No one likes thinking about their taxes, let alone actually doing them. But they are a reality of life, and if you’re self-employed, the become even more complicated than they are for the average working person. There are more calculations, more receipts to save, and kiss goodbye using any of the IRS’s simple forms.
This is why I advocate planning early. Please note here, I am not a tax professional. Most agents do not have accounting backgrounds (though likely some do), so it is important that you speak with an actual accountant when it comes down to doing your tax return. However, I can give you a heads up regarding some of the things to keep an eye out for so you have what you need to file.
Start before you publish. Yes, that’s right. Even if you’re still in the early phases of shopping your novel to agents or editors, you should already take a professional outlook when it comes to your finances. There’s no way of knowing how fast your project might sell, and if payment comes in December then suddenly you were a working writer for that year, able to write off far more things than you could when you were unpaid.
Keep everything. All those pesky receipts? Get yourself a nice little accordion file and organize them as you go. You might already be holding onto obvious receipts, like the ones for office supplies or postage, conference registration, and so on. But keep the ones you’re unsure about, also. Magazine subscriptions? Books? The lumbar pillow for your desk chair? Keep them all, and note their purpose on the back. Your accountant will be able to tell you if something is fair game.
Log your mileage. Do you drive to conferences? Or to the airport before you fly to one? To the post office to send out ARCs for review or prizes from giveaways on your blog? You can deduct a certain amount each year based on the miles you drive your car for work purposes if you are filing as a self-employed individual. Even if you use that car for personal use, too. Just pick up one of the small logs they sell at most office supply stores and keep track of your starting and ending miles, and how many of them were for work purposes. Just leave your log in the car so you remember to use it. You’ll be surprised how quickly you’ll end up with a few hundred dollars more to deduct by year’s end.
Keep your writing area separate. If you can possibly have your own room to designate as your office space, do so, even if it’s not much more than a closet. The rules on what can or cannot be considered a viable working space vary from year to year (and no doubt from country to country — I’m only familiar with U.S. tax laws). Check with your accountant to determine what qualifies. Not only will you be able to deduct a percentage of your rent or mortgage based on the square footage of your office, but of any other cost that goes toward the entire house, such as heat, electricity, etc. It’s worth the deduction if your home layout permits.
Find an accountant who is familiar with writers or at least works with other self-employed individuals. They will be much more in tune with what you can deduct and what to avoid because it might raise red flags with the IRS. Check with local writing groups or online writers’ forums if you need some recommendations, or simply ask local accountants how much experience they have with this area of the tax code.
If you’re not ready for an accountant quite yet, be sure to read one of the many available guidebooks geared toward helping self-employed individuals determine their deductions to make sure you are holding onto all the right paperwork. Better to have too much than to be missing something vital when you’re ready to file.