Year-End Tax Help for Authors

This post by attorney and tax expert Julian Block originally appeared on Indies Unlimited on 12/7/14.

The only time most of us think of doing something about our federal income taxes is once a year — the hours we spend actually grappling with Form 1040 or when gathering records to deliver them to a paid preparer. What we should do is make tax planning a year-round concern and position ourselves to take full advantage of the many opportunities that are available to lessen the amount that is siphoned off each year by the IRS. The savings can amount to many thousands of dollars. What follows are some tactics that not only can save taxes for 2014, but even provide a head start on 2015 as well.

Timing receipt of income pays off for freelance writers. The IRS requires most freelance writers and other self-employed individuals to use the cash method of accounting, under which income isn’t counted until cash, a check, or an e-payment is received and expenses aren’t counted until they’re paid.

How does the IRS apply that requirement to a hypothetical freelancer we’ll call Phyllis Neff? Like most other writers, Phyllis has a good deal of flexibility on whether to report income or deduct expenses in 2014 or 2015. As part of her end-of-year financial planning, therefore, she should review perfectly legal tax-trimming tactics that must be taken by Dec. 31 if they aren’t to be lost forever.

 

Read the full post on Indies Unlimited.

 

What Every Self-Published Author Needs to Know About Taxes

This post by Helen Sedwick originally appeared on Jane Friedman’s blog on 6/18/14.

Note from Jane: Today’s guest post is by attorney Helen Sedwick (@helensedwick), an attorney licensed to practice in California only. She just released the Self-Publisher’s Legal Handbook, now available in ebook and paperback formats.

This information is general in nature and should not be used as a substitute for the advice of an attorney authorized to practice in your jurisdiction.


Most writers don’t realize that their memoir, short story collection, children’s book, or novel could mean money in their pockets, even if sales are disappointing.

Suppose you spend $5,000 hiring editors, designers, and other freelancers to publish your book. At the end of the year, you’ve made $2,000 in sales, which you offset with $2,000 of expenses. Can you deduct the remaining $3,000 from your “day job” income and reduce your income taxes?

Yes, if you treat your writing as a business and not a hobby.

U.S. tax code encourages new businesses by permitting entrepreneurs to offset losses from one business from other income as long as the owner has a serious intent to operate the business at a profit. The IRS wants you to succeed, so they can tax your income later.

 

Click here to read the full post on Jane Friedman’s blog.