Self-employed and freelance writers may yearn for the simpler
times of W-2s and 1040As, and it may seem particularly daunting if this is the
first year (2014) that you are filing as self-employed. If this year (2015) is
your first year, then use this as a guide to prepare for next year. You should
receive 1099s from any clients you’ve done at least $600 worth of work for, but
don’t forget to keep an accurate report of all business income you’ve received
during the year.
Whether you use a professional tax accountant (preferred) or
not, you should be familiar with the different expenses and forms. By the way, your
fees for business-related tax and/or legal advice are tax-deductions. Our business
tax accountant once told us that “a good accountant pays for themselves”. You
can access IRS forms and publications at http://www.irs.gov/Forms-&-Pubs
so that you can see what type of information is asked for.
Tax time really isn’t as complicated when you’re prepared.
Record keeping is crucial. Gather all business related receipts which,
hopefully, you’ve been throwing in a shoebox throughout the year. You will want
to include the costs of all business supplies such as stationary, books, pens,
printer paper, envelopes, and other necessary supplies. Don’t forget rolling
carts, easels, table covers and other supplies you need for author events. If
you require any special clothing for business purposes that MAY be eligible for
tax deductions also.
Did you purchase a new computer, office machinery, a car, or
anything that you use for business? Even if you made the purchase within the
last few years, the item may be subject to depreciation so make sure that you
have proof of date of purchase and the cost. There are formulas available to
figure Depreciation of Business Assets, many
of these can be found with an internet search and professional tax accountants are
usually quite familiar with the latest formulas and rules. If you took a
business loan be sure to deduct the interest you paid.
Do you rent office space or lease office equipment or a car
used for business? These costs need to be counted in your expenses. Office
utilities, if separate from your home and used solely for your business are
business deductions. If you use a designated home office and it is used
exclusively for work purposes, then you can deduct a percentage of your home utility
bills that is equivalent to the space your dedicated office takes up in your
home; be careful about the percentage you report, if you are audited this could
be a major sticking point. Home office phone charges may be deductible — for
one home phone you need to keep a record of business calls and use that cost
only, but if you have a second line, you may be able to deduct that line cost
in entirety. Cell phones used for business are also tax deductible. The cost of
business insurance or the percentage of home insurance (equivalent to a home
office) may also add up to deductible expenses.
Advertising doesn’t have to come from high-powered ad
agencies to be counted as business expenses. Business cards, postcard mail
campaigns, swag that you give away at author events or during contests,
websites, Facebook ads, and ads you put into local charity journals are all
considered advertising. If you have to travel, keep a record of mileage on your
car, tolls, mass transit fares, overnight lodging, and restaurant dinners; all
costs should be deemed reasonable and not excessive. Don’t forget to include
the costs of business “entertaining” such as a dinner where you court a
publisher, etc. — again all costs should be reasonable based on average values.
Writing Exercise: Describe how it feels to work for yourself,
be sure to include your hopes and fears. What are your goals? If you’ve been
self-employed for a while, what would you do different knowing what you do now?
Why did you make the decision to freelance as opposed to working for someone
else?
Writing Prompt:
If you could designate a corner/nook in your home, or even a full room,
as a designated office, make a list of furniture and supplies you would need to
fit that real space.
Challenge Assignment: Make a detailed marketing plan for promoting
and selling your writing in 2015. Include a budget, advertising outlets, event venues
and work schedules.
