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Wednesday, May 12, 2010

For Writers Tax Season Lasts All Year!

The Write Life
By Sylvia McClain
ISBN Print: 978-0-974264-39-3
E-book: 978-0-974264-30-X

Usually I run reviews on this blog, today I am taking the liberty of using an excerpt because I know it will help both the working reviewers who have published their reviews here and the authors who have had reviews of their books run here! It is from Sylvia McClain's The Write Life.

Did You Know the Tax Season Isn't Over: For Writers it Last all Year?

You got paid for a story you wrote. Congratulations! You’ve become a recognized and published writer.

Now you have to ask yourself this question. Am I now self employed?

Contrary to public thought, there is an easy answer to it. If you write continuously and regularly with the activity being your primary source of income or profit, then it is a business and you are self employed. If your writing is a sporadic activity or a hobby, it is not a business. Whether you are self-employed or not, all earned income of $400 or more must be reported to the Internal Revenue Service (IRS). Money earned from a sporadic activity is easily reported on a 1040 tax form. There is another side to reporting your income as a sole proprietor of a business. To be self-employed means there is not an employer to withhold monies from your pay to meet your tax obligations. It’s now your responsibility and you can accomplish this new task.

First, let me help you understand the basics of the tax structure for the self-employed. Schedule C, Profit or Loss From Business and Schedule SE, Self-Employment Tax must be filed with your 1040 form. Schedule C calculates the amount of money you made or lost writing and Schedule SE determines taxes owed, if any.

The secret to overcoming a large tax bite is keeping good records of money spent to make money. In other words, knowing what you can deduct as an expense against your profits will help lower your tax liability. This will lower the amount that will appear on Schedule SE’s net income to be taxed. The lower the amount, the less you will have to pay in taxes. So what are the business expenses that a writer can apply against his or her profits? Any ordinary and necessary expenses incurred to operate your business. An ordinary expense is an expense that is common and accepted in your field of business. A necessary expense is one that is appropriate and helpful for your business. Advertising, educational cost, computer paper and postage are a few tax deductible writer expenses. Publication 535, Business Expenses from the IRS can assist you with definitions of other types of business expenses.

If you don’t feel tax savvy, there are preparers to do your taxes for you. You must keep good records of your expenses and income. Also, check to make sure the preparer is familiar with, and an expert in the field of writing. Not all preparers specialize in the writing profession. Preparers sometimes depend on the computer programs to guide them.

Now go on, don’t be afraid to continue doing what you love to do. Write. Before you know it, you could just make a very good living doing it. A tax bite can be turned into just a little pinch.

Author Biography:
Sylvia McClain blogs at and is a book reviewer in her own right at and Atlantic Publishing Company. The Write Life is now available in its 2nd edition.

The New Book Review is blogged by Carolyn Howard-Johnson, author of the multi award-winning HowToDoItFrugally series of books for writers. It is a free service offered to those who want to encourage the reading of books they love. That includes authors who want to share their favorite reviews, reviewers who'd like to see their reviews get more exposure, and readers who want to shout out praise of books they've loved. Please see submission guidelines on the left of this page. Reviews and essays are indexed by author names, reviewer names, and review sites. Writers will find the index handy for gleaning the names of small publishers. Find other writer-related blogs at Sharing with Writers and The Frugal, Smart and Tuned-In Editor. As a courtesy to the author, please tweet and retweet this post using the widget below:

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