Today's topic always gets me hot. MONEY!
This month we'll all be getting 1099's from our publishers. If you're a brand new author - Congratulations! You now fall into the category of a small business for tax purposes.
If you're new to earning 1099 income, you're also going to get a nasty shock. Every dime you earn isn't just subject to income tax. If you made over $400 as an author, you're also facing a bill for self-employment tax - 15.3% of your net income.
That means if you were successful enough to make it into the top 5% of all authors and earned $10,000 or more, you owe Uncle Sam at least $1,530 extra!
But if you've kept good records, every dime you spent on a deductible expense will lower that amount. That means if you treated yourself to a new Kindle for about a hundred bucks in 2014, you can probably deduct it. It may not sound like much but the $15.30 you save pays for takeout pizza next time you're trying to meet a deadline and don't have time to cook.
Besides being a self-employed author, I've owned four other small businesses, from a real estate company to a food concession at Miami Arena. Over the years, I've learned a lot about how to take advantage of every single deduction available.
Here's where I issue my disclaimer: I am NOT an accountant or a tax attorney. The following information is gleaned from years of personal experience. If you have any questions about specific deductions, talk to an accountant. If you don't have one, feel free to use my personal rule of thumb for picking a good accountant. He or she has to save me MORE than I'm paying to have the return prepared!
Here's a list of basic deductions a small business can claim:
1. Business Equipment
This includes computers, printers, copy machines and printers. Here's a useful quote on what constitutes business equipment from Jeremy Slaughter at Demand Media:
"Businesses may also require specialized equipment such as tools, manufacturing equipment or heavy machinery. For tax purposes, you can deduct all of this equipment along with any other equipment used in the operation of a business. They key is determining how to deduct each type of equipment.
Small businesses can expense any equipment with a useful life of less than one year. Common examples include electronics not considered to last more than a year and hand tools such as shovels and rakes. Business owners typically deduct equipment like this as “small tools and equipment” on an income tax return."
2. Travel Expenses
Did you attend a writer's conference workshop, convention? Did you visit a new location for one of your books? Airfare, gas, tolls, hotels, meals, cab fare - all of those can be deductible expenses. Keep receipts from everything.
3. Supplies
Here are a few examples - yellow pads, ink cartridges, printer paper, business cards
4. Other deductions
Advertising, including giveaway prizes and ads in on-line trade publications
Books
Internet access
And if you're doing really well, you can set up a self-employed retirement account and deduct every dime you're saving so you don't have to write porn when you get old!
Don't miss my other posts in this series:
Why Write Erotica - Here Are 10,000 Reasons