Yes, this is how I feel. Like I’m drowning.
In honor of the approaching tax deadline and in confession of my yearly tax ritual, I’m reposting this blog from last year.
Some of you have seen it before and think there’s no need to read it, but I’ve added a few more details that might be helpful.
Others think you don’t need to read this post because you’re not “there” yet. That’s the whole point. You need to be “here” before you get “there.”
It will make your life much easier when “there” is where you’re “at.” Hahahaha!
The Tax Man Cometh: Recordkeeping Tips for Writers
Yes, I do realize that I’m running out of time. I’ve been working on taxes off and on for weeks now, but obviously, I’ve not been working fast enough. Believe me, it’s not that I’m wasting time watching TV or chatting on Facebook for hours at the time. It’s just that I’ve hardly been home AND there’s so much stuff to do FOR taxes before I can actually DO taxes.
My entire writing life has been this way when it comes to taxes. If you’re early in this writing journey, I encourage you to begin now to organize so that your stuff is in order as your business grows. It’s never too early to do things right, so here are some hints to get you started.
1. Treat your writing as a business. I admit, when I first started out, I HOPED this would become a business, but I didn’t treat it as one. I fit it in as life allowed. I wrote when I felt like it. I kept records only if I happened to think about it. If I had started out with a system in place for production, training, and bookkeeping, I wouldn’t have had to reinvent and play catch up each time God moved me to the next level…or the next tax season arrived.
2. Open a checking account. Believe me, it’s much easier if you go ahead and start out with a separate checking account for your business. Most banks offer DBA accounts, some without any fees or minimum balance. But even if there is a minimum, perhaps you can transfer the that amount into the account and forget it’s there. That way you can avoid the minimum balance charges. Then when God blesses your writing and you have enough to do without the cushion, you can return the money. With all the debits and credits funneling through a separate account, it helps to keep all your bookkeeping in one place without having to pull out the information from your personal account.
3. Charge expenses through one credit card when possible and pay it off each month through your business checking account. This not only helps simplify your bookkeeping by funneling everything through one account, but it also allows you to split expenses into separate accounts with only one check. And if you use bookkeeping software, it will maintain the account entries for you, which is very helpful at tax time.
4. Keep your receipts to document your expenses.
5. Set up a bookkeeping system early in the process. By having a system already in place, you can easily add line item accounts as you grow and need them, rather than trying to go back at tax time and develop a whole system of accounts for all the receipts you’ve accumulated. Also, be sure you are consistent with your account names. This is HUGE! One time I call something Training. The next time I call it Continuing Education. So when tax time comes, I have to go through and combine numbers from the separate accounts. It’s very time consuming have to go through each entry and make sure they’re all combined into the right accounts.
6. Account for all legitimate expenses and income. Report any income you receive, regardless of the amount. If you receive $5 for a devotion, count it as income. If you spend $5 on a pack of computer paper, claim it as an expense. That is the give-and-take of business and separates you from the hobby-writer. Of course, as with any small business, you’ll most likely be paying out expenses long before you’re receiving any type of income.
7. Maintain a mileage log. Trips to purchase supplies, mail manuscripts, and attend writers conferences and local writers’ groups are all legitimate mileage deductions. And since those business miles are deductible, I try to combine trips to the grocery store with deductible trips. Just remember, it only works if you would pass your grocery store on the way. You can’t go out of your way and still count it.
8. Keep a calendar. Document your meetings, what you worked on at home, phone calls, and other business-related activities. That, too, is documentation that you’re a business-person, not a hobbyist.
9. Pay your taxes. Be sure to check your state’s retail tax laws in addition to the income tax laws. If you’re selling products of any kind, there’s a good chance you’ll owe taxes.
Start now to treat your business as a business and you’ll be way ahead of most writers when it comes to organization. You’ll certainly be way ahead of where I was at that time. Sometimes I don’t think I’ll ever catch up!
(Photo courtesy of www.FreeDigitalPhotos.net and koratmember)