Monday, January 16, 2012
It snowed here in Chicago last week. Snow was falling when I woke up Thursday morning, and it didn't end until late Friday afternoon. We wound up with five inches of the white stuff, and were only saved from more because the ground was still warm due to the fifty-degree weather preceding the storm. Still, it made for some shoveling, and that I didn't mind. Shoveling gave me an excuse to abandon the dining room where I was struggling through the annual chore of sorting through bills, receipts, and records needed for filing our income tax.
(It also gave me that righteous feeling of burning off some calories, something much needed considering my post-holiday scale numbers.)
Thankfully, my husband does the major work on our taxes. My job consists of putting the records for my two C-Schedule forms into some kind of recognizable order, 'recognizable' meaning our accountant won't tear her hair out when she sees them.
You see, I have a bad habit of tossing everything into a folder in the file cabinet with the promise that "I'll get to it next week." Like tax procrastinators everywhere, "next week" usually means somewhere around April 10th.
This year, though, I decided to mend my evil ways. With my latest writing project finished and off to be formatted, I dug into my tax folder early. Good thing I did. It seems I'd misplaced the pamphlet from the Illinois Tollway Authority on which I'd scrawled the user name and password I use for their website. Without that, I had no way of downloading my toll records for the year. That might not seem a big deal if you don't use your car for business, but as a writer, I travel a lot, and those tolls add up quickly.
If you're reading this and you write on an active basis with profit as your goal, do you use Schedule C to report your income and losses? If you don't, you're liable to run into problems with the IRS. Royalties, advances, and any other profits from the sale of your books -- private sales at book fairs, presentations, libraries, or other customer events -- must be recorded on a Schedule C. Business expenses such as mileage and tolls to and from book events, lodging costs for conferences at which you're speaking, and ordinary business expenses connected to your writing -- office supplies, editing fees, advertising and marketing costs -- are deductible on a Schedule C form, as is depreciation of home office equipment such as your computer.
Whatever you do, don't be tempted to avoid paying the self-employment tax by reporting book profits -- royalties or other payments -- as "Other Income" on a Schedule A form. The IRS may treat your writing as a hobby rather than a business and may even audit your past tax returns, leaving you in a whole heap of trouble.
My best advice to serious writers is, get yourself a good accountant who understands publishing and the tax laws related to it.
And don't be like me and put off your tax chores until the last possible moment. I was lucky and eventually found my ITA pamphlet tucked in with the 2008 tax forms. How it got there I'll never know, but it sure came in handy for recording my 2011 toll payments. If I'd waited until April to look for it, I'd have been scrambling to get done by the 15th.
Then I really would have been snowed under! :)