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Writing and Taxes
by Elizabeth S. Craig, @elizabethscraig
The business side of writing is my least
favorite part. I struggle to keep
up. And there’s sort of a residual guilt
that I’m not doing all I can do to keep my accounts organized. But I’m trying.
New as of 2013 is an accountant. I tried…I did try…to do my taxes last
February. I’ve done my own taxes for the last ten years. This time, however, they boggled my mind
about halfway through and I also felt a rising panic that I was doing something
wrong. I found a CPA right away.
One of the problems is that my
income—never very much, but always nice to have and increasingly relied upon—comes from many
different sources. I’ve now got income
coming from two traditional publishers, Amazon, Smashwords, Nook, ACX, and
CreateSpace. My accountant recently
asked me financial planning questions. I ended up giving
several apologetic shrugs. I’m sure this
makes her want to drink heavily.
“So you’re getting a check this
fall? But you don’t know what that check
will be for?” She smiles patiently at
me.
“No idea.
It’s for royalties from Penguin.”
“For sales. But you don’t know your sales.”
“That’s right. It’s just sort of a surprise.” I’m blushing now. It makes it look as if I’m not paying
attention. But these are numbers I’m not privy to—primarily bookstore
numbers. This is, admittedly, one of the things that drives writers a little nuts when it comes to traditional publishing. I add, “But I also have
self-published books and I’m paid 60 days in arrears for those. I should be able to give you an idea of the
money coming in 60 days from now for my self-pubbed books, if that helps.” Financial planning, when you're a writer, means a lot of guesswork and piecing together.
I did get some tips from the CPA that
I’ve been fairly good about following (and then some that are good tips that I
haven’t gotten around to yet).
Open a
business checking account. If you
can, find a free one—probably with a small bank or a credit union. Have your publishing income direct deposited
into that account. Write checks for
publishing-related expenses from that account, too—it just helps to keep
everything straight.
Keep a
small notebook in your car to record gas expenses for writing-related trips.
This is not only for promo…this could be gas spent driving to the post office
to mail off giveaway prizes to readers or gas used driving to the bank to
deposit a random check.
For US writers (since I have no idea how
this applies to international writers)—if you know you’ll likely be paying a
fair amount of taxes to the federal government in April (because this stuff
isn’t taken out of our checks, y’all), we should pay
the government estimated, taxes along the way. To avoid penalties, for sure, but also to
keep the tax bill from putting us in total shock when we get it in April.
Contributing
to a 401K (self-employed people can be eligible) or an Individual Retirement Account can help to reduce the
amount of taxes we pay.
Obviously, the necessity of paying taxes
means that we shouldn’t spend all of the money
from the checks that come in. As difficult as this is. :)
If your income is higher during the year
than you’d previously estimated, it might be a good idea to check back in with your accountant and make some
plans.
Keep
receipts. Keep your office supply
receipts, your receipts for computer-related purchases, your gas receipts, your
conference receipts. Remember to keep
receipts of payments for services, too—your agent’s commissions, your cover
designer’s bill, your formatter’s invoice, etc.
And the disclaimer…clearly, I’m not a tax adviser (ha!) If you need tax advice…I do recommend you find a
professional. It will keep you from
staying up at night worrying about this stuff.
Until you find your professional, here
are some interesting articles on taxes and writing income to get a more
thorough overview.
Taxes
and Record Keeping for Writers—by Starla Criser
How do you keep track of your writing
income? Got any other tips?
Image: MorgueFile: ModernCog
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