Accounting for Writers and Artists
(Note: Neither I nor the panelists are CPAs, lawyers, etc. Don’t consider this tax advice, etc.)
Edward Muller, John R. Gray III, John Hedtke, Richard A. Lovett
· How does accounting impact your business?
o JG: I hire an accountant once a year. He gives me a layout of what’s new and what I need to keep track.
§ I keep every possible receipt. I write on the back what they are for. I fill out every form with what fits into the categories, and the accountant figures out what can be used.
o JH: Was a sole proprietor for years, doing it all myself. I tried a CPA a few times, but found I was still doing most of the work myself. It was going through all the spreadsheets and receipts. I have a big box, and I stick everything into that box. Periodically I sort it into folders.
o RL: Does it himself. My system is receipts. I keep them, I stick down at my kitchen table. I have an old fashioned ledger paper. I do not put money into the bank or receipts into an envelope until I’ve put them into the ledger. I take the ledger sheet, and using a calculator, put it into schedule C. The one that causes me the greatest grief is mileage. I have a mileage counter in my car to keep track, the trick is to remember to do it.
o EM: I write short science fiction, and sold it. I have a day job. My wife is a doctor. We use a CPA. Thermal print will fade, so write it down on paper. I claim mine as hobby income. Then you have hobby expenses. A whole slew of rules on that.
o JG: I don’t claim a whole office, because the rules are too strict. It’s too much of a nightmare.
o RL: I claimed a home office, but it was somewhat easier to claim, because it was my sole source of income and sole place I worked.
o JH: For a number of years I took a deduction for home office. I took a deduction for 25% of my home. A lot of money. But you don’t want to claim
· For online expenses?
o Put the email receipts into a folder.
o Print the receipts.
· Save all bank statements for at least three years in case you are audited.
· If you have a business, you can take losses and apply it against other income.
o You can do it 3 out of 5 years.
· Travel for novelists for research…
o Is the primary purpose business?
§ You can deduct as long as side trips are less than one third.
§ It’s got to be plausible.
o It’s different for foreign travel.
o Must document the travel purpose, the research you are going to do. More documentation is better.
· Never volunteer anything in an audit. Find out why they are audited.
· How do you know when you should start paying quarterly taxes?
o They’ll tell you.
o You are required to make estimated tax payments when you expect to pay more than $1,000.
o If you do have to pay, then if you pay a quarter of previous year’s taxes each quarter, you are safe even if your income goes up.
· Royalties are schedule C income, subject to social security taxes. But the IRS might try to tax you twice on this.