Wednesday, March 30, 2011

Taxes and the Expenses Related to the Business of Writing

NOTE: Since I'm not a tax expert, I've asked Brigitte A. Thompson  to help us out with a guest post on the nasty topic of paying taxes, keeping records, and paying as little as possible. (Okay, maybe not that last one, but if you do this right, you might save a little more money than expected.) Enjoy her helpful post, and thanks for welcoming her to my blog.

Brigitte A. Thompson is the founder and President of Datamaster Accounting Services, LLC. She has been active in the field of accounting since 1986 and is a member of the American Institute of Professional Bookkeepers and the Vermont Tax Practitioners Association.

A prolific writer, Brigitte is the author of several business books, contributing author and freelance writer specializing in accounting topics. You can visit her online at and

Taxes and the Expenses Related to the Business of Writing

Spring is in the air, trees are beginning to bud, flowers are rising up toward the sun after a long winter of sleep and April is just around the corner. Along with these joyous signs of spring, April brings a sense of dread to many. It’s tax time… the day when taxpayers in the United States must file federal income tax returns or request extensions.

Many new clients come into my office with the proverbial shoe box filled with papers they have frantically gathered hoping for salvation in the experienced hands of their tax professional. Most are frazzled, embarrassed by their lack of attention to recordkeeping, and seem to be caught off guard by the fact tax day is once again upon us.

Tax time isn’t fun by any stretch of the imagination, but it does not have to be stressful or chaotic. There are many things writers can do to minimize the anxiety of filing tax returns.

Recordkeeping for Writers

As a writer who is self-employed, you are your business. With any business, it is important to keep accurate records reflecting all income and expenses. This information should be organized, easy to maintain and readily available for your own use or in the event of an audit.

I recommend writers break recordkeeping tasks into manageable steps which can be completed daily, weekly, monthly, quarterly and annually. Examples can include:

- Daily task: Open incoming business mail and sort into groups such as checks received, invoices to be paid, junk mail to recycle.

- Weekly task: Complete a deposit slip and bring money received to your bank.

- Monthly task: Balance your business bank statement.

- Quarterly task: Send estimated tax payment to the Internal Revenue Service.

- Annual task: Record ending mileage on vehicle used for business purposes.

Organizing Suggestions

Your recordkeeping system does not need to be expensive or fancy. Color coded folders may work well if you are a visual person. Purchasing duplicate checks may be helpful if you frequently forget to record transactions in your register. Implement a system that works for you.

Receipts can be stored in large clasp folders which are identified by month and year. Transactions can be recorded on a print or computerized spreadsheet such as Excel. If you are comfortable with bookkeeping, you could consider purchasing software created for this purpose such as QuickBooks.

Stackable trays on your desk can tame the piles of paper as can horizontal desktop sorters and wall-mount tier organizers. File cabinets come in many different sizes, materials and finishes and can integrate seamlessly into your recordkeeping system.

Importance of Recordkeeping

Even though establishing your recordkeeping system may seem daunting at first, it is well worth the time to implement. Accurate records can protect you in the event of an audit and provide the information necessary to determine the profitability of your writing business. Maintaining good records can also reduce your taxable income which will reduce the amount you pay in taxes.

My article, Expenses Related to the Business of Writing, is available online ( . It is an excerpt from my book, Bookkeeping Basics for Freelance Writers.


Karen Lange said...

Thanks for the info!

Accountant, Author & Freelance Writer said...

Hope - Thank you for welcoming me to your blog. I'm happy to visit and to share information on tax deductions for writers.

Accountant, Author & Freelance Writer said...

Karen - Thank you for visiting :)

Linda Stacy said...

I was much less frazzled about taxes this year because I did precisely what you recommend - I stayed organized all year long. So when it came time, I had everything together. There was no last minute searching my memory for expenses and my desk for receipts.

Accountant, Author & Freelance Writer said...

Linda: It really does make a huge difference not only by reducing chaos and stress, but by reducing income taxes as well.

Thank you for your note :)

Jill Kemerer said...

Excellent advice. I'm checking out the links next!

Accountant, Author & Freelance Writer said...

Thank you Jill. I appreciate your visit & comment.