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"Roundheads and Ramblings"

Taxes

A Spreadsheet for Writers




That's what it looks like. If you think it would meet your needs, you can download a working copy here:

Paying Taxes Is Not Supposed to Be Fun.

Yesterday I talked about all the lovely tax deductions writers can get. But I forgot to add the most important point. You have to keep track of those expenses.  Here’s how I learned to handle that "tacky" detail.
 
One fateful year, I received a terrifying call from my accountant, reminding me that because of the high volume of sales of Beyond All Price in the last quarter of 2011, I owed the IRS a quarterly payment on my 2011 taxes. All she needed, she told me, was a list of all my income and all (read: ALL) my book-related expenditures over the past year.
 
Have I been keeping those records? Well . . . sort of. I have a couple of file folders at the corner of my desk into which I've been stuffing receipts and credit-card bills. And I had started out last year by downloading a highly recommended program for organizing those receipts.  I just hadn't actually kept the records up to date.  Arrrghh!
 
Gamely I dug out all those little slips of paper and opened my expense record, only to be horrified by how complicated it was.  It had a separate sheet for each month, with a row for every day in the month. And each sheet had some 35 categories of expenses, each with its own column on a spread sheet that measured some 18 inches across. That meant I was looking at over 8000 little cells to be filled in before the actual calculations even began. I started sorting my little pieces of paper into monthly piles.  I didn't take long before I realized that this program was major over-kill, and much too complicated.
 
When I couldn't find a simpler version that seemed designed for the kinds of expenses writers and indie publishers incur, I decided to design my own.  The result is a simple template that works on any computer that can handle Excel.  It put all my expenses onto just 1 page. Just set your page to portrait and under the print function, scale to about 80% or 1 page wide and 1 page tall.
 
The layout is simple.  It has three sections: one for travel expenses, one for day-to-day expenses, and one for including the figures for a dedicated home office. You get just one cell for each expense during a given month, so you may have to do a bit of addition on your own--adding all your postage, for example. And travel mileage needs to be converted to cost by multiplying it by the IRS allowance for mileage.  (That's not as complicated as it sounds. The current allowance is $0.50 a mile, so you just divide the number of miles by 2 and add a dollar sign.)
 
When you're finished entering your numbers, the spreadsheet calculates each type of expense (in the rows) over the course of the year and the total for each month (in 12 columns.)  At the bottom right corner, you get the grand total.  Simple.  There are also some blank rows, so if you need to add some new categories, you can just type them in. The "total" formula is already entered in the blank cell at the end of each row.  I finished my calculations in a single morning.
 
It was so easy that I decided to share the template here. I’ll post it tomorrow.
 

Those All-Important Tax Deductions

OK, today is tax day, and like a lot of other people, you've spent the day buried in paper and mathematical scribblings.  I went to the post office today on a non-tax related matter and  had to wait in line to get a parking place. I gathered that most of the people in line were not there to buy stamps. Anyhow, it occurred to me that it must be time to remind my readers of a sure-fire way to save money on your taxes.  It's too late for your 2014 return, but the outlook for 2015 can be much brighter.

How? One simple trick does it all. BECOME A WRITER!

The Internal Revenue Service has a soft spot for writers. Who would have guessed! Once you admit that you are an author by claiming that designation as your profession, the tax laws are on your side. Someone in Washington actually understands that book production takes a long time, and that you can work at it for years without making any profit, because you are still creating the book, not selling it. They will grant you your deductions for expenses for up to five years before they start refusing your claims to be a “real” writer. On your tax return, don’t list yourself as “store clerk” or “plumber’s assistant” while you are writing. There’s a special designation for writers; find it and use it. Oh, you should keep your day job, but think of yourself as a writer and regard “fry cook” as your hobby, not the other way around. Then start collecting your deductions.

Have you set up your home office? Then you have a place of business. Measure the space in square feet, determine the square footage of your entire house or apartment, and then figure out the percentage of the residence that is exclusively used for business. (A 10’ x 12’ office in a 1500 square foot house = 8% devoted to business use.) That percentage now applies to all of your housing expenses that affect the entire space—heating and lighting bills, rent or mortgage interest, insurance, homeowner association fees, security system, and termite protection are all common expenses. You can’t deduct painting the living room if you use the back bedroom as your office, but you can deduct 8% of the cost of a new roof, since that applies to the entire structure.

Next, take a look at your home office and its contents. If you are using an old card table and a folding chair for a desk, you probably can’t deduct their cost, but if you go out and purchase a new computer desk, using it only for your writing, its price will be deductible. New or fairly recent electronics (computer, printer, external backup drive) can be deducted or depreciated. The first phone line into your residence is not deductible, but if you add a second line for a fax machine or an 800 number for your business, you’ve found another deduction.

Be sure to keep track of all expenses for office supplies—pens, pencils notepads, printer cartridges, diskettes, scotch tape, paper clips, file folders, labels, a calendar, an appointment book, scissors, a rack to hold current file folders. You can even deduct the cost of air, if you buy it in compressed form and use it to clean your keyboard. (I use mine to chase the cat off the desk, but the principle is the same.)
Think advertising. Anything you have printed with the name of your company or the name of your next book can be deducted as an advertising expense. Of course you’ll have a supply of business cards, but you can also use the same size card to announce an upcoming book. (I just had some printed with a picture of “The Second Mouse” on them. I have a second set of half-size business cards with photographs of Beaufort, SC, on them to advertise my next novel, The Road to Frogmore.) Both were deductible, as are bookmarks that match your book covers or brochures telling dealers and bookstores how they can order your books.

Much of your book budget will go for travel—to research libraries, book signings or writing conferences. If you travel by car, you can deduct the exact mileage, so long as you keep a log or record of the odometer. You’ll be asked for details of the car’s purchase price, its year and model, its VIN, and its total mileage, so keep them handy. You’ll be able to deduct 50 to 55 cents a mile if your travel is purely for business. I bought a magnetic company sign for under $10.00. On business trips, I slap that on the front door of the family sedan and turn the entire trip into a business expense. You can also deduct hotel bills, parking fees, and bridge or road tolls if you keep records.

And finally, you’ll need to keep careful count of the books you order for resale. With a print-on-demand contract, you don’t have to keep a huge inventory on hand, but you’ll need a constant supply of printed books to give away, to send to book reviewers, to sell to your friends, to take with you to speaking engagements, or to enter into book contests. You may be asked to report your sales and to pay sales tax, so you’ll need to account for every copy you purchase. Be sure to check with your municipal and state laws on sales tax. In my state, you don’t have to report sales for tax purposes until your sales go over $3000.00, but that may not be so for where you live. The ones you sell will cost you a bit, but the ones you give away can be deducted.

For many authors, these expenses can mount up to a tax deduction of several thousand dollars. Just remember that you are expected to be earning a profit after five years of effort. If you are making money, you can only deduct expenses that exceed your income. If you are not making any money after five years, the IRS will tell you that writing is now just your hobby and deny any deductions. It will be time to declare your real occupation as fry cook or plumber’s helper.

Portions of the above blog were originally published in 2013 and have been  taken from my book, "The Second Mouse Gets the Cheese: How to Avoid the Traps of Self-Publishing," available from Amazon, Barnes and Noble, Apple iBooks, and Smashwords.com.

Those All-Important Income Tax Deductions


The Internal Revenue Service has a soft spot for writers. Who would have guessed! Once you admit that you are an author by claiming that designation as your profession, the tax laws are on your side. Someone in Washington actually understands that book production takes a long time, and that you can work at it for years without making any profit, because you are still creating the book, not selling it. They will grant you your deductions for expenses for up to five years before they start refusing your claims to be a “real” writer. On your tax return, don’t list yourself as “store clerk” or “plumber’s assistant” while you are writing. There’s a special designation for writers; find it and use it. Oh, you should keep your day job, but think of yourself as a writer and regard “fry cook” as your hobby, not the other way around. Then start collecting your deductions.

Have you set up your home office? Then you have a place of business. Measure the space in square feet, determine the square footage of your entire house or apartment, and then figure out the percentage of the residence that is exclusively used for business. (A 10’ x 12’ office in a 1500 square foot house = 8% devoted to business use.) That percentage now applies to all of your housing expenses that affect the entire space—heating and lighting bills, rent or mortgage interest, insurance, homeowner association fees, security system, and termite protection are all common expenses. You can’t deduct painting the living room if you use the back bedroom as your office, but you can deduct 8% of the cost of a new roof, since that applies to the entire structure.

Next, take a look at your home office and its contents. If you are using an old card table and a folding chair for a desk, you probably can’t deduct their cost, but if you go out and purchase a new computer desk, using it only for your writing, its price will be deductible. New or fairly recent electronics (computer, printer, external backup drive) can be deducted or depreciated. The first phone line into your residence is not deductible, but if you add a second line for a fax machine or an 800 number for your business, you’ve found another deduction.

Be sure to keep track of all expenses for office supplies—pens, pencils notepads, printer cartridges, diskettes, scotch tape, paper clips, file folders, labels, a calendar, an appointment book, scissors, a rack to hold current file folders. You can even deduct the cost of air, if you buy it in compressed form and use it to clean your keyboard. (I use mine to chase the cat off the desk, but the principle is the same.)
Think advertising. Anything you have printed with the name of your company or the name of your next book can be deducted as an advertising expense. Of course you’ll have a supply of business cards, but you can also use the same size card to announce an upcoming book. (I just had some printed with a picture of “The Second Mouse” on them. I have a second set of half-size business cards with photographs of Beaufort, SC, on them to advertise my next novel, The Road to Frogmore.) Both were deductible, as are bookmarks that match your book covers or brochures telling dealers and bookstores how they can order your books.

Much of your book budget will go for travel—to research libraries, book signings or writing conferences. If you travel by car, you can deduct the exact mileage, so long as you keep a log or record of the odometer. You’ll be asked for details of the car’s purchase price, its year and model, its VIN, and its total mileage, so keep them handy. You’ll be able to deduct 50 to 55 cents a mile if your travel is purely for business. I bought a magnetic company sign for under $10.00. On business trips, I slap that on the front door of the family sedan and turn the entire trip into a business expense. You can also deduct hotel bills, parking fees, and bridge or road tolls if you keep records.

And finally, you’ll need to keep careful count of the books you order for resale. With a print-on-demand contract, you don’t have to keep a huge inventory on hand, but you’ll need a constant supply of printed books to give away, to send to book reviewers, to sell to your friends, to take with you to speaking engagements, or to enter into book contests. You may be asked to report your sales and to pay sales tax, so you’ll need to account for every copy you purchase. Be sure to check with your municipal and state laws on sales tax. In my state, you don’t have to report sales for tax purposes until your sales go over $3000.00, but that may not be so for where you live. The ones you sell will cost you a bit, but the ones you give away can be deducted.

For many authors, these expenses can mount up to a tax deduction of several thousand dollars. Just remember that you are expected to be earning a profit after five years of effort. If you are making money, you can only deduct expenses that exceed your income. If you are not making any money after five years, the IRS will tell you that writing is now just your hobby and deny any deductions. It will be time to declare your real occupation as fry cook or plumber’s helper.

Portions of the above blog have been  taken from my book, "The Second Mouse Gets the Cheese: How to Avoid the Traps of Self-Publishing," available from Amazon, Barnes and Noble, Apple iBooks, and Smashwords.com.
 

What Not to Say to the Person Who's Trying to Hire You

Sometimes I just have to shake my head and move on.  Recently I've been trying to add to my small business's staff by hiring an accountant and an editor. (If you missed my blog about why every self-publisher needs a staff, you can find it here) In both cases, I started by taking the recommendations of friends.  I should have known better!

Case #1: The Accountant.  She "welcomed my business", but never had time to meet with me.  Meanwhile, I was sweating the fact that my book sales had added thousands of dollars to our income, without any deductions coming out of them.  I knew I was going to owe self-employment taxes at least, and we might also be hit with a fine for not submitting quarterly estimated payments to cover the difference.

As January 17 got closer, I again asked for an appointment, which she made, and then cancelled twice. On the third appointed day, I arrived at her office with all my paperwork in hand, only to be told she was "out of town." Her receptionist offered to call her, and I had the dubious pleasure of listening to her sputter an apology. "Leave the paperwork there," she said.  "I'll be back in the office tomorrow, I'll look it over, and call you." Right! She finally called on the Saturday afternoon before the deadline to say she didn't have time to go through the paperwork.  Her recommendation: Send the IRS $2000 or more, and they'll be happy.  Then, she said she would file to get me an extension on paying my taxes in April.  Bottom line: "Call me back at the end of April, and we'll try to find a time to go over all this before the October deadline.

FAIL!

Instead, I found myself a new accountant -- one recommended by the Chamber of Commerce.  He was polite and accommodating, offering a whole afternoon to get us straightened out.  Thank you, Kind Accountant, for treating me as if my business is important.

Case #2: The Editor. She was excited to read the first three chapters of my book -- until she read them.  Then back came the critique. "You seem to want your historical novel to be historically accurate, but all these details are going to bore your reader, as they do me.  I prefer to work on a story line that has lots of action and excitement.  I can do an edit on these pages and put in some more exciting events, but you'll have to start all over again to write the kind of book I produce." 

FAIL!

I had told  her that I am a historian and that the book is based on a real person.  Sorry, but we can't put car chases, explosions, and terrorist threats into a Civil War novel. So I found a new editor, too -- one who found the real story interesting and promised to help me polish the book I wanted to write. 

It's been an interesting couple of weeks! I'm trying to put a positive spin on the experiences. After all, I did end up with two wonderful additions to the "staff." But what on earth is wrong with people who offer their "services for hire" but don't want to serve the people who hire them?