Note from Jane: Today’s guest post is by attorney Helen Sedwick (@helensedwick), an attorney licensed to practice in California only. She is the author of Self-Publisher’s Legal Handbook.
This information is general in nature and should not be used as a substitute for the advice of an attorney authorized to practice in your jurisdiction.
Most writers don’t realize that their memoir, short story collection, children’s book, or novel could mean money in their pockets, even if sales are disappointing.
Suppose you spend $5,000 hiring editors, designers, and other freelancers to publish your book. At the end of the year, you’ve made $2,000 in sales, which you offset with $2,000 of expenses. Can you deduct the remaining $3,000 from your “day job” income and reduce your income taxes?
Yes, if you treat your writing as a business and not a hobby.
U.S. tax code encourages new businesses by permitting entrepreneurs to offset losses from one business from other income as long as the owner has a serious intent to operate the business at a profit. The IRS wants you to succeed, so they can tax your income later.
For a long time, the IRS followed the rule that an income-producing activity was considered a hobby unless it showed a net profit during three out of five years. (If your writing is a hobby, then you may deduct book-related expenses only from book-related income.)
In practice, the hobby rule is not that strict. If you have a serious intent to make a profit from your writing (and quit your day job), a little advanced planning and discipline will help convince the IRS you’re an entrepreneur.
Treat your venture as a business.
Set up a website and advertise. Print business cards and bookmarks. Promote yourself and your book on social media and other venues. Hire experts to advise you. If you don’t treat your writing as a business, no one else will.
There is no need to incorporate or form a business entity. Your business is just as legitimate as a sole proprietorship. Maintaining an entity is simply too expensive, unless you are making $5,000 or more in net income. In that case, don’t worry about hobby rules, but discuss forming an entity with a tax professional to save on self-employment taxes.
Give your business a name.
Having a name helps you and others separate the business from your personal activities. File a Fictitious Business Name Statement (also called a DBA, doing business as, filing) with your local county. I suggest using a service, such as the DBA Store.
Obtain a Federal Employer Identification Number (EIN).
Even if your business is a sole proprietorship and you never have employees, get a separate EIN, the equivalent to a Social Security Number for your business. Be sure you go directly to the IRS website. Sham sites that look like the IRS site are popping up every day. They ask for your Social Security Number, mother’s maiden name, birthday—all the tools for stealing your identity. Don’t use them!
Apply for a resale certificate.
Unless you live in a state that does not charge sales tax, obtain a resale certificate, sometimes called a seller’s permit. Put the certificate in the name of your company and use your new EIN.
Find out if you need a local business license.
Many cities and counties require some businesses to obtain a business license. Search for “business license” and the city and county where your business is located. The Small Business Administration website has helpful links.
Invest time and effort into making a profit.
Attend conferences, and even better, speak at them. Join and host readings. Arrange school visits. Keep working on new books. Pitch new projects.
Follow tax rules.
- If in any calendar year you pay an independent contractor (other than a corporation) $600 or more for services or $10 or more in royalties, ask the freelancer for a W-9 and report the payments on a 1099-MISC and the equivalent state form. This does not apply to payments to a corporation such as BookBaby, CreateSpace, or Lightning Source.
- Report your business income and expenses on a Schedule C. If you have kept separate financial records, this is easy.
- If your net income (gross revenues less deductions) from writing and self-publishing is $400 or more in any year, you may be required to pay self-employment tax on that income. If taxes on that income exceed $1,000 per year, you may be required to pay quarterly estimated taxes. Once you have reached this level of success, it’s time to consult a tax professional.
Separate personal finances from business finances.
Set up separate bank accounts and credit cards to cover business income and expenses.
Don’t jump the gun.
Wait until you have reasonable writing income before “launching” the business for tax purposes. Limit your deductions to those related to your self-published book or freelancing efforts. If you try to deduct ten years of writing conferences, you are inviting IRS scrutiny.
Maintain good business records.
In tax audits, more people are nailed for losing receipts than for cheating. If you don’t have a file cabinet (real or virtual) dedicated to your writing and self-publishing business, then get one. Invest in a simple business accounting software program.
Keep all records for seven years. Some people say three, but I suggest seven years to support your position that writing is your business.
What records to keep:
- royalty statements
- sales slips for direct sales (the ones you make at conferences and readings)
- appointment books
- brochures, business cards and handouts from conferences
- manuscript critiques
- thank-you notes from libraries or schools after readings
- fan email
- contest entries and notifications
- correspondence with freelancers, whether or not you hire them
- letters from agents and publishers, including rejections
- bank and credit card records
- printouts of PayPal summaries
- W-9s and 1099s
- sales tax returns
This tactic won’t work forever. If you have too many years of losses, the IRS is likely to question you or audit your returns. So don’t go overboard.
This nitty-gritty is the unromantic side of writing. But take the time to do it right, and you could save enough taxes to enjoy several lovely, romantic dinners, if not a wonderfully passionate vacation.
Disclaimer: Helen Sedwick is an attorney licensed to practice in California only. This information is general in nature and should not be used as a substitute for the advice of an attorney authorized to practice in your jurisdiction.
Note from Jane: I highly recommend the Self-Publisher’s Legal Handbook. I received an advance copy and found the information useful and essential for just about any author. Click here to learn more and download a sample.
Helen Sedwick is a business lawyer with 30 years of experience assisting clients in setting up and running their businesses legally and successfully. Her clients include entrepreneurs such as wineries, green toy makers, software engineers, and writers. She is the author of Self-Publisher’s Legal Handbook.
Any tax advice for authors and writers should start with the question: are you a hobbyist or a pro? Being a “pro” affects what you can deduct expenses related to your work as an author, so it’s important to understand the distinction.
Making money as an author isn’t easy, and even bestselling authors advise you not to quit your day job. While many people are passionate about their writing and aspire to make a living at it, not every book author can claim to be a professional — “for profit” — in those most important eyes of the IRS. Here are some guidelines.
Hobbyist vs. Pro Author
The IRS makes a critical distinction between sole-proprietor authors (and all other hobbyists) who ply their craft vocationally rather than depend on their writing work to make a living.
You are presumed to be a professional if your writing makes a profit in at least three of the last five tax years, including the current year. If your book authoring doesn’t prove to be a for-profit endeavor, losses from your writing may not be used to offset other income for tax purposes (that is, if you can’t prove yourself to be a pro, allowable deductions cannot exceed the gross receipts for the activity.)
Of course, many self-published book authors want to make a profit and become pro (like Donna Fasano), but not everyone will. For that reason, writing is one of the professions that the IRS deemed worth deeper scrutiny because of their potential pursuit and attractiveness as avocations rather than vocations. (Others include horse and dog breeding, yacht chartering, airplane leasing, gambling, photography, fishing, farming, stamp collecting. and bowling).
The Hobby Loss Rule for Authors
Essentially, what’s informally known as the “hobby loss rule” separates the hobbyist from the pros. In addition to the 3-out-of-5-years of profit, the following factors (annotated from the IRS) may further help you to determine whether your writing would likely be considered “for profit” or as a hobby in the eyes of the government (1):
- “Does the time and effort put into your writing indicate an intention to make a profit?” A full-time corporate day job requires you commit 35 hours or more to it — something to think about when considering your claim of “professional writer’s” hours.
- “Do you depend on income from the activity?” Be realistic here: if your rent is $1,000 a month and for the past two years your total writing income from e-book royalties hovers around $25 for the same time period, you’re not going to legitimately claim that you depend on that income.
- “If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?” The former part of the question could be interpreted as: could you have possibly made a profit had it not been for factors in the book marketplace? If you’re a writer in “startup,” rather than a hobbyist, you have several years to show a profit (see below).
- “Have you changed methods of operation to improve profitability?” In other words, where your writing is concerned, if your profits are less than what you’d like, are you thinking like a businessperson and trying to improve your income by changing the way you operate? Maybe that would mean spending money to create a multi-author blog, or paying someone to create a content marketing plan, or augmenting your income by trying to get sponsors for your blog.
- “Do you have the knowledge needed to carry on the activity as a successful business?” Being a professional book author, like running any business, is complex and challenging. How much do you know about running that business? Are you running it like a business, keeping records, keeping an eye to profitability?
- “Have you made a profit in similar activities in the past?” If you have a successful book under your belt — or even a series of articles in paid publication — that’s a predictor that you’re a pro.
- “Does your writing make a profit in some years?” The IRS is looking for sustained activity and profit to show you’re a professional rather than an amateur dabbler.
Of course, the hobbyists today can be the professionals of tomorrow. If you truly aspire to be a professional book author but don’t quite make the cut of the IRS definition, take heart. Keep plugging away at your writing and keep in mind the factors you need to develop to become considered a “pro.”
Read more about taxes and the book author, including sales tax facts for self-published authors.
Disclaimer: This article is meant to give general insight into tax information that might apply to writers, and to give readers an entry point so they themselves can research further. While every effort was made to ensure the information in this article was accurate at the time it was written, the Book Publishing site guide is a writer — not a tax expert. Therefore, anyone filing his or her taxes should consult a qualified tax preparer for updated tax laws and further specifics on how these rules might apply to an individual tax situation.
Following are specific IRS resources regarding the subjects mentioned in this article, to facilitate research into individual tax matters.
(1) Internal Revenue Code Section 183 (Activities Not Engaged in for Profit), as described in FS-2008-23
(2) IRS Publication 970 – Tax Benefits for Education
Note: The general information included in this article is not to be used avoid any tax penalties that might be levied by the IRS (see the Treasury Circular 230 regulation for the specific provision).
Unique Tax Issues to Be Aware of as an Author
Tim Boyle/Getty Images
Book authors face some unique situations when it comes time to file their tax returns. From keeping records to deciphering what it means to be an “exception” to a key tax rule, here’s a round-up of tax-related issues that may affect those who write books.
Book Writing: Hobby or Profession?
The “hobbyist vs. for profit” distinction for authors matter greatly for tax reporting. Because the job of a book author is not necessarily “steady,” there is an ebb and flow of income, some years might be more profitable than others — some years, not at all. In addition, with the proliferation of self-published authors — many of whom do see at least some income from their work — it becomes a bit confusing.
Profitability is a key factor in how the Internal Revenue Service determines whether or not you can legitimately claim the costs of your writing as business expenses. If you don’t already know for sure, it’s important to be aware of how the IRS makes the distinction between whether you’re a hobbyist writer or professional author.
Writers and Taxes: An Important Exception
The profession of “freelance author” is a bit different than most others in the eyes of the U.S. government — at least as far as capitalizing expenses on a tax return concerned.
The uniform capitalization rules require that most taxpayers match expenses with the income related to the expense during a tax year. However, since 1988 writers (and other artists, such as photographers) are exempted from this rule. That means, if you’re working on a long-lived book project (such as the biography of a U.S. President), you are allowed to deduct the expenses related to that book (say, travel for research) in the year the expense is incurred rather than in the year you receive the income.
Typical Tax Deductions for Authors
Bookmarks, launch parties, Book Expo America (BEA) trade show attendance, membership fees for the Author’s Guild — those are just a few of the business expenses a book author might incur. While you’re gathering and organizing your receipts — or setting up your new-author organization system for the coming tax year — learn about some author-specific, typically deductible expenses, so you can remember to plan or and/or keep the appropriate records for them.
Sales Tax Payments for Self-Published Books
Income taxes aren’t the only taxes self-published authors need to worry about. If you’re a self-published author and sometimes sell your own books, you’ll likely need to be collecting and paying state sales tax.
Disclaimer: This article is meant to give general insight into tax information that might apply to writers, and to give readers an entry point so they themselves can research further. While every effort was made to ensure the information in this article was accurate at the time it was written, the Book Publishing site guide is a writer — not a tax expert. Therefore, anyone filing his or her taxes should consult a qualified tax preparer or tax expert for updated federal and state income tax and sales tax laws and further specifics on how these rules might apply to an individual tax situation.
I’m thinking of publishing a book on kindle, but I don’t currently have a business set up. Do you need a business to publish a book? I’m curious as to how to handle US taxes for the royalties. I wouldn’t be publishing it from outside the US.
4 Answers 4
No, you don’t need to set up a business to self-publish a book. In the U.S., royalty income and all related expenses to publishing the book (e.g. paying a graphic designer to create a cover, advertising, travel expenses for a book tour, etc.) are reported on Schedule C of your personal tax return.
Regarding Social Security and Medicare taxes, you don’t use the forms 940/941 that an employer would file. Instead, these contributions are called self-employment tax on your personal return, and cover both the employer and employee portion for Social Security and Medicare. The employer portion is a deduction on your personal tax return (available even to those that don’t itemize deductions).
As Steven pointed out in his answer, don’t forget that you may owe additional taxes that aren’t covered by withholding of any W-2 income you may have, so you may need to make estimated quarterly payments to avoid having to pay an underpayment penalty when you file your tax return.
Amazon will send you a 1099 that will identify the amount of royalties that they paid you. If you are just now starting, I would strongly recommend setting aside at least 30% of everything you earn in royalties as soon as you receive it. You are now considered self-employed, and you will have to pay 15% of your royalties as self-reported income tax. You will also have the self-employment tax, or the Social Security/Medicaid portion an employer would normally pay, which is now your responsibility. That will be about 15% as well.
Also keep in mind that if you start doing well with your sales, you will probably want to start paying that 30% to the IRS every quarter as estimated taxes. If you wait until the end of the year and then show a large sum of income on which you had not paid any taxes during the year, they will slap a penalty on you for failure to pay sufficient estimated taxes. Paying the estimated taxes throughout the year will help you to avoid that.
Usual disclaimer: I am not a lawyer nor a tax accountant. But here’s my understanding.
Yes, you must set up a business. You must report this income to the Federal government on Schedule C, which by definition makes you a business.
If you’re thinking, “Do I have to set up a CORPORATION?”, then no. You can be a simple sole proprietorship. This usually does not involve a lot of paperwork. You must check your state and local law to see what you have to do. I used to have a small side business in Ohio. There I was basically required to file a state form registering my business name and address and pay a small fee, like $50 or something like that. Now I live in Michigan and I had to fill out a form with the city and give them some modest amount of money, I forget how much. I also had to register with the state through a website. Big long form to fill out, but I don’t think I had to pay anything.
If you will be selling books directly to customers, you must register to collect sales tax. If you do all your selling through Amazon or other distributors, it’s their job to collect the sales tax. In America, only the final customer pays sales tax, not anyone else in the supply chain. (Unlike VATs in Europe.)
I presume you are not going to open an office but will work from your home. Check on local regulations about home-based businesses. Many towns have regulations intended to prevent someone from opening a factory in the middle of a residential neighborhood that has trucks arriving day and night and that’s churning out pollution, or to open a night-club that results in rowdy drunks wandering the streets. It’s highly unlikely that a writing business is going to disrupt the neighborhood, but you might get caught on some technicality not intended for people like you.
As @StevenDrennon notes, be prepared to pay taxes. I think he’s a little sloppy on his terminology: “Self-Employment Tax” means Social Security Tax paid by self-employed people. With a regular job, you pay half the tax and the company pays half the tax. (Which is all a silly fiction: as far as the employer is concerned, their half of the tax is part of what it costs them to hire you, and has to be turned over to the government just like your half of the tax. A more accurate statement would be that the amount of tax reported on your pay stub is only half of what you actually pay. But that’s another story.) When you have self-employment income, you have to pay both halves, or about 15%.
In addition, you must pay regular income tax on whatever you earn. How much this is depends on what tax bracket you’re in. It could be anywhere from zero to 39-point-something percent as of 2013. Plus you may have state and local taxes.
But remember to keep track of your expenses, as these are deductible. If you create a web site to market your book, your web hosting fees are deductible. If you mail copies of the book to reviewers, the cost of these books to you and the postage to mail them is deductible. If you buy software to format the book or produce artwork for the cover, that’s deductible. Etc.
If writing will be a significant percentage of your income, then you need to make quarterly estimated tax payments or you’ll get slapped with penalties. If you have a regular job and writing is just a small sideline, then you don’t really need to worry about this. Depending on how big a sideline, it may mean you owe a little bit come April 15. If your writing is small enough compared to your regular income, it may just be a dent in your refund. Yes, I know, we’re all hoping to write a best seller and get rich, but I suspect that most of us here measure our writing income in a few hundred to maybe a few thousand dollars a year.
“To produce an income tax return that has any depth to it, any feeling,” author Frank Sullivan quipped, “one must have Lived–and Suffered.” The suffering stems not only from the necessity of giving hard-earned money to the government, but also from the nature of dealing with tax regulations. Because tax policy is one of the most potent ways to regulate society, Congress and the President frequently amend the tax laws. Yes, the IRS puts out general guides to federal taxation, such as IRS Publication 17, Your Federal Income Tax, for individuals, and IRS Publication 334, Tax Guide for Small Business, for individuals who use Schedule C or C-EZ; both are free from http://www.irs.ustreas.gov . And yes, the IRS also has a Tele-Tax service you can use to check the status of a refund or hear recorded tax information. But the advice you receive might be erroneous and is not binding on the government. And in any event, IRS publications and tapes represent the views of the IRS and are sometimes inconsistent with precedent established by the tax courts.
The good news, though, is that tax preparation can be considerably easier if you follow a few simple recommendations, and you may be able to reduce your tax bill in the process. Of course, these recommendations are not a substitute for the advice or services of a qualified tax advisor, but if you’re publishing or thinking of publishing your own work,you should be able to prepare and carry out a tax strategy that will make your accountant’s job easier in April.
The guidelines we offer in Part I will cover the simplest issues. In forthcoming newsletters, we’ll provide advice on more complicated tax issues, including the home officededuction and the hobby loss challenge.
If you’re self-employed and make money from writing or self-publishing, youmust file Schedule C–Profit or Loss from Business or Profession–as an addendum to Form 1040. Schedule C is the main form for filing self-employment income and expenses (except for prize and award income, which you may enter directly on Form 1040 as “Other Income” to avoid payingself-employment tax on it).
In addition to personal income tax, you may also have to pay state or local taxes, such as an unincorporated business tax. These taxes vary with each state and municipality, so be sure to consult the tax guidelines of your home state and locality.
Updating your records on a regular basis makes the task of filling out tax returns mucheasier come April. Consider maintaining a separate business checking account and savings account for your professional income and expenses (seeIRS Publications 552, Recordkeeping for Individuals, and 583, Starting a Business and Keeping Records, for details about the “permanent, accurate, and complete” records the IRS requires).
Record all income and expenses generated from your self-publishing project promptly in a ledger, specifying the date any money was received or paid out, the character of the receipt or payout, the source or destination of the income, and other relevant data, and supporting the entries with copies or originals of the checks, bills, and receipts.
To set up a simple and efficient ledger, use column 1 for the date, column 2 for the nature of the income or expense, column 3 for the check or receipt number, column 4 for the amount of income, column 5 for the amount of the expense, and column 6 and subsequent columns for different expenses based on your special needs (for instance, office supplies, local transportation, subscriptions, legal/accounting fees, etc.). This means entering each expense twice, once in the expense column and again under the particular expense category into which it falls. For obvious reasons, it helps to make your expense categories fit easily into the expense categories shown on Schedule C. If you are self-publishing books, you should keep track of production and printing expenses as separate categories. Computer programs such as Excel, Quicken, and Quickbook are good for this kind of record-keeping.
Although larger publishers, with average annual gross receipts in excess of $1 million, must use accrual accounting, othersmay choose either the cash method or the accrual method. The cash method requires that you include all income actually received during the tax year and deduct all expenses actually paid during that year. (Also,in a few cases, the cash method might involve including income not yet actually received, if the income was credited or set apart so as to be subject to the taxpayer’s control. For example, income received by an agent for an author will usually be taxable to the author when received by the agent.) The accrual method, on the other hand, requires that you include all income that you earned and have a right to receive in the tax year, even if you do not actually receive it until the following tax year, and that you deduct expenses when they are incurred instead of when they are paid.
Most taxpayers operate on the simpler cash method, and we’re assuming here that you will too. Similarly, since the tax year for most taxpayers is January 1 through December 31, we’re assuming that you’re also using the calendar year.
The cost of creating a work (or of acquiring a capital asset) is called its “basis” for tax purposes. When you use the cash method and deduct expenses currently, your work has a zero basis and the entire amount of the proceeds from sales will be taxable income. However, the cost of inventory may have to be deducted over several years under capitalization rules provided by the InternalRevenue Code.
One tax-saving technique for any taxpayer using the cash method is to pay as many expenses as possible in December while putting off the receipt of income until January, the new tax year. The idea is to decrease this year’s tax bill by offsetting income from the present tax year with expenses while deferring income until the following tax year. However, if you anticipate a significant increase in your income in the next year that will put you into a higher tax bracket, or if the tax rate is set to increase in the new year, it makes more sense to receive as much income during the present year as you can, and to defer paying expenses until the next one.
Grants are usually taxed as earned income, as are all monetary prizes, unless a recipient assigns an award to a qualified charitable institution. In that case, for tax purposes, the prize and the donation are not treated as income and a deductible charitable contribution, but rather as if the award was not received. If you win a monetary prize, you may enter the amount received on Form 1040 (as “Other Income”) and thus avoid paying self-employment tax on it. On the other hand, if you fear a home-office deduction or hobby loss challenge by the IRS, it might be better to enter such income on Schedule C. You should discuss how to treat a money prize with your tax advisor.
For help with respect to home office deductions and hobby losses, among other things, watch this space.
Current tax and benefit rules do not work well for authors. Many authors hold a number of jobs to sustain a creative career, and need to navigate a complex, bureaucratic tax system. Those who are registered solely as self-employed do not receive holiday or sick pay, or other employee benefits such as company pensions.
A 2016 European Commission study on authors’ remuneration which surveyed authors, journalists, translators and illustrators across Europe found that UK writers had less protection than in many other countries. For example the AGESSA scheme in France allows authors to receive benefits such as sick pay and unemployment benefit, with publishers and other content users making contributions to the fund. Similar provisions apply in Germany.
The only thing that hurts more than paying an income tax is not having to pay an income tax.
Thomas Dewar – Income Tax, Pay, More
Emerging and struggling authors face difficulties in claiming benefits. Under the old system, which is now being phased out and replaced by Universal Credit, some authors with low earnings could claim Tax Credits to supplement their income. This enabled them to dedicate more time to their writing, ensuring that they could continue to write as a profession.
But the introduction of Universal Credit means that the self-employed must meet the “Minimum Income Floor” to receive benefits. This is equivalent to the National Living Wage for most working-age people. Given the median annual income of a professional author is £10,500, which is well below the National Living Wage, many authors will lose their entitlement to benefits under Universal Credit.
Furthermore, a self-employed worker’s entitlement to Universal Credit is assessed monthly. This will make it even harder for professional writers to reach the Minimum Income Floor and claim Universal Credit, as authors’ incomes are not stable and tend to fluctuate from month to month.
We are calling for reforms to Universal Credit so that it does not penalise self-employed creators on low incomes. We also believe it should deal with “lumpy” incomes by basing payments on average incomes over two years. This would ensure that authors are paid benefits in lean periods and do not fall out of benefits on receiving an advance or royalty cheque.
Making Tax Digital (MTD)
Under the Government’s MTD proposals, any business or self-employed worker whose annual turnover exceeds £10,000 would have to file quarterly returns online. The Society of Authors has long argued that the minimum threshold is far too low, and would place an administrative and financial burden on lower paid workers.
Self-employed workers and businesses earning above the VAT threshold (currently £85,000) were required to start filing quarterly returns for VAT purposes from April 2019. It will be extended to self-employed workers earning below the VAT threshold from April 2020 at the very earliest. We will be keeping a close eye on HMRC’s next steps and ensuring that any future reforms don’t damage authors’ interests.
National Insurance Contributions (NICs)
In September 2018 the Government announced that it was dropping plans to abolish Class 2 NICs. This is good news for the lowest paid, but we question why HMRC has completely rolled back plans that would have benefited 3.4 million people.
Class 2 NICs are paid by self-employed workers earning more than £6,365 (2019/2020 figures). Those earning below this threshold can make voluntary Class 2 contributions of £3 a week to access benefits such as the state pension. Had Class 2 NICs been absolished, those earning below the threshold could only have made voluntary contributions through Class 3 NICs, which are £15 a week. This adds up to £780 per year, a fivefold increase on the Class 2 annual contribution of £156.
The SoA submitted evidence and met with HMRC officials, in order to express concern that this change would disproportionately affect authors and other creators who are already struggling financially. We are pleased that HMRC has listened to concerns of the lowest-paid earners. However we urge the Government to continue to find an approach to National Insurance which simplifies the system for everyone, whilst protecting the pensions of the lowest paid.
Creators’ work is the foundation of the largest sector within the UK economy. Yet their needs are repeatedly ignored when policy, economic and support decisions are being made.
We are a member of the Creator’s Rights Alliance (CRA) #PayTheCreator campaign, which brings together the campaigning work of member organisations to collectively call for creators of all types to be paid properly for the work they do, and the rights they grant, and to be given the same considerations enjoyed by other workers in the areas of pay, business support and policy making.
As a writer, you can save hundreds (even thousands!) of dollars at tax time by deducting business expenses. That’s because every time you write off an expense, you lower your taxable income – putting the money you spend on your business back in your pocket.
A Few Things to Keep in Mind
When it comes to deducting business expenses, there are certain regulations you need to follow:
Business expenses must be both ordinary (commonly accepted in your trade) and necessary (helpful and appropriate for your business). The expenses we list below fall into this category.
The IRS requires documentation of any business expense you deduct. That’s why it’s so important to track your expenses during the year. If you didn’t track your expenses last year, don’t worry; our guide shows you how to retroactively find deductible expenses.
Because there’s always a chance you may be audited, save your business receipts for at least three years after you file your taxes.
Tax Deductions for Writers
If you’re a writer, here are 19 deductible expenses you should keep track of throughout the year:
1. Mileage: Keep track of all your business-related trips! While there are lots of ways to do this (like taking odometer readings before and after trips), the easiest way is to use an app like Stride that records mileage while you drive:
Between your home office and appointments (this does not apply if you have a permanent place of work to which you must commute)
Between client appointments
On work-related errands, such as picking up supplies
If you choose to take the standard mileage deduction, keep in mind that you cannot deduct individual vehicle expenses like gas, oil changes, car repairs, and car insurance.
2. Home Office: The IRS keeps a close eye on this deduction, so make sure you only write off your office if it’s a dedicated home workspace used solely and regularly for your writing business.
Have a home office? You can write it off with either:
The simplified option: Multiply the square footage of your office (up to 300 square feet) by the standard rate of $5.
The actual expense method: Add up the expenditures related to your home office, including:
Direct expenses, such as supplies for and repairs to your office. You can deduct these in full.
Indirect expenses, like your mortgage, insurance, and utilities. You’ll divide the total cost of these expenses by the percentage of your home that’s used for business.
3. Software and Other Subscriptions: You can write off any software or subscriptions you use to run your business, like:
4. Professional Development: You can deduct costs for any continuing education classes, conferences (like the American Society of Journalists and Authors Conference), or publishing events (like BookExpo) that help you learn new techniques and improve your business. You can even deduct travel and lodging expenses if you travel to a convention or conference. Meals are deductible when you’re away for business, but only up to 50 percent.
5. Subscriptions: The cost of magazines, journals, newsletters, and other subscriptions that are useful for your writing business (e.g. a magazine to which you want to sell a freelance article) is deductible.
6. Research Expenses: If you invest in books or research for your writing, you can deduct those costs.
7. Outsourcing: The cost of hiring someone to help with your business (e.g. an editor or proofreader) is deductible.
8. Agent Fees: Keep track of any fees your literary agent charges… they’re deductible!
9. Office Supplies: Items that you buy for everyday office use, like pens, paper, postage, and notepads, are all deductible. Good news: you can still write these off even if you take the simplified home office deduction.
10. Cell Phone Bills: Do you use your phone exclusively for business? You can fully deduct related expenses (including the phone purchase and monthly bills). If you also use your phone for personal reasons, you should only deduct the portion used for business. The best way to do this is to calculate what percentage of your calls were work-related and then claim that percentage of your bill.
11. Business Cards: Designing and printing business cards is a deductible marketing expense.
12. Submission Fees: From small journal submission fees to larger contest entry charges, all your submission fees are deductible.
13. Printing and Copying: Keep your receipt anytime you print or copy work-related materials like marketing flyers, rough drafts, and office records. Print jobs are deductible!
14. Advertising: When you invest in promoting your business, keep track of how much you spend! Online ads, signs, print ads, videos, website hosting fees, and more are all deductible.
15. Promotional Goodies: If you give away items like bookmarks to help promote your business, keep the receipts… promo goodies are deductible!
16. Parking: Anytime you have to pay for parking while you’re working, save your receipts; these expenses are deductible. Unfortunately, this doesn’t apply to parking tickets or traffic violations, so drive safely!
17. Tolls: Any toll fees you pay while working are tax deductible as long as they’re not already being reimbursed.
18. Memberships: If you enroll in any memberships, such as to the Science Fiction Writers of America, to help you do your job, you can deduct your dues. This also applies to nonfiction writers and their professional organization memberships.
19. Health Insurance: As long as you don’t get health insurance via a spouse or employer, you can deduct 100 percent of your monthly premiums. Keep in mind that if you receive a government subsidy, you can only write off the amount you pay each month (not the original price of your plan). Note: your health insurance premiums are taken as a personal deduction on Form 1040, NOT deducted as a business expense.
Some Common Expenses You Can’t Deduct
The IRS deems some common expenses as non-deductible. These include:
Personal hygiene expenses, like haircuts, clothing that can be reasonably worn outside of work, and dry cleaning (unless it’s for a uniform)
Legal violation fees, like parking tickets or court fees
Commuting mileage if you work at a permanent office away from home
Life insurance premiums when you are the beneficiary, even if you take the policy out to secure a business loan
An Easy Way to Track Your Expenses
Have you tried our free expense tracker? Stride is an app that makes it simpler than ever to find deductible expenses, take pictures of receipts, and automatically record business mileage.
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Thinking About Your Archives? It’s Never Too Late to Consider the Future of Your Past (2021)
By Sarah Hillier
This guide to literary archives covers basic archival principles and what’s important to keep, how to maintain and organize your files, digital considerations, selecting the right archival repository, how to negotiate the donation or sale of your archives, and more.
Everything You Never Wanted to Know About Taxes (2019)
By Joel Fishbane
A practical tax guide for those in the business of writing that covers types of income and expenses, details about the GST, and incorporation. This publication contains information useful to all writers, whether you file your own taxes or have them filed by a professional.
The Last Chapter: Estate and Legacy Planning for Writers (2019)
By Susan Goldberg
This publication covers wills and powers of attorney, literary estates and appointing a literary executor, and how to plan your literary archive. It includes comments from Shauna Singh Baldwin, Brian Brett, Terry Fallis, Lawrence Hill, Robert J. Sawyer, Susan Swan, and others.
How to Self-Publish (2017)
By Eve Silver
This in-depth guide covers the how and why of self-publishing, from editing and design to distribution and marketing. It includes information suitable for authors with both unpublished and previously published materials.
$9.99 – Add to Cart
Sell Your Book: An Author’s Guide to Publicity and Promotion (2017)
By Suzanne Alyssa Andrew
This publication provides ideas for publicity and promotional activities that work, including a blueprint for your own personal book marketing plan. It features tips from authors Claire Cameron, Chris Chambers, Farzana Doctor, Christine Fisher Guy, Maria Meindl, Lana Pesch, and Russell Smith, with industry advice from Dundurn Press’s Margaret Bryant, Quill & Quire’s Sue Carter, and McNally Robinson’s Chris Harrow.
Contracts Self-Help Package
If you have been offered a contract by a publisher, or anticipate such an offer in the near future, help is available. This package helps writers evaluate and negotiate contracts offered by publishers. The Model Trade Book Contract is an example of an equitable publishing agreement between an author and publisher. Help Yourself to a Better Contract (written for the Union by legal-counsel Marian Hebb) is a guide to the negotiation process, including a checklist of favourable contract provisions.
Model Trade Book Contract (2021)
This comprehensive model contract provides reasonable minimum terms for trade book contracts and is a useful comparative tool for evaluating your publisher’s contract.
Help Yourself to a Better Contract (2006)
By Marian Hebb
Checklist of favourable book contract provisions with advice on what to ask and what to watch for. Designed to aid writers in book contract negotiations with their publishers.
Anthology Rates and Contracts (2006)
This document provides notes on contributions to anthologies, suggests minimum rates, and provides a suggested anthology contract.
$7.00 – Add to Cart
Author & Editor (1983)
By Rick Archbold, Doug Gibson, Dennis Lee, John Pearce, Jan Walter
A booklet describing the relationship between author and editor, including a list of dos and don’ts for both parties.
$7.00 – Add to Cart
Author & Literary Agent (2007)
Guidelines and responsibilities governing the relationship between the author and the literary agent.
$7.00 – Add to Cart
From Page to Screen (1999)
A reference guide regarding options, film, and TV contracts for original literary works, including information on minimum and maximum rates paid.
$7.00 – Add to Cart
By Marian Hebb
This publication includes various details to consider when negotiating a ghost writing agreement, including a sample contract.
$7.00 – Add to Cart
Glossary of Publishing Terms (2003)
An aid to authors when dealing with the book publishing industry — usually during contract negotiations. Intended as a user-friendly, alphabetical reference guide to terms commonly used within the industry.
$7.00 – Add to Cart
Writers’ Guide to Grants (2001)
An informative list of grants available to Canadian writers; includes information about writing samples, types of juries and how they judge, and application procedures.
Taxes, record-keeping, and keeping track of deductions don’t always come naturally to writers. This post, written by tax professional Andrew Stern, author of Z Art of Taxes, helps demystify the process.
Take it away, Andrew…
What writers should know about taxes
KISS! No, not the rock group. You know what I mean. Simplicity.
I’ll start with a general tax/financial overview and then address a few specific issues for writers.
Your financial life can overwhelm if not handled strategically and in a timely fashion. Create a system where you can track your entire financial life without it taking much of your time. No special skill set is required.
It’s easier than you think. All tax & financial responsibilities start with excellent recordkeeping. You must be able to see and analyze your financial life to accomplish your financial goals and meet your tax & financial responsibilities.
Tax planning and preparation is a math puzzle with variables from year to year. The math, for the most part, is straightforward.
Your goal is to connect your opportunities into one cohesive overall tax strategy: business deductions, business use of home and auto, retirement plan funding, estimates, health insurance, medical expenses, Health Savings Accounts. They all fit together into your tax planning.
What writers can deduct
Your business deduction opportunities are the same as any other self-employed taxpayer. Tax code states that an expense can be deducted for business if it meets the test of being “ordinary and necessary” to your profession.
Your task is to carefully analyze where you spend your money to see what fits into that definition. There are certain expenses that are black and white; you drive a car, use a phone, have an office. What you are looking for, in addition to the obvious, are the indirect, peripheral, personal expenses that might be linked to the tax code definition of what constitutes a business expense.
Manipulate and exploit your financial life. Identify what you like to spend money on and see if it can be linked to your business. If you like to drink wine and spend money on wine, write articles about wine and submit them to publications for publishing. If you like to travel, write travel articles and submit them for publishing. Look at what your interests are, where you spend your money on those activities, and use them as subject matter for your writing opportunities.
Book “production costs”
If you spend money to create a product, such as a book, film, or a set of recordings (what we call an album), a product that once it is finished will get duplicated and sold, the expenses associated with the creation of the product have specific rules. All expenses incurred are rolled into one “production cost” category, they are capitalized (sorry, tax speak), and amortized (sorry, tax speak again, this means deducted) over a three (3) year life, using the safe harbor. You can deduct 50% of the production costs in the 1st year, 25% in years 2 & 3.
For example, if I record an album I would pay for musicians, engineering, recording studio time, art work, mixing, and mastering. Those are all production costs. They create the product which I can then duplicate and sell.
Keys to tax preparation and tax planning
- Track your entire financial life using personal finance software.
- Stay current on all tax deadlines, filings, and scheduled tax payments.
- Start early in the year for tax preparation. This allows you to go through this process with enough time to ensure that you have not overlooked anything or missed opportunities.
- The information required for your tax return preparation is obtained thru careful analysis of your yearly software reporting.
- Turn what you spend money on into deductions.
- Engage in tax planning every year.
- Perform tax planning every year in November or December.
- Find a good tax practitioner who is…
- Smart, someone with a bigger perspective of the world
- Responsive, always returns e-mails and phone calls within a day or two
- Can explain issues in plain English
- Street-wise & financially savvy
Using a personal finance software program is the BEST way to track your financial life:
- No more creating spreadsheets where you must log in every single piece of data.
- No more dumping receipts on your desk and sorting thru them.
- No more last minute crush to the deadline.
Using the personal financial software works like this
- Every line item on every credit card and checking account statement is downloaded directly into the software.
- All you must do is to categorize what the inflow and outflows are.
- No special bookkeeping skill set required.
- Doesn’t take very much time, 5 to 10 hours a year.
Clear as muddy waters?
Andrew Stern is a tax practitioner, Enrolled Agent, musician. I’ve had my own tax accounting practice for 30 plus years, working for a wide variety of clientele, including many taxpayers in the arts: writers, musicians, fine artists, etc. Been playing guitar since I was a teenager, have my own ProTools recording studio in my residence, write, record and release music with my spouse, Laura LaRue. The past 5 years we have released dance singles, charting Billboard top 20 dance charts, licensed and used for placement, most recently Shameless season 7 on Showtime. Also have catalog for pop, rock, ballads, and Latin dance available thru download. Music and videos can be reached at z-axman.com. Latest project is our Nashville style country album, just being released. You can check it out at 3pairsofboots.com, available thru download.
Please note: This blog post is not a substitute for legal or tax advice. If you have specific tax issues or questions, discuss them with your legal or tax advisor.
Art: Vanitas Still Life by Jacob de Gheijn II
Are you a self-employed scribe? Though it may not always seem like it when you’re crouched over a keyboard cranking out content, your words can be worth their weight in gold if you know which tax deductions to claim. В В Keep reading for a list of ten unmissable tax deductions for writers. В
В Being a self-employed writer makes you eligible for the self-employment tax deduction. Your eligibility means you can reduce your taxable income by the employer-equivalent portion (i.e., half) of your self-employment taxes. Self-employment tax includes both Social Security and Medicare tax. For example, paying $1,000 in self-employment tax would reduce your income subject to tax by $500. Reducing your taxable income lowers your overall tax liability. В
В Enjoying casual Friday every day isn’t the only perk of being a work-from-home wordsmith. You can also deduct the costs of your home office in one of two ways. You can deduct a certain dollar amount per square foot of your office up to a specified square footage through the simplified method. Or, you can deduct a percentage of the real costs of the home office through the traditional manner. В
В From a personal computer to a desk, you’ll have to fork over a pretty penny on office equipment for your writing business. You can offset these expenditures by depreciating them – that is, deducting the costs in a single year or over a period of years.
В It might not cure your writer’s block, but getting health insurance is a must for penmen and women of all ages. Fortunately, self-employed writers can deduct 100 percent of the premiums they pay for medical, dental and vision insurance. В
В Ernest Hemingway once said, “The only kind of writing is rewriting.” If you are fortunate enough to have the resources to hire in-house or contract editors or proofreaders to aid in the rewriting process, you can deduct their wages. You can also reduce your income by any tax-deductible hiring expenses, from recruitment to job fair expenses. В В
Declaration of status
The Internal Revenue Service requires that we have declaration of status on file for anyone who is or will be receiving payments from Springer. The type of form to be filled out depends on the country of citizenship. Below are the names and description of the forms that we require.
Revenue service forms
W9 , this form is to be completed and signed by all US nationals, and US permanent residents. (individuals and companies) This form represents a declaration of US citizenship/permanent residence. At the end of the tax year all authors who fall under this category will receive a 10-99 Misc form listing all payment made during the corresponding tax year.
Tax form for authors/editors publishing with Springer US offices
We recommend that you complete and return these tax forms to us along with your contracts; this will ensure that Springer withholds the appropriate tax rate on your royalties as required by the US Government. While these forms are not required, it is of benefit to you to complete and return these forms to us.
Only fill in these forms when you sign a contract with Springer New York. This information is not relevant to any authors (whether or not based in the US) who sign contracts with Springer offices in any other country.
- All United States citizens should fill out and return form W-9 with their Social Security Number (SSN) included. Royalty income will be subject to 28% backup withholdings as required by the United States Government on all W-9 forms received without SSN’s.
- All foreign authors and editors should fill out and return form W-8BEN and include their assigned United States Government Individual Taxpayer Identification Number (ITIN) in Line 6 of the form. By including the ITIN, the tax treaty between the US and the individual’s respective country of residence will be applied. If no ITIN is given, royalty income will be subject to 30% backup withholdings as required by the United States Government. Foreign authors and editors can call the IRS directly at 1-800-829-1040 or visit their website at http://www.irs.gov/individuals/index.html and select the ITIN help function to get help based on their individual circumstances. Providing the individual’s country tax ID in Line 7 will not exempt them from withholding. Filling out the W-8BEN without and ITIN only confirms that the person is not a United States citizen. It does not exempt them from withholding’s deductions.
If you decide to return these forms at a future date instead of with the fully executed contracts, we ask that you kindly include a photocopy of the fully signed agreement for additional reference.
If you are a repeat Springer Editor and you have already supplied these forms to us in the past, you are not required to send them again.
All of these forms, along with detailed instructions on how to complete them, can also be downloaded from the Internal Revenue Service Website:
US authors and permanent US residents
As long as we have a completed W9 form, there will be no tax withholding on any royalty payments.
Non US Authors
The Internal Revenue Service requires that we withhold 30% of all royalty earnings for all foreign nationals except as provided below:
Some countries have established tax treaties with the US, which benefits its citizens by lowering the amount of tax withheld by the US taxing authority. The way to take advantage for this is by obtaining an individual tax identification number from the US internal revenue service. This document is valid for life, and can be used with other companies from which our authors may also be receiving payment. For more information please go to IRS.gov and type ITIN in the search term. Then click on the top subject Individual Taxpayer Identification Number (ITIN) you will be prompted to a detailed frequently asked questions section. Once an ITIN is obtained, this must be submitted to our office and we will then apply the appropriate tax withholding rate. *some countries do not have a tax treaty with the US, in this case the rate will remain at 30%
Contact the author helpdesk for questions on author royalties
Editor’s/author’s complimentary copy
Book editors/authors are entitled to receive a free copy of the electronic version of their book. According to the publishing agreement between an author/editor and Springer, authors/editors may receive free print copies. The agreement will also state if a discount applies when obtaining additional print copies.
Book discounts for authors & editors
Book authors, editors and chapter authors are entitled to order Springer books — print and electronic versions — at a generous discount. The quantity of books ordered must be in the normal range for private use. Resale is not permitted.
At the end of the book production process book authors receive either
- an e-mail that includes their log in details for their personal MySpringer account. You are registered as an author and will receive your discount automatically when ordering online through MySpringer.
- or an e-mail that includes the personal SpringerToken¹ (together with instructions how to use it).
If you did not receive one of these e-mails for any reason, you can alternatively request the author discount (SpringerToken) via the request form below. The time between submitting the request and receiving the token should generally not take longer than two working days.
¹) SpringerToken for authors: personal discount that can be used by one person only. It is valid for a lifetime. Just enter it with your first book order. For any further online book orders your author discount will apply automatically.
Ordering books with a discount (SpringerToken)
The SpringerToken is only needed for your first order of Springer books (print and electronic versions). It is valid for a lifetime. For any further online orders you will automatically receive your author discount.
Further ordering information
- Payment methods
You may choose between credit card or invoice (options might depend on the delivery country).
- Shipping times
Shipping times are mentioned on each book’s homepage on springer.com and on your specific order confirmation.
- Tax charges
Tax is charged according to the delivery country. It is possible to enter a tax free code during the ordering process or on you springer.com user profile page (My Springer).
- Contact the author helpdesk for questions on author discounts
Invoice copy / invoice correction / statement of account
For any questions about your invoice or statement of account please contact our author helpdesk
What Is a Tax Return?
A tax return is a form or forms filed with a tax authority that reports income, expenses, and other pertinent tax information. Tax returns allow taxpayers to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes. In most countries, tax returns must be filed annually for an individual or business with reportable income, including wages, interest, dividends, capital gains, or other profits.
- A tax return is a documentation filed with a tax authority that reports income, expenses, and other relevant financial information.
- On tax returns, taxpayers calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.
- In most places, tax returns must be filed annually.
Understanding Tax Returns
In the United States, tax returns are filed with the Internal Revenue Service (IRS) or with the state or local tax collection agency (Massachusetts Department of Revenue, for example) containing information used to calculate taxes. Tax returns are generally prepared using forms prescribed by the IRS or other relevant authority.
In the U.S., individuals use variations of the Internal Revenue System’s Form 1040 to file federal income taxes. Corporations will use Form 1120 and partnerships will use Form 1065 to file their annual returns. A variety of 1099 forms are used to report income from non-employment-related sources. Application for automatic extension of time to file U.S. individual income tax return is through Form 4868.
Typically, a tax return begins with the taxpayer providing personal information, which includes their filing status, and dependent information.
The Sections of a Tax Return
In general, tax returns have three major sections where you can report your income, and determine deductions and tax credits for which you are eligible:
The income section of a tax return lists all sources of income. The most common method of reporting is a W-2 form. Wages, dividends, self-employment income, royalties and, in many countries, capital gains must also be reported.
Deductions decrease tax liability. Tax deductions vary considerably among jurisdictions, but typical examples include contributions to retirement savings plans, alimony paid, and interest deductions on some loans. For businesses, most expenses directly related to business operations are deductible. Taxpayers may itemize deductions or use the standard deduction for their filing status. Once the subtraction of all deductions is complete, the taxpayer can determine their tax rate on their adjusted gross income (AGI).
Tax credits are amounts that offset tax liabilities or the taxes owed. Like deductions, these vary widely among jurisdictions. However, there are often credits attributed to the care of dependent children and seniors, pensions, education, and many more.
After reporting income, deductions, and credits, the end of the return identifies the amount the taxpayer owes in taxes or the amount of tax overpayment. Overpaid taxes may be refunded or rolled into the next tax year. Taxpayers may remit payment as a single sum or schedule tax payments on a periodic basis. Similarly, most self-employed individuals may make advance payments every quarter to reduce their tax burden.
You can file a tax return by filling it out yourself, using a tax software program, or by hiring a tax preparer or accountant who will gather the required information from you and file it on your behalf.
The IRS recommends that filers keep tax returns for at least three years. However, other factors may require more prolonged retention. Some situations may require indefinite retention of filed returns.
If a tax return contains errors, an amended return should be submitted to correct the discrepancy.
Cliché or not, we all know the two inevitable things in this world: death and taxes. Funny enough, both of them take you by inches, nibbles, and bits at a time. Well, beating death is somebody else’s job. I’m here to give you some very general financial planning advice for the self-published author.
Two Disclaimers: This blog post is written based entirely on United States tax law. That’s where we’re located, as are the majority of our clientele, so it only makes sense for me to focus there initially. If you’re an international tax guru, though, please contact me. I’d love to do a follow-up for authors who don’t live in the USA, but I’m going to need some research assistance.
Additionally, we are not tax preparation professionals or experts in tax and business law. We stand by this advice as generally useful, but your situation may vary. Consult a pro before making any final business decisions!
What’s Out and What’s In(corporated)?
One of the first things new small businesses often ask themselves is if they should incorporate. At the new, small-business level, the main reason to incorporate is to protect personal assets from liens, debts, and company bankruptcy. Your three typical options will all do this for you. They are Limited Liability Corporations (LLCs), S-Corporations, and C-Corporations.
A-B-C, Easy as 1-2-3
So what’s the difference between an LLC, an S, or a C?
S & C-Corporations require a level of bureaucracy. These types of corporations require regular shareholder meetings, detailed minutes of those meetings, and generally more meetings across the board (even though those meetings are just with myself). Since all of that sounds more like an early level of Hell than it does like something I want to do to be successful, that alone is enough for me to give them a pass.
Additionally, S-Corps also have ownership rules, such as requiring citizenship and a limited number of owners. LLCs have no punitive ownership rules. So based just on simplicity, LLCs are starting to look pretty good.
But what about the taxes? I’d probably put up with some of that unfun stuff of C and S-Corps if it saved me money, right?
Well, the C in C-Corps doesn’t stand for cash when it comes to taxes. C-Corps face the dreaded “double taxation” problem. What I mean is, all net income is taxed at the 34% corporate tax rate and then all distributions and/or payroll are taxed at the owners’/employees’ income tax rates. That’s a lot of taxes!
By contrast, LLCs & S-Corps are “pass thru” entities. What this means is profit and loss are not taxed at the corporate level. Instead, owners are taxed at their own tax rates based upon the ownership percentage.
S and C-Corps have complicated rules. C-Corps have a more significant tax burden. LLCs dodge both of those issues. I think it’s safe to say that an LLC is almost certainly the best option for starting a small, probably single-person, publishing businesses.
One extremely important thing to keep in mind for the self-published author is that without choosing one of the three above company options, the author will be a self-employed/sole proprietorship. A sole proprietor’s personal assets are not protected and can be seized/forfeited to cover any debts of a failed company. If the self-published author plans on taking on debt to fund the business or acquire assets, then she should definitely choose one of the Big Three above.
Does Size Matter?
Yes! And I’m not just saying that so we can all snicker together like 8 th graders.
Growth isn’t likely to be a major decision point for a very long time unless the owner reaches a point she stops consuming all of the profit as income and can afford to start taking a salary. Meaning that a small company – let’s say operating at less than $250,000 net income (after all expenses) – will likely operate as an LLC for a very long time.
Once the profit begins to exceed that of what the IRS defines as a “middle class income” (roughly that magical $250,000 mentioned above), then a C-Corp could become the better option. It’s much more attractive to look at $1 million net income and paying yourself a salary of $100K with attributable taxes compared to $1 million in personal income tax.
There’s some common wisdom floating around the interweb that one should incorporate outside of their home state in order to reap the benefits of more business-friendly states. This is a thing, but it adds many layers of complexity that the average small business owner probably doesn’t want.
Larger corporations incorporate in other states when they can get tax breaks and the like for having corporate offices in one place and manufacturing/retail someplace else. As you can imagine, these aren’t likely to be concerns of the average small business owner, especially authors (even before weighing the costs of all the added complexity).
That said, you may live in a state that is just heinously unfair to your situation. If so, the added difficulty may be worth the financial incentive.
The Cost of Doing Business
Here’s some news: Setting up corporations costs money. The good news is, in most states, the fees for filing paperwork and getting business licenses are typically only a few hundred bucks. Are you ready for what could be the bad news?
Depending on a variety of factors and preferences, you probably need to budget at least a thousand dollars to set up your new incorporation. The reason is this stuff is hard. There are a lot of i’s to be dotted and t’s to be crossed, sometimes literally. You need this work done correctly, professionally, and on the first try. You should pay somebody to do it, and, sadly, good lawyers and accountants ain’t cheap.
I mean, if I suggested getting a professional for your covers, what did you think I was going to say about taxes?
So now you’re all set up as a business with a novel that has been professionally edited, designed, and published. Are you wondering how you’re going to tell people about it? Come back next week for some basic suggestions on marketing your new book.
Receiving a grant from the Canada Council for the Arts has different tax implications for everyone. The Council cannot provide advice on the income tax implications of your grant. The Council recommends that you consult with a fiscal advisor to determine how the grant you receive will impact your personal and/or business income taxes. It is important to note that the payment terms of a grant may have an impact on the calculation of the taxes payable.
Payee name versus Responsible party
When you receive a grant, you have to fill out the Grant Acceptance Form (GAF) that allows the grant recipient to select a payee for the grant as well as select to which bank account the grant payment must be issued. Although you may request to have the grant deposited in a bank account other than that of the grant recipient, the T4A at the end of the year will be made out in the name of the grant recipient for payments issued during the calendar year. The grant recipient – not the payee name on the cheque – is the party responsible for any tax filings based on funds received.
T4A – Box 105
Scholarships, bursaries, fellowships, artists’ project grants, and prizes
In accordance with Canada Revenue Agency (CRA) guidance, the Canada Council for the Arts enters all grants in box 105 of the T4A slips. Box 105 is described as follows on the T4A: “Scholarships, bursaries, fellowships, artists’ project grants, and prizes”.
Enter on line 13010:
Individuals who are not self-employed who received an art production grant should enter the amount per the T4A less eligible expenses on line 13010 of their tax return, if the amount received is neither business nor employment income. Please refer to Income Tax Folio S1-F2-C3, Scholarships, Research Grants and Other Education Assistance, and Income Tax Folio S4-F14-C1, Artists and Writers for more information (links below).
Enter on line 13499/14300:
An artist who is self-employed is generally considered to be operating a business, provided the activity is undertaken in pursuit of profit and there is objective evidence of business-like behaviour which supports that intention. If you are self-employed, report your income and eligible expenses on the appropriate lines for self-employment income (lines 13499 to 14300). Please refer to Income Tax Folio S4-F14-C1 for more information on self-employed income (link below).
Expected expenses versus Grant payment
You may request that Council issue multiple payments for your grant instead of receiving one big lump sum. It is important to understand why. A T4A is prepared yearly for payments issued during the prior calendar year. It will be easier for tax reporting purposes if you try to match your grant income and eligible expenses in a given year.
Income Tax Folio S4-F14-C1 provides examples of expenses that are deductible by an artist or writer. Example 7 illustrates how to calculate income from an art production grant that is neither business nor employment income, taking into account the applicable exemptions.
Paragraphs 3.98 to 3.101 of Income Tax Folio S1-F2-C3 also explain how to calculate the amount of an art production grant to be included in income when it is neither business nor employment income.
This income tax folio discusses the reporting of income by artists and writers from artistic and literary endeavours. It includes the criteria used by the Canada Revenue Agency (CRA) to distinguish artists and writers who are employees from those who are self-employed. This distinction is important in determining the expenses that are deductible in computing income.
An artist or writer may receive amounts that are neither business nor employment income, that may be required to be included in income. This Chapter also discusses the tax treatment of amounts received by an artist or writer that are to be used in the production of a literary, dramatic, musical, or artistic work (referred to in this Chapter as an art production grant).
This Chapter provides a general discussion of the taxation of scholarships, fellowships, bursaries, prizes, research grants, certain government financial assistance for education and training, forgivable loans and repayable awards. It examines the differences between the types of payments and benefits described above and explains how such amounts should be treated for income tax purposes. It provides the reader with an extensive review of the applicable legislation and is intended for readers who have a general understanding of the Act.
The Canada Revenue Agency (CRA) offers a free Liaison Officer service to owners of small businesses and self-employed individuals to help them understand their business tax obligations. A visit from a Liaison Officer is 100% confidential.
Other links and tools on the Canada Revenue Agency website
You can also find more information on “Tax Tips for Artists” on the CARFAC website.
6 Min Read | Mar 25, 2022
Being a freelancer means being your own boss, and that can be awesome. You go out, kill something, and drag it home every day. That’s how it’s done, baby! And you’re not alone. In fact, freelancers are expected to make up the majority of the U.S. workforce within the next decade. 1
And why not? As a freelancer, you choose your hours, what projects to take on, and where you work. You get to call the shots!
But even if you already have a full-time job, freelancing is a great way to earn some extra money. And let’s be honest, who doesn’t want more cash in their pockets?
But here’s some real talk: Whether you’re a full-time freelancer or just getting your side hustle on, it will impact how you file your taxes. And if you’re not careful, you could lose a large chunk of your freelance income to an enormous tax bill.
Tax Basics for Freelancers
What are the basics? There are three main things you need to know:
What’s the minimum I have to earn to pay freelance taxes?
If you earn $400 or more from freelance work in any given year, you are responsible for paying taxes on those earnings. Dave recommends you save as you go by setting aside around 25–30% of every freelance check you receive in a separate savings account to cover the taxes.
Business taxes can be confusing. Get the help you need.
Why so much? Because you have to pay both income tax and the self-employment tax.
What is the self-employment tax?
The self-employment tax is 15.3% and solely exists to cover your Social Security and Medicare taxes. 2
At a normal full-time job, your Social Security and Medicare taxes are taken out of your paychecks automatically—and your employer covers half of those taxes. But as a freelancer, you’re considered both an employee and an employer. That’s why the IRS wants you to cover the whole 15.3%.
The Schedule SE tax form helps you calculate your self-employment tax, which you’ll then report on your standard Form 1040. You might also be able to deduct the employer-equivalent portion (50%) of your self-employment tax on your 1040.
Remember, the self-employment tax is in addition to your regular income tax rate. That’s why Dave recommends setting aside 25–30% out of your freelance checks in a separate savings account: because that’ll cover both your income and self-employment taxes. This will keep you from getting hit with a huge bill at tax time.
When do I have to pay freelance taxes?
According to the IRS, you should pay taxes quarterly if you expect to owe at least $1,000 in taxes this year. 3 Since taxes from your freelance income aren’t being withheld throughout the year, there’s a good chance you’ll need to estimate your taxes for the upcoming year and pay the IRS on a quarterly basis.
So, how do you know if you need to do this or not?
That’s a great question. If you’re only making a couple thousand dollars or less freelancing each year, you can probably skip estimated tax payments and just report your freelance income when you file your tax return.
But if it’s looking like you’ll owe $1,000 or more in taxes, Form 1040-ES can help you ballpark how much you’ll make during the year and then determine your estimated taxes based on your projections.
If you underpay your estimated tax—these are estimates, after all—you’ll have to pay the remaining taxes when you file your annual tax return. (And yes, freelancers must file an annual tax return by April 15—just like everyone else.) On the other hand, if you overpay your estimated tax, you’ll receive the excess amount back in the form of a tax refund.
Keeping Track of Your Freelance Income
As a freelancer, you should receive a 1099-MISC from each business client who paid you $600 or more. 4 For example, if you’re an event photographer who worked several corporate events for a specific company in your town, you can probably expect them to send you a 1099-MISC form.
What if your customers or clients use PayPal or other online payment systems to pay for whatever product or service you offer? If that’s the case, you might get 1099-K forms from those online payment systems instead. 5
But just because you didn’t receive a 1099-MISC or 1099-K from a client doesn’t mean you’re off the hook. You still need to report all your self-employment earnings to the IRS on a Schedule C form.
A Schedule C tax form serves as the hub for all your freelance income and expenses. First, you’ll report all the freelance income you earned during the tax year in Part I. This includes amounts already reported on the 1099 forms you received from clients and amounts not yet reported from clients who didn’t send a 1099. After that, you’ll list your expenses in Parts II–V to see if you can claim any deductions.
Self-Employment Tax Deductions
Tax deductions lower your taxable income, potentially reducing your tax bill and saving you hundreds of dollars in the process. And as a freelancer, you get to claim a bunch of them!
But many self-employed professionals aren’t taking advantage of tax deductions. That means some freelancers are paying more taxes than they have to!
As a freelancer, you can claim deductions on expenses that, according to the IRS, are “ordinary and necessary” for the operation of your business.
Some of the most common deductions for freelancers include:
Advertising and marketing
Computer equipment and software
Travel and business meals
Careful documentation and detailed bookkeeping—like saving all your original receipts and invoices—can help you prove that those expenses were vital to your business, which will save you money come tax season.
One way to make the process of tracking your expenses simpler is to open a separate checking account specifically for freelance work. It’s a great way to keep your personal and business finances separate—and track your expenses so you can claim them on your income taxes.
Find a Quality Tax Professional
Taxes are complicated enough as it is—and they only get more complex when you throw multiple streams of income into the mix. One of the biggest mistakes you could make as a freelancer is to try and go it alone when tax season comes around.
Dave’s nationwide network of tax Endorsed Local Providers (ELPs) can help. Work with a top-rated tax advisor who will take the time to help you understand your tax situation and make sure you get every deduction you’re eligible for.
About the author
Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.
The Tax Adviser encourages you to submit articles or call to reserve a topic.
The Tax Adviser covers a wide range of tax information. As an editorial objective, The Tax Adviser deals primarily with the technical aspects of federal (and some state) taxation, providing practical, administrative, and technical commentary through articles and regular columns. Thus, the material has a broad range of appeal, satisfying the needs of anyone who must keep informed on federal tax matters. Qualified articles will be accepted from CPAs, lawyers, tax executives, and professors.
We request that you submit your article exclusively to The Tax Adviser; articles are not considered on any other basis. Please note that our acceptance of a manuscript for review is not approval to publish the article. It is our practice to send the article to at least two of our editorial advisers for their opinion on publishing the article, technical advice and constructive comments. The reviewers are expected to submit their decision within about four weeks.
Articles accepted for publication are subject to editorial revision. Regrettably, our budget does not provide for compensating authors of articles. However, as a token of our appreciation, an author will receive five copies of the issue containing his or her article. Also, 50 complimentary reprints of the article itself will be made available on request.
If you would like to have an article peer reviewed by an academic peer, please let us know.
Download author guidelines for suggested subjects and a guide to preparing a manuscript.
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Joining ASCAP as a writer is a great first step for your music career. Before you finalize that application, make sure you have joined as a music publisher, too
A publisher is a person or entity that controls how a musical composition is used and monetized. Publishers pitch the works that they represent to recording artists and music supervisors and license them for film & TV, as well as other uses. They also collect multiple revenue streams for their writers, including mechanical royalties (e.g., from the sale or download of recordings), sheet music sales and more.
1. You are missing out on $$$ without one.
When ASCAP distributes royalties for a performance of your music, 50% goes to the writer(s), and 50% to the publisher(s). If you want to access your publisher’s share, you will need to set up a publishing company with ASCAP.
2. It’s easy.
All you need to become an ASCAP publisher is a mailing address, email address, US tax ID number and about 10 minutes. You don’t even need to set up a corporation or fictitious business name to join – if you choose the “Individual/Sole Proprietor” option, you can simply enter your Social Security Number and you are good to go.
3. Set yourself up for the future.
4. You can name it (almost) whatever you want.
Starting a publishing company is more than just a great business idea. Since each publishing company name has to be different than every other publishing company name in the world, it is also an opportunity to flex your creative muscles.
Ready to join? Visit www.ascap.com/join and choose the “Writer & Publisher” option to get started. Already an ASCAP music creator? Select the “Publisher” option.
Help us build a stronger future for music.
#StandWithSongwriters and make your voice heard.
Whether you are just starting a digital marketing campaign or thinking about hiring a marketing agency, one of the questions you might be asking is: “Are marketing expenses tax-deductible?”
The answer is “YES!” The government allows you to deduct marketing expenses used to generate or keep customers. Advertising and marketing expenses qualify as an ordinary, reasonable, and necessary tax deduction. When done right and with professionals, marketing and advertising can have a high ROI.
Marketing and advertising expenses aren’t a particularly tricky tax-deduction as long as they are directly related to your business activities. Below we’ll break down 8 categories of marketing expenses that are tax-deductible, tell you which ones are not, and what is considered marketing according to the IRS.
8 Common Marketing Expenses That Are Tax-Deductible
1. Website Expenses
- Designing, developing, and creating your website
- Website fees for hosting and maintenance
- Ongoing website content creation
- Document all of the different accounts and companies you pay each month to deduct website expenses if you use more than one
2. Marketing and Advertising Expenses
- Marketing Plan or Marketing Strategy
- Content Writing
- Sales Enablement
- SEO Services
- Email Marketing
- Graphic Design and Branding
- Display banner ad campaigns (except political sites)
- Paid Media Marketing: Google AdWords or Search Pay-Per-Click (PPC) campaigns
3. Consultant or Marketing Agency Retainer
- Costs for hiring a consultant or marketing agency to conduct any of the campaigns above or below
4. Social Media Expenses
- Paying a consultant or marketing agency (anyone outside your company) to run your social media
- Content-creation expenses
- Fees to companies that manage your social media accounts, and subscription-based social media sites like LinkedIn Pro.
- Linked In, Facebook, Twitter, Instagram, ad campaigns
- Influencer Marketing (May require 1099 contracts depending upon the amount paid)
5. Technology and Marketing Software Expenses
- Monthly costs or annual subscriptions (which generally come with a discount) for software like the following:
- Any CRM, social scheduling tools, or marketing software
6. Print Advertising Expenses
- Ad space in newspapers, magazines, or billboards
- Creation and printing of advertising materials like brochures, mailers, or business cards
7. Multimedia Advertising Expenses
8. Special Promotions
- Publicity campaigns
- Sponsor for a local event or pay to have your logo featured on a local sports jersey (You can deduct the expenses for any special event with the goal that it would expose people to your business)
- Hosting seminars, webinars, or workshops promoting your business’s services
- Swag for clients, influencers, and staff to promote your brand include promotional items like water bottles, t-shirts, and notebooks
Deducting Marketing Expenses vs. Selling Expenses
Business costs for both marketing and selling are deductible, but in separate places on your business tax return.
- If you use your website for advertising, you may deduct web maintenance costs as an advertising expense.
- If you use your website for selling (having a shopping cart, for example), this is a cost of selling and is considered separately.
- Costs for temporary signs are considered advertising.
- Costs for permanent signs (that last more than a year) are not advertising, but signs may be depreciated as long-term assets.
- Advertising as an indirect political contribution is not deductible.
- Advertising on your car: the cost of placing an ad on a vehicle is deductible however, the cost of operating or driving the vehicle is not. Read more about what the IRS says about ads on vehicles here.
- Costs for help-wanted ads are a deductible business expense, but they are not considered marketing or advertising.
- Donations to charities or non-profits are not a marketing or advertising expense. However, these expenses may be deductible in other areas of your business or personal tax return. Check with your accountant for further clarification.
Marketing Expenses That Are Not Tax-Deductible
You can’t deduct costs that are primarily personal or hobbies, even though they have some promotion value. For example, if your daughter is getting married and you invite some of your best clients to the wedding, you cannot deduct the wedding costs. You may not deduct costs of personal hobbies carried on with business associates. For example, if you and a client like to go to NASCAR events, you can’t deduct these costs as marketing or advertising expenses.
- You cannot deduct advertising expenses associated with research and development activities.
- While you can deduct the cost of putting an advertisement for your business on your car (business or personal), you cannot deduct the cost of driving your car around town as an advertising expense. The IRS specifically discusses this subject, because it’s misunderstood.
- Advertising as an Indirect Political Contribution. You can’t deduct the cost of advertising in any publication or website used by or for a political party or candidate. No political expenses are deductible for businesses.
With any of these guidelines, you should check with your accountant to learn what tax deductions and filings are right for your business. If you plan your budget a year ahead, you’ll want to include marketing as a necessary operating expense that you can deduct from your taxes. This will help you get into the mindset of investing in marketing for your business this year and for each year to come. You’ll find you reach your revenue goals faster and have more to deduct from your bottom line.
Read more about which marketing and advertising expenses you can deduct in IRS Publication 535.
Looking to spend your marketing budget to maximize your deductions?
Laura is a Creative Business Strategist who cofounded LAIRE, Inc., a digital growth agency. Laura is an entrepreneur and avid writer with a love of studying marketing and high performance. Laura has trained hundreds of thousands of people as a speaker, trainer, and coach giving keynotes at seminars and conventions for the past 20 years. Laura absolutely lives for marketing, creating, and inspiring big ideas.
The Plain Writing Act of 2010 was signed on October 13, 2010. The law requires that federal agencies use clear government communication that the public can understand and use.
While the Act does not cover regulations, three separate Executive Orders emphasize the need for plain language: E.O. 12866, E.O. 12988, and E.O. 13563.
Executive departments and agencies must:
Have a plain writing section on your website. Start with our templates for your plain writing page and compliance report (DOC).
By July 13, 2011, agencies must:
- designate a senior official for “plain writing”
- explain the Act’s requirements to staff
- establish a procedure to oversee the implementation of the Act within the agency
- train agency staff in plain writing
- designate staff as points of contact for the agency plain writing web page
- publish a compliance report (DOC) for meeting the requirements of the Act on its plain language web page
By October 13, 2011, agencies must:
- Use plain language in any document that:
- is necessary for obtaining any federal government benefit or service or filing taxes
- provides information about a federal government benefit or service, or
- explains to the public how to comply with a requirement that the federal government administers or enforces
- Write annual compliance reports and post these reports on its plain language web page.
Request a free training session for your federal agency.
Subscribe to our mailing list
Learn about upcoming events and get the latest news from the federal plain language community.
The Plain Language Action and Information Network develops and maintains the content of this site with support from the General Services Administration.
Winners of the 21st Annual Law Student Tax Challenge
The Section is pleased to announce the winners of the 21st Annual Law Student Tax Challenge, a contest designed to give students an opportunity to research, write about, and present their analyses of a real-life tax planning problem. The competition is open to both J.D. and LL.M. law students. For the 21 st year of the competition each team presented their oral arguments virtually before a panel of distinguished tax lawyers and tax court judges, with the winners announced at a virtual awards ceremony. Holden Branscum and William Gebo of University of Memphis Cecil C. Humphreys School of Law were awarded first place in the J.D. Division. Their coach was William Kratzke. Adnan Alam and Melia Mbanefo of Temple University Beasley School of Law were awarded first place in the LL.M. Division. Their coach was Andrew Weiner.
Winners, J.D. Division
1st Place: Team 18
Holden Branscum and William Gebo of University of Memphis Cecil C. Humphreys School of Law, 1st place winners for the J.D. Division.
2nd Place and Best Written: Team 37
Max Cargal-Bley and Han Shen of the University of Washington School of Law, 2nd place (and best written) winners for the J.D. Division.
3rd Place: Team 6
Allison Martinez and Chloe Webb of the University of Missouri – Kansas City School of Law, 3rd place winners for the J.D. Division.
Winners, LL.M. Division
1st Place: Team 7
Adnan Alam and Melia Mbanefo of Temple University Beasley School of Law, 1st place winners for the LL.M. Division.
2nd Place: Team 9
Paige Cham and Anastasia Jones of the University of Florida Levin College of Law, 2nd place winners for the LL.M. Division.
Best Written: Team 5
Otto Bosch and Micah Moore (not pictured) of the University of Missouri – Kansas City School of Law, Best Written winners for the LL.M. Division.
- Hsin-Ming (Mindy) Berlin and Joseph Thomas
Villanova University Charles Widger School of Law
- Chase Hewitt and James Phillips
University of Maine School of Law
- Trevor Rowland and Andrii Onysko
University of Oregon
Entry. Rules, and Problems
- J.D. Rules
- LL.M. Rules
- J.D. Problem
- LL.M. Problem
LL.M. Problem: Employee Location Data (Excel)
LL.M. Problem: Form 8986
Videos: 21st LSTC Winners Oral Round
How Does the Challenge Work?
An alternative to traditional moot court competitions, the Law Student Tax Challenge (LSTC) is organized by the SectionвЂ™s Young Lawyers Form. The LSTC asks two-person teams of students to solve a complex business problem that might arise in everyday tax practice. Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to a client explaining the result. Based on the written work product, six teams from the J.D. Division and four teams from the LL.M. Division receive a free trip to the SectionвЂ™s Midyear Meeting, where each team presents its submission before a panel of judges consisting of the countryвЂ™s top tax practitioners and government officials, including tax court judges. The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community.
Scott Woody, who won the J.D. Division of the 2016 LSTC alongside teammate Frank Cardoza, writes about what the LSTC has done for him.
Testimonial from 2016 LSTC Winner Scott Woody
Participating in the Law Student Tax Challenge (вЂњLSTCвЂќ or the вЂњChallengeвЂќ) was an invaluable tool in developing my career as a tax attorney. The Challenge allowed me to develop and demonstrate real world legal skills as well as provided me with multiple networking opportunities.
The Challenge helped me develop the type of research and writing skills that are invaluable regardless of if I chose to become a tax attorney or not. The Challenge also allowed me to develop a written work product, in the form of a вЂњpartner memoвЂќ and a вЂњclient letterвЂќ that I could present to potential employers to demonstrate my day one abilities. Some potential employers even commented on how they felt that kind of work product was more valuable than even a journal article because it showed a product that was researched, written, reviewed, and rewritten by me and my partner, by ourselves. The Challenge also allowed to me demonstrate my ability to commit to a project and to show I had the perseverance to complete it.
The Challenge also presented, and continues to present, me with multiple networking opportunities- both within the ABA Tax Section and in the general legal community. The ABA Tax Section is a very open and welcoming community and when coupled with my participation in the LSTC, most section members were quick to speak to me in person or via email. In addition, the mere mention of my voluntary participation in a national competition during law school remains an instant conversation starter at any conference or legal gathering I attend.
Simply put, I can say without a doubt my participation in the Challenge was a significant factor in where my career is today.
We have created an archive of previous Law Student Tax Challenge videos, problems, best written winners, results, and more.
Self-published authors face daunting questions about what they can and can’t write off on their tax returns. We at Self-Publishing Relief are not accountants, so it’s important that you get the recommendations of a trained personal accountant for your unique tax situation. But we can offer you some generally accepted information to help you begin sorting out your self-publishing finances.
Q: As a self-published writer, what can I write off on my taxes?
A. Generally speaking, you can write off any expenses that go directly toward the advancement of your writing career: printer paper and other office supplies, plus books or other media purchased for research are some examples. Travel for work-related events is usually an acceptable write-off too—as long as your trip isn’t a vacation in disguise. Writers who have a home office space dedicated specifically to writing can also write off a percentage of their mortgage or rental payment based on square footage. Learn more about common write-offs for creative writers.
Self-published writers can also write off the cost of publishing, including costs related to editing, design, typesetting, printing, etc. If you pay an independent contractor (like a freelance editor or a personal assistant) over $600 a year (at the time of this writing), ask for a W-9 form so that you can write off that expense. Corporations do not need to send you a W-9.
Q: What shouldn’t I write off?
A. If something you’re hoping to write off is used for both personal and professional tasks, talk to an accountant about writing it off.
Q: What if I lose more money than I make?
A: As long as you have documentation that can prove you’re serious about making a business of your writing, it shouldn’t matter if you lose money on your efforts. To prove to the government that you’re a legitimate self-publishing enterprise, consider setting up separate business accounts with banks and credit card companies, applying for a Federal Employer Identification Number, getting a local business license, etc. Learn more about proving the legitimacy of your writing business.
Q: Do I need a specialized accountant?
A: We strongly recommend that you hire a personal accountant if you are going to write off business expenses for self-publishing. Tax software programs are not always adequately equipped to make judgment calls about your indie expenses and income. And a professional accountant can help advise you if you’re audited. If you find yourself making a lot of money, you may want to research accountants who specifically handle taxes for writers.
Q: How should I keep track of my expenses?
A: Writers can itemize their expenses into categories like:
- Web and online expenses
- Professional services
Ask your accountant for a full list.
Q: What should I do about my self-published royalties?
A: You have to report all income to the government, whether from e-book royalties or print sales. Keep careful documentation.
Write Off With Care
Demonstrating to the government that you are attempting to make a profit in spite of taking heavy losses might be fine for a while. But after a time, Uncle Sam may start asking questions. In a best-case scenario, you should be able to eventually show some profit for your self-publishing efforts—five straight years of losses might raise a red flag. If you are audited, be prepared with thorough documentation and accounting.
Question: Do you write off self-publishing expenses?
A Tax Preparer, or a Tax Accountant, is responsible for submitting tax forms on behalf of clients to pay the appropriate amount and maximize the client’s return. Their duties include interviewing clients about their income and expenses, auditing account details and acting as a liaison between clients and the IRS.
Tax Preparer duties and responsibilities
Tax Preparers perform many accounting, customer service and organizational tasks to help maintain the financial health of their clients or employer. Their duties and responsibilities often include:
- Informing clients or employers on the tax preparation process
- Collecting relevant financial records, including pay stubs and income statements
- Inputting data from financial records into tax return software or databases
- Using applicable federal, state and local tax law to determine deductions and how much each client will pay or earn on the return
- Completing and filing tax documents with appropriate agencies, like the IRS, state and local government entities
- Acting as a representative for clients with applicable agencies as required
- Building customer relationships to promote and expand the business
Tax Preparer Job Description Examples
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What does a Tax Preparer do?
Tax Preparers work for financial institutions to provide specific tax advice and submit a person or business entity’s taxes. Their role is to produce error-free tax forms on behalf of a client to maximize their financial health. They review the past tax returns of their clients and collect new tax data to calculate how much their client owes. They give advice on future tax planning and communicate with clients about upcoming tax requirements and deadlines. Tax Preparers can upkeep an individual’s tax files or work with a business’s tax records and help distribute W-2s to employees.
Tax Preparer skills and qualifications
Tax Preparers use their transferable soft skills, technical abilities and industry knowledge to ensure returns are on-time, complete and accurate. These skills and qualifications often include:
- In-depth knowledge of applicable tax laws, regulations and deadlines
- Proficiency with common tax preparation, word processing and spreadsheet software applications
- Familiarity with the tax return submission and confirmation process, including how to navigate the IRS and other government entity online platforms
- Excellent customer service skills, including patience and flexibility
- Great organizational skills, including time management and strategic thinking
- Strong written and verbal communication skills
- Keen attention to detail
Tax Preparer salary expectations
A Tax Preparer makes an average of $16.45 per hour. Pay rate may depend on level of education, experience and geographical location.
Tax Preparer education and training requirements
Tax Preparer candidates should have at least a high school diploma or GED and completed coursework in tax preparation, accounting, bookkeeping, business finance and other relevant topics. Roles that only handle simple tax returns may only require minimum education and on-the-job training. Single corporations or roles with more complex tax return duties may require an associate or bachelor’s degree in accounting, finance or another relevant field. Previous training with federal, state and local tax laws may be demonstrated with completed federal and/or state examination and certification or licensure.
Tax Preparer experience requirements
Entry-level Tax Preparer candidates may have the minimum education with 1 or 2 years of previous work experience in customer service, administrative support, accounting or another relevant field. Some candidates may have worked only 1 or a few previous tax seasons in this role. Experienced candidates may have 3 or more years of previous experience in those fields or have previous experience as a Tax Preparer. Other experienced candidates may also have experience as a Certified Public Accountant, demonstrating more advanced knowledge of best practices and experience with tax audits.
Job description samples for similar positions
If the job description for the Tax Preparer does not suit your needs, view descriptions for related professions:
Frequently asked questions about Tax Preparers
What is the difference between a Tax Preparer and a CPA?
A Tax Preparer is a niche accounting role while Certified Public Accountant (CPA) is a broad designation that can refer to any type of Accountant who has fulfilled their certification requirements. Tax Preparers generally work as part of a team, while CPAs can choose to work independently to provide accounting consultations for businesses or individuals. Not all Tax Preparers are CPAs, although some do hold this designation to show their professional qualifications. CPAs can choose to focus on taxes like Tax Preparers do, or they can perform other accounting responsibilities like overall records compliance and balancing a company’s financial recordkeeping.
What are the daily duties of a Tax Preparer?
Tax Preparers spend most of their time in an office environment reading through financial documents and filling out forms. They request specific forms from the IRS and use them to submit tax returns for their clients. Tax Preparers may also talk with their clients in person to learn more about their recordkeeping practices and possible opportunities for write-offs. To get larger returns for their clients, Tax Preparers review tax laws to find tax credits and exemptions. They sign tax forms on behalf of their client and mail them to the IRS, then update their clients on the status of their return.
What are the characteristics of a good Tax Preparer?
Good Tax Preparers are focused, routine-oriented people who have the natural math skills to perform correct calculations on tax forms. They are highly organized and can easily access the records they need, recalling where they filed specific forms, receipts and account reports. Tax Preparers are also excellent researchers who can find financial details for clients who had poor recordkeeping practices prior to hiring a Tax Preparer. They are logical and strategic, able to make suggestions about future business practices that could reduce their tax costs or make their accounting more efficient.
What should you look for on a Tax Preparer’s resume?
When reviewing resumes for a Tax Preparer, look for some form of formal training in accounting practices. Tax Preparers should include information on their tax preparation certification if they live in a state where it is required. Previous bookkeeping experience and experience filing taxes for businesses demonstrate that a candidate has the technical skills to uphold compliance when preparing tax documents.
Job Description Examples
Need help writing a job description for a specific role? Use these job description examples to create your next great job posting. Or if you’re ready to hire, post your job on Indeed.