Nobody wants to do their taxes. But as a writer, it can be especially frustrating, complicated, and depressing. But you don’t have to go it alone. Here’s five great articles to read about doing your taxes as a writer. Whether it’s your first year filing as a freelancer or you want to get a head start on next year’s taxes, check out these articles.
1. “Tax Advice from a Debut Novelist” by Adrienne Celt
Are you new to the writing or contract-work world? Adrienne Celt has the perfect introduction to tax season at Electric Literature. Celt is calm, empathetic, and lays out what to expect as someone who’s been there. If you’re stressed or feel like you don’t know even know where to begin, take a deep breath and start here.
Here is a complicated fact that almost made me cry when I first found out about it: when you start earning freelance income (again, this might mean your advance, your royalties, or any other money that doesn’t have taxes withheld automatically), the government will expect you to start paying estimated taxes each quarter instead of just paying in one big chunk at the end of the year—though you still have to submit regular taxes then, too. This isn’t as bleak as it sounds, though.
2. “Freelancers, Here’s How to Do Your Taxes” by Laura Shin
Okay, now it’s time to get serious about your earnings. This Forbes article digs deep into a host of issues you’ll have as a freelancer, from finding an accountant (recommended) to quarterly payments (necessary). It’s actually one section of a four-part series on freelancing and finances, so after reading about your potential write-offs, you can click around to find out how to budget, save for retirement, and more.
Don’t make the mistake of thinking that if you can’t pay the full amount, you shouldn’t file. You absolutely should file on time and pay what you can to limit your penalties and interest. Then, call the IRS to discuss your options. You may receive an extension or even be able to get some penalties waived. The most common resolution to this scenario is to sign up for the IRS Online Payment Plan.
3. “Here’s A Surefire Tax Estimating Process for Freelancers” by Josh Fruhlinger
Author/blogger Josh Fruhlinger knows his stuff about Mary Worth. But he also has a great system for figuring out his quarterly tax payments as a freelancer. He offers three different methods for keeping track of what you will owe the IRS throughout the year. If it sounds scary and, well, taxing, it is! But it’s a bullet you need to bite as a freelancer.
The key to avoiding crisis is to segregate the amount you owe in taxes from your spending money as soon as you can, maybe even as soon as you make it. This will give you a much more immediate sense of how much you really make, what sort of lifestyle you can really afford, and what sort of financial changes you need to make to live within your means.
4. “What Every Self-Published Author Needs to Know About Taxes” by Helen Sedwick
This guest post at JaneFriedman.com is by Helen Sedwick, author of Self-Publisher’s Legal Handbook. Sedwick offers specific advice on writers who are forming a business or are sole-proprietors of their work. If you have “serious intent to make a profit from your writing” (cue existential crisis), it’s a route you should consider. Her whole book looks like a must-read for the entrepreneurial writer.
For a long time, the IRS followed the rule that an income-producing activity was considered a hobby unless it showed a net profit during three out of five years. (If your writing is a hobby, then you may deduct book-related expenses only from book-related income.) In practice, the hobby rule is not that strict. If you have a serious intent to make a profit from your writing (and quit your day job), a little advanced planning and discipline will help convince the IRS you’re an entrepreneur.
5. “The Income-Tax Man” by Mark Twain
Hopefully the articles above make the whole freelancer-tax process seem easier, doable, and more manageable—not even more dastardly and stressful. Just to ease your writer woes though, here is a short story from Mark Twain that proves tax season has always been the bane of writer’s lives. With his signature wit, Twain spins a yarn about an innocuous meeting with the tax man that turns sour when he finds out how much he owes. Luckily, he learns a handy trick from a rich friend up the road.
Ah, what a miscreant he was! His “advertisement” was nothing in the world but a wicked tax-return—a string of impertinent questions about my private affairs occupying the best part of four foolscap pages of fine print—questions, I may remark, gotten up with such marvelous ingenuity that the oldest man in the world couldn’t understand what the most of them were driving at—questions, too, that were calculated to make a man report about four times his actual income to keep from swearing to a lie.
by Kjerstin Johnson