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.
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.
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.
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.
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.”
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.
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).
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.
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.
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.
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.
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. :)
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.
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.
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.
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.
are some interesting articles on taxes and writing income to get a more
thorough overview.
Taxes 101 for Authors—by Susan
Spann
Spann
10
ways to cut costs from your freelance writing business—by Michelle V.
Rafter
ways to cut costs from your freelance writing business—by Michelle V.
Rafter
Taxes
and Record Keeping for Writers—by Starla Criser
and Record Keeping for Writers—by Starla Criser
How do you keep track of your writing
income? Got any other tips?
income? Got any other tips?
Image: MorgueFile: ModernCog
The idea of making enough money from sale of my books is laughable in my case, but if it ever starts to make a difference, these are really good idea. I’m lucky in that I had my own business for 30+ years, so I know to keep receipts and track income and expenses as well as pay estimated taxes. Good info, Elizabeth
Elizabeth – Oh, this is such great advice!! Thank you! Something as simple as keeping records can make all the difference. And let’s face it; the business side of writing matters, whether or not we think it’s fun. Writers have to self-advocate, and that includes ensuring that the business end of things is managed.
I learned to keep track of receipts and gas mileage early, although sometimes I forget. We do have our own CPA though. The past two years have rather confused him with my royalties and the fact I can’t predict from year to year.
Brilliant.
I maintain an LTD firm (full Maryland corporation) specifically for managing intellectual property. It makes tax time so much easier to have the receipts in hand and the income segregated. It’s no fun playing tax-man catch-up.
Incorporating and managing writing like a business yields huge benefits in my home state. The business income is taxed at a much lower rate than personal income for the first $250K and using the IP pile for IP expenses, travel, conferences, hardware (desk, table, laptops…) is much easier than segregating the personal expenditures. Oh – with depreciation!
Good move. I’d recommend everyone do this. Money to my accountant is the best investment I’ve made. She saves me in excess of her fees every year. Piece of mind –
Hi Elizabeth .. anything to avoid panic at any cost and over taxes most definitely … being methodical at least and being prepared – this is such excellent advice ..
Thanks once again .. cheers Hilary
I’ve been self-employed for 14 years and always kept track of my business expenses and income. I’ve written off some fun trips because they were business related, too. I wouldn’t try to do taxes by myself though. I loved accounting in high school, but since I could get audited one day, I want an official CPA covering my butt.
I’m not a published author, but I hope to be one someday. I’m very grateful to you for posts like this that offer straightforward advice for writers and I always bookmark them in a special file to refer to when I might need them. Thank you so much for this blog!
Alex–Ha! Yeah. Nothing like telling an accountant that you have no idea what sort of money you’ll be making.
Karen–I wish I had your experience and background!
Margot–It’s definitely not fun. :) But we’ve got to take care of it.
Jack–We’re talking about the same thing. I’ll definitely be considering setting myself up as a Real Business very soon.
That’s what I think. She also wrote off things (non-writing-related, actually), that I didn’t even know could be written off. Those took care of the $500 or $600 tax prep fee.
Hilary–Panic is never a good thing! And messing up taxes can be an expensive mistake.
Diane–Yes! That’s exactly what I thought. I was terrified that I was going to somehow get myself audited through my complete incompetency with numbers. I feel so much better with the CPA.
Momlarky–Thanks and best wishes for your writing!
Oooh, I hope to have this problem soon! Now I have something to refer to–thanks for the great advice :)
Just the thought of doing my own taxes makes ME want to drink heavily. ;)
I live outside the US and thankfully in a tax free country, however I do have to pay 30% tax on any income I make from book sales and then there’s the exchange rate which does not work in my favor. This was one of the reasons I decided to self-publish.
I setup a separate account for my writing expenses/income, however it was for budget purposes.
Elizabeth–Thanks for coming by!
Adrienne–Turbo Tax for Small Businesses! Ha! Got it at Costco with a coupon each year. It asks questions, you answer them…pretty easy. Well, until it’s NOT so easy anymore.
Elke–A tax-free country. That sounds…lovely. :)
But the exchange rate and the 30% tax on the income…not so great.
Honestly, I’ve thought more about taxes in the last 12 months than I ever have in my life. The self-employed thing is a bit of a pain sometimes.
Great subject! Our tax guy has me keep records of all our housing expenses, like phone and utilities. He’s able to write off some of that, because I work from home and have been paid.
Thanks, Elizabeth!
Julie–I think that this year there are some changes that will make it even easier to write off home office expenses? My CPA was telling me the ins and outs…I was trying to listen and not have my eyes glaze over. This stuff is so very important, but my gosh, so dull when the accountants try to explain!
You have given your readers efficient tips regarding financial planning, but the best advice I got from you was to ask an expert. Managing your finances isn’t that easy, indeed. Some people even stay up late to analyze all their records. If you want everything to be clear and systematic, hiring an accountant is the best solution. You don’t have to work on your finances alone as there will always be an expert who’s willing to help you with this matter.
Neil Dando @ Wormald and Partner Accountants
Taxing policies are designed to help people to pay taxes on time.But if they found something that can not be understood then he must take advice from the local government community to solve his problem.
Thanks
Sanola Jerry
Accounting Software
That was a good move, getting a CPA. Some people think they can just wing it, yet you can’t take something like taxes in stride, where the smallest oversight can have lifelong implications.
Allison Gill
If you can do accounting stuff by your own, then your lucky. But if you are stressed by numbers and finances, asking a professional is a great way for you to manage your funds. Filing your taxes can really be a nightmare, especially when you don’t know how to do it right. Having an accountant beside you wouldn’t make that work too complicated for you.
Cory Saba @ Integrated Accounting