January means two things in the tax world: time to start thinking about the 2013 tax return, and a new year of records to begin keeping for 2014. If you self-publish, you have even more expenses and obligations, so start the year off on a good footing.
I’ll start off with the easy part first: new recordkeeping.
No one likes keeping track of everything, but the more information you write down each day or week, the less you’ll have to remember when it comes to filing your taxes. How many deductions do you think you might have missed because you forgot to write something down?
Good recordkeeping = less tax paid
If your writing brings in the majority of your income, you may also need to be sending in estimated tax payments throughout the year to avoid IRS penalties. You’ll need an accurate profit and loss snapshot each quarter to do this correctly. I’ll talk about this in a future posting.
Get a start on keeping better records of income and expenses in 2014.
Recordkeeping Tips for January
1. Get a special calendar (I like the 2-page per month type). Use it to write down business expenses each day or week. Don’t use it for appointments or try to scribble expenses in your regular calendar. You’ll appreciate having everything in one place later on.
NOTE: If you have another writing-related business like editing, cover art or formatting, get a separate expense log for that business. You may want to file a separate Schedule C for that business, so keeping separate records will make that easier for you.
2. Write down your car’s odometer reading in the calendar. For mileage deduction on Schedule C, you’ll need to know how many miles you drive per year for all purposes.
3. Do you pay someone else for editing, formatting, cover art or similar? If you pay anyone more than $600 in a year, you will need to send them a 1099-MISC and you should consider issuing one even if the amount is lower. In order to do so, each person you pay should fill in form W-9 for you. Have everyone do this at the beginning of the year, then it’s easy to deal with once you hit the $600 limit. If you don’t have a W-9, the IRS expects you to withhold 20% of the payments. (We talk about this in detail in the Tax Tips courses). Download Form W-9
If your cover artist or editor is in another country, they need to fill in Form W-8BEN and send it to you, to prove you don’t need to do the 20% withholding. Protect yourself with the correct forms, regardless of whether the editor or cover artist needs to file a US return. Download Form W-8BEN
4. Familiarize yourself with the categories of deductions on Schedule C. This way you know what you can and should be counting as expenses (and writing in your 2014 expense log calendar). Download a copy of the form at the IRS website: http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
5. Print out 2013 statements from all bank accounts, credit cards or PayPal that you used for business. If you already get paper statements, make a copy for your tax return. Some websites only have the last 12 months of statements available, so if you wait till March or April, you may have trouble getting Jan and Feb 2013
6. Consider joining one of my Tax Tips classes (First session Jan 10-20, Second Session Feb 18-28) for step-by-step help with everything on Schedule C, estimated taxes, self-employment taxes, and more. More information at taxtips.emlynley.com
[author] [author_info]EM Lynley is a licensed tax preparer in the state of California. CTEC #A233919[/author_info] [/author]