The Tax Man Cometh: Recordkeeping Tips for Writers

Photo courtesy of FreeDigitalPhotos.net/koratmember

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)

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  • http://www.lizcowenfurman.com/ Liz Cowen Furman

    Because of the Motel I have already had to do this and I need to streamline. I have thousands of receipts by the end of the year that I stuff in a file then go through in January. Takes a couple days and I know if I were to separate them as I go it would be easier but alas…I usually feel good if I wrote on the top of each receipt what it was for and what category. You’ve inspired me to get more organized.

  • Catherine Young

    Hi Vonda,

    Not there yet, but have no idea what direction God is taking me after the latest twist. I am finishing my dissertation this summer — yes, it’s long overdue!! Then what? Don’t know but Jeremiah 29:11 tells me that His plans are “to prosper me and not to harm me, plans to give me hope and a future” (NIV).

    Plan to take time this summer to set up that business account and get a card with it. Dave Ramsey’s Financial Peace University has taught me where I can get that money — so cool that God, through others including YOU, is teaching different elements of writing and business upfront.

    Thanks so much for following God’s leading for repeats!!!
    Catherine

  • http://www.jubilantlight.com/ Nan Jones

    EW-W-W-W-W…I’m hyperventilating just reading this – lol! I don’t have a business brain and the thought of it is like sticking pins in my eyeballs. Well…that’s a little extreme (I’ve had a hard day :-) ) What is the dollar amount that must be reached before being required to call it income? Can expenses be claimed even if that dollar amount has not been reached? I love you Miss V.

    • http://www.VondaSkelton.com Vonda Skelton

      Oh believe me, that’s exactly how I feel! But that’s part of being a good steward of what God gives. If you’re getting paid for anything, it’s income. But remember, the income is usually MUCH less than the expense at the beginning…which means you’ll work at a loss for a while.

      • http://www.jubilantlight.com/ Nan Jones

        It’s good to know I’m not alone. :-) I realize that income is income, but I thought there was a dollar amount that needed to be reached before the IRS considered it income that needed to be claimed – like $1000 or something like that. Or does the ball start rolling once you become a “business” and then it doesn’t matter what the numbers are? At that point income is income and expenses are expenses…? Thank you for being sensitive to my allergic reaction to business ;^)

  • Ckknefely

    A timely reminder, Vonda.

    Making copies of paychecks before deposting them also helps me remember the small jobs as well as the lucrative ones.

    • http://www.VondaSkelton.com Vonda Skelton

      Yes, I do that, too. Helps keep it all straight until you get them entered into the bookkeeping system. Thanks for the reminder!

  • Anonymous

    Whew! This business of ministry is, well, entrepreneural.

    • http://www.VondaSkelton.com Vonda Skelton

      There’s a lot going on right now related to business, isn’t there? Looking forward to hearing more about your system. :-)

  • Angela

    Vonda, Thanks for the tips for us maybe someday writers.

    • http://www.VondaSkelton.com Vonda Skelton

      But don’t forget to use them now to be ready when you do have an income. :-)

  • Glenda Mills

    Thanks Vonda, for good info!

    • http://www.VondaSkelton.com Vonda Skelton

      Glad it was helpful, Glenda. :-)

  • Anonymous

    I totally feel your pain. I finally got my schedule C finished on Good Friday. Of course that was after several weeks of gentle reminder emails from my…organized…husband.

    • http://www.VondaSkelton.com Vonda Skelton

      So you’re not that far ahead of me–yay!

  • http://www.susanstilwell.com Susan Rinehart Stilwell

    Great info, Vonda! Maybe someday I’ll actually have some income to record ;)

    • http://www.VondaSkelton.com Vonda Skelton

      You will, Susan. I have no doubt about that–if that’s what you want! :-)

  • Ellen Andersen

    It’s hard to believe I’ll ever get to the point where this is necessary, especially since I’ve never written anything for money.

    Even if I do get to that point, I don’t understand number 3 with funneling everything through one account, and splitting expenses into separate accounts.

    • http://www.VondaSkelton.com Vonda Skelton

      That’s the whole idea, Ellen. Set everything up now and keep records now. You can file as a sole proprietor now and use your expenses as the reasonable expenses of starting a new business. That way you have everything in place when you do start earning an income.

      Please know I’m not a tax expert, but it’s generally accepted that if you’re sincerely trying to get your work published–versus simply writing as a hobby–you can deduct reasonable expenses. Conferences, travel to conferences, copy paper, etc.

      Do some research on the internet and you’ll find lots of helpful info at irs.gov and others.

      With the credit card, the idea is that you can charge everything, then once a month when you pay the bill, you separate the different accounts involved in what you’re paying. Like when you pay your $35 credit card bill, you can designate that $5 went to office expenses/supplies for copy paper and $30 went for a critique at Blue Ridge–One check with the total divided into the different expenses.

      I hope that helps!

  • Delores Liesner

    Great post Vonda. I’d add one more thing – to either scan or copy receipts. Many of the receipts nowadays seem to have fading ink and by the time one goes to do the taxes the receipts are not legible.

    • http://www.VondaSkelton.com Vonda Skelton

      That’s a great reminder, Delores! Thanks for sharing it. I’m afraid that’s another one of those things that I know I SHOULD do, but don’t. This is a good time for me to start it!