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It's that time of year again, so I just wanted to share some extremely basic tax advice for new writers in the US (thread):
1. You are essentially an independent contractor. You'll need a real accountant, (avoid Turbo Tax, HR Block, etc) but any reliable accountant should be able to handle independent contractor filings and quarterly tax payments (more on that later) so it shouldn't be super expensive
2. Quarterly tax payments: this is how you pay your taxes throughout the year and don't get smacked with a huge bill when you go to file. Some writers like the set aside 50% of everything they earn but I'd rather pay a more precise number in smaller payments.
3. How to do this? Estimate your earnings for the calendar year. Got a signing payment in February and a deadline payment in November. Add them up? Expecting a little freelancing work? Add that. Royalties and publication payments as you move forward.
4. This can be tricky because some of this is difficult to guess. What if you don't turn in the manuscript on time? What if the publication date gets pushed? Unexpected royalties? No big deal! Shoot your an accountant an email and ask if your quarterly payments should be revised.
5. So that's your income side. Now we get to deductions. Set up a system that works for you in which you can track ALL work expenses. And there are a lot! Convention travel, postage, newsletter fees, website costs, new keyboard, pretty much any book (gotta keep up your field).
6. I do this two ways. Paper receipts get stuffed into an envelope marked tax receipts and email receipts get entered onto a spreadsheet. At the end of the year, I add it all together, making sure I've got agent fees, office dimensions, etc. Send it to your accountant and done.
7. I imagine this gets far more complicated the more varied streams of income you have, but it's worked for me thus far. I've spoken to a few different accountants about incorporating and none have advised it.
Hope that helps some of you!
Hope that helps some of you!
8. Also, get at least a second or third quote from any accountant and don't be afraid to walk away if you get a sketchy vibe or they're throwing wild numbers at you in regards to fee. There are absolutely people out there who will prey on your inexperience.
