Tax tips for writers

Here's what writers need to know as tax season approaches.

Tax Tips
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Manage expenses and receipts

One way to maintain dependable numbers is to establish separate personal and business accounts. When writer and editor Christy Karras and another author decided to co-write a book, they spoke to an accountant and set up an LLC, or limited liability company. The accountant advised them on what they should do as small business owners.

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“He talked about maintaining the corporate veil between personal and business expenses and how that veil is important to the IRS,” says Karras. “Part of the way you do that is set up separate bank accounts and credit cards.” In addition to maintaining the separation, it keeps things simple. “I don’t like filling in boxes. I love the fact that I can directly dump my online bank account into a spreadsheet,” she says. “I believe in making things easy and automatic.”

Many writers use expense management software like Expensify, Freshbooks, or Quickbooks. Some use a combination of journals, envelopes, or spreadsheets to track expenses and income and keep receipts. “Find a system that you’ll actually use,” says Santos. “Any of the approaches are fine – as long as you follow one and you’re consistent.”

She emphasizes the fact that the IRS wants two main things for each deduction: proof of payment and proof it’s a business expense. If you’re not keeping separate accounts, a record on a credit card statement might be proof of payment but not an indicator that it’s a business expense. That’s why keeping receipts – whether in digital or hard copy format – is so essential.

Records maintenance is also critical because a writer’s income doesn’t always match up with expenses. Harpaz says, “The income might come in a different year than expenses. The IRS understands that.” Still, it’s best to align the two items as much as possible.