Sunday, March 07, 2010

Tackling Taxes if You Are a Self-Employed Writer, Poet and/or Artist - The Basic Organization

(I had this cartoon up last year around this time and well, I think it's funny enough to have it make a return showing...)



I am not an accountant and will not pretend to be one here.

In fact, I hate doing taxes so much, I have never done my own, but since college have paid someone to do them. Even when I was Top-Ramen-Eating broke, I went to Sears and had them done byH&R Block for $50. Taxes are an area where I believe people know more than me and I don't like to mess around with them, so I will pay them do to the chore I dislike the most...yes, even more than cleaning the bathroom.

But I'm writing this post is just to pass along some information I received last year from our tax accountant in the job of keeping track of things as a freelance writer or artist. It's a question I get a lot this time of year and thought maybe the info could help you out a bit.

If you haven't created files for your receipts & income this year or become organized with your self-employed/freelance part of your life, it's not too late, it's only March, you can start keeping track of your expenses and earnings right now. (And if you are making $$ off of your writing or art, I am pretty sure you need to let the IRS know each year...)


Here's how I organize my earnings and expenses for my writing life.

Note: I live in Washington State, so the rules, laws, etc. might be different than your state so make sure you look into it so you get it correct for yourself. I am not an expert, just someone who is trying to follow the rules and stay organized.

So here is my basic organization for my writing life and then I'll break it down a little more.


Since I am self-employed, the most important thing I can do is keep my receipts on expenses, keep track of my mileage, and keep track of how much income I made as a writer.

Here is my basic breakdown that I organize by--

EARNINGS
EXPENSES
MILEAGE

What I usually do is just have one big folder in my desk file drawer for all of these.

I organize it a couple days before our appointment with our tax accountant, as that way everything is in one place and I don't have to spend all year thinking about it.

My yearly process is like this--I get a receipt and put it in the folder. I win a poetry contest or am paid for a reading, I put the check stub in the folder. I drive some place to give a reading, I put the mileage in my folder. That's it, I just do that all year long. It's simple and doesn't take any time.

Another way you can do this is to have 3 folders near your desk or where you can put in all your receipts, check stubs, or notes (in the case of mileage) for these three items. This may help you at first remember what you need to keep for your taxes.

* * * *


Once you have this system down, you can break down these categories even more.

Expenses can be broken down into:
Meals
Lodging
Books
Printing/Other Expenses
Other Home Office Expenses (if you have a home office)


Since I have a home office, my tax guy needs these numbers for the year as well since a certain percent is deductible--

Electric:
Water:
Garbage:
Propane:
Phone/Internet:

****There are certain rules about what a home office consists of, so definitely look into that because I know not every home office counts. My home office is the writing studio I build (aka Shed of Kells) and it does count as a true home office.

For me, paying the extra fee to have an accountant take care of this for me and to have someone who will answer all my questions is completely worth the charge than for me to do my own taxes.

So that's about it. That's how I organize my taxes for my writing life.

Each year it gets a little easier because I know what I'm looking for and am supposed to keep. It's pretty much a habit for me to just toss all my receipts, payment info, and mileage into my folder. And 2010-Kelli is currently thanking 2009-Kelli for being so organized, it makes this time of year so much easier.

Happy Refund Check to you! (I hope!)

~

5 comments:

Jessie Carty said...

the one question i always wonder is when do you need to file/claim? if you only bring in say $1000 gross is it worth the bother?

Kells said...

Hi Jessie,

I'm not sure what the amount is. I think once you decide to declare your writing as a "business" then you just report every year (whether you run a loss or not - and even if you only make $100).

I think once you make writing not a hobby then you declare everything. I'd talk to someone who knows something about taxes. I am definitely not the expert, this is just how I've been doing things, so I am not sure of all the laws, details, etc. We do everything through our tax guy, so he always knows what's up.

best,
Kel

Juan said...

Searching the net I came to this page, maybe you guys can answer my question: I am a Net. Engineer (Master in Computer Science) got tired of US and retired before my time in the year 2000, I constructed a house and live in the middle of nowhere between mountains in the SW of D.R. and thanks to the generosity of Banco Central of Dominican Republic and the high interest it pays I don't need to work, my first book is almost ready for press and the second is in the making, the question is about time, can I declare that I took the whole year writing the book? Every year of work you get like 4 points for your retirement in US, do they recognize an interdependent writer all the time that he takes to write a book like if he were actually working the whole year? If so, can I also declare office, internet and electricity expenses?

Thanks!

JMC

Juan said...

sorry for the typo, I have different dictionaries and spell checkers for 3 languages and they do have a mind of their own!

Kells said...

Juan,

I have no idea. Sorry. I'm not an accountant and just was sharing some info my accountant told me. I'm not qualified to give out tax advice. You will probably want to speak to someone who is an accountant or in the IRS. Wish I could help. But congrats on your book.

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