Monday, March 9, 2015

#Authors! Make Love to the #Tax Man - Get Your Paperwork in Order...

Yeah, I know. Nobody thinks "sex" when the tax man shows up. That was a cheap ploy to get you here because everybody hates tax time...

I'm a CPA and this time of year, I step out of the Cass Elliot Crime Series to work in a tax office. We see hundreds of clients every year, and most of them pay more for our services because they don't take the time to organize their paperwork. (We have one trainable client - he tossed all his paperwork in a boot box and brought it to us last year. It took a couple of hours to sort through it all, and when we gave the boot box back to him, everything was bundled together by source: farm income and expenses, royalty income, itemized deductions, etc. This year, he did the organizing himself, saving us two hours and himself some cold cash.)

I know, I know. Authors are creative types and all this tax nonsense brings us down. It's not that bad, really. If you haven't kept track of your writing expenses during 2014, it may take a little longer to pull everything together, but it's worth the effort because every legitimate business expense you identify lowers your total writing income, which lowers your tax bill.

You'll need to:

gather your 1099-MISC statements from Amazon, Apple, Smashwords, B&N, etc. Ensure your name is spelled correctly and your Social Security number is accurate.

summarize any fees you received for speaking or other engagements.

summarize the income you earned from selling books directly (at book signings, book fairs, or direct from your website). Remember to add up the cost of all those books including shipping, any postage related to shipping them to buyers, and do a count to see how many books you have left in inventory at the end of the year.

prepare a simple schedule summarizing all the expenses related to your writing business (we have four businesses, use an Excel spreadsheet for each, and update them regularly). Use the expense section from Schedule C as a guide. (Read this post if you're not sure about using Schedule C over Schedule E.)

remember to include the miles you drove related to your writing business. If you take a royalty check to the bank, take a writing related package to the post office, visit a book club, or pick up paper and toner, all of these miles are legitimate business expenses. The easiest way to track them is to keep a mileage log in your vehicle, and write down the date, purpose of your trip, and starting and ending miles each time you make a business related trip (the IRS wants you to use a log and keep it as documentation). Failing that, estimate distances and number of trips. This year, start logging.

remember to include the cost of hotels, plane tickets, cab fares, parking, and meals when you travel for writing related purposes. If you attend writing conferences, the fees to attend are deductible.

include the cost of memberships or dues paid to writing related organizations, and the cost of writing related subscriptions.

if you write at home, measure the square footage of the area you use exclusively for your writing and the storage of writing related materials. You might be entitled to take an 'office in the home' deduction. Ask your tax preparer.

calculate the cost of health, dental, and long term care insurance for yourself and your family. If your writing business is profitable, you may be able to deduct some or all of these costs.

And that's pretty much it, folks. Your tax preparer will love you, or, if they're the no-personality type, not hate you. If you self-prepare your taxes, it'll make the process much smoother.

Leave your questions in the comments and I'll do what I can to help.

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