Thursday, January 17, 2008

The Tax Man Cometh

Guess who's coming to town now that Santa has gone back to the North Pole? The Tax Man. Tax time is coming sooner than you think and writers everywhere are gearing up to pen the most vexing manuscript of the year: IRS tax forms. If this is the first year you've made money with your writing--congratulations!--but you might be wondering just how to handle filing your taxes.

If you are comfortable reading the cryptic and frankly Byzantine IRS rules, then have at it, but if you can't make heads or tales out of them, you might try a program like Turbo Tax. With basic questions, this program can help you organize everything and enter the correct amounts on the right lines of your 1040 and Schedule C.

If you've raked in oodles of money you probably need to hire a certified public accountant (CPA) to handle your tax returns, but for those earning modest amounts, places like H&R Block can do the job at a reasonable fee.

Regardless of how you choose to handle your taxes the best thing you can do is be prepared. Throughout the year, keep track of your income such as advances, royalty checks, and any speaking fees or honorariums. You'll also want to track your expenses such as travel, postage, agent fees, writing materials, and any contest entry fees. If you are not comfortable using a spreadsheet such as Excel or Quattro Pro a simple spiral bound notebook will work just fine. It doesn't have to be fancy it just has to keep track of everything you get or spend.

Also, check out the September 2007 issue of the Romance Writers Report for an informative article by Dianne O'Brian Kelly. Dianne is a CPA/tax attorney and a talented humor writer. In her article "At a loss for Words? Claim those tax deductions!" Dianne discusses some common misconceptions about deducting expenses even if you haven't shown a profit. Diane has other tax information on her webpage at www.blarneybabe.com

You can find detailed information about any tax form at www.irs.gov

6 comments:

Anitra Lynn McLeod said...

I should mention that I have 20 years experience as an accountant and I do taxes for my friends and family for fun. Ya, I'm weird!

Mel Hiers said...

Woo hoo for weird! Frankly, this part of the writing business scares me to death. I can barely fill out my EZ form every year! This is the first year I'll have to worry about money from my writing. I'll get a $12.51 check in June. *grin*

Oh. Anyway. Thanks for the tips Anitra! :-)

Helen Scott Taylor said...

The tax system over this side of pond is just as complicated but, lucky me, my sister is an accountant!

Helen

Savanna Kougar said...

Anitra, this is a big fat sore point for me. Nothing against your accounting ability, a wonderful skill and knowledge to have. Actually, I'm so poor I don't have to worry about the income tax. And it's a good thing in my case because then I don't have to battle with my integrity over this. Since the income tax is technically illegal under the Constitution of the united states. The problem being they'll throw you in jail or worse, anyway. So I never tell anyone not to file or pay. Although, I'm betting more and more people will revolt simply because they can't pay in our current falling economy. And, truthfully, I'm not sure what I'm going to if I ever fall into 'their' paying category again. Truth is truth.

Anitra Lynn McLeod said...

Wow, Mel, get that big check into a ROTH IRA! LOL! My take from writing this year was (drum roll please) a grand total of 50.00! But some day I'll make more! :)

I think this is a part of the business that a lot of writers don't think about UNTIL they get an advance or royalty check--I just want to get folks planning for the moment when it happens.

Ah, Helen, see, accountants are good folks to know just like librarians! ;)

Sav, I hear what you're saying but I always tell folks to file since I'm bound by GAAP ethics to do so. And I personally don't mind paying taxes since they go to build the roads I drive on, pay the police who protect me, and educate the children who will some day rule the world I live in. ;) But I do understand what you are saying.

Savanna Kougar said...

Anitra, yeah, I hear you. I don't mind paying taxes for those services, not at all. I would prefer to pay just and legal taxes to accomplish the much-needed repair of our infrastructure, etc.
But thanks so much, for hearing me.