waiting" Siren BookStrand, March, 2014
"Ely's Epiphany" Secret Cravings Publishing, December, 2013
"Search & Rescue" Secret Cravings Publishing, July, 2013
"Finding Eve" Champagne Books, September, 2013
"Nimue's Daughter," Shared Whispers, Champagne Books, September, 2013
"Her Teddy Bare" Carnal Passions, May, 2013
"The Aegis" Champagne Books, April, 2013

"Into the Lyons' Den" Champagne Books, August, 2012
"His Desire" Siren BookStrand, May, 2012
"His Obsession" Siren BookStrand, April, 2012









4 comments:

Liz Flaherty said...

Thanks for sharing the spreadsheet!

Victoria Roder said...

Very interesting and useful information, thanks!

Julie Eberhart Painter said...

They'll get what I've got when I get it!

Annabel Aidan said...

I usually have at least a half a dozen additional schedules to file -- A, C, E, and a bunch of numbered ones.

I also learned that you can depreciate a race horse, but not a hearse.

One of those things that stuck with me that I'll use in a novel someday.