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| Posted By : von Darkmoor - 10/18/2006 10:14 PM | Howdy folks!
Just curious how y'all conduct your writing businesses. My Monday night writing group had a speaker this week and, among other things, he spoke about and handed out a small chapbook he'd made on tax-related points of interest for writers. In it he discusses creating a business entity in order to handle my writing persona and income and claim expenses.
Obviously there are benefits and disadvantages to each of the 'doing business as' options: sole proprietorship, partnership (which he said most authors do with their spouses), limited liabilty, S or C corporation.
So, what's the general thought on this and what's the recommendations regarding claiming income/expenses for tax purposes?
Thanks!
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J Waltz
~ Read My Reviews @ www.vondarkmoor.blogspot.com
~ Take The Challenge @ www.finepoll.com/display-poll.asp?poll=124 |
| Posted By : Christopher_Heath - 10/19/2006 8:39 AM | Anybody know how much you have to earn through writing before you have to claim it on your taxes? Or to stay legal do you have to claim even the smallest amount.
Christopher M. Heath
"The Coruscate King" in Freehold: Betrayal - Ghourlesh Book I
"Azieran: Beyond the Black Veil" in Stalking Shadows
"Azieran: In the Wake of Ain Koph's Fall" in Grendelsong #4
"Azieran: Kaiburr the Rotund" in Blood, Blade, and Thruster
"Azieran: Loxlimchk" in Turnpike Gates
"Azieran: Creed of the Desert Kings" in Forgotten Worlds
"Azieran: Maixgloan" in GrendelSong #2
"Azieran: She of the White Lotus" in Sages and Swords
"Azieran: Blood and Kings" novella by Carnifex Press
+ others
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| Posted By : Gloria Weber - 10/19/2006 8:03 PM | I'd like to add a question of my own:
How much would you have to earn before you could write off a computer as a business expense? |
| Posted By : von Darkmoor - 10/19/2006 9:57 PM | Regarding the computer: It's not so much how much you earn, it's what the computer is used for. If the computer is used by anyone else at all, or by you for any reason other than writing or writing-related work ( in other words, you can't do your home budget on it, can't use it to download music, can't play games on it, can't make the family picture book on it ) you can't write it off. As far as the IRS is concerned, it is ALL or NOTHING. Same as a dedicated writing location in your home - no matter what the size is, if it's dedicated solely to you and solely to your writing you can write off that percentage of your home expenses - utilities, mortgage, insurance, etc. For example, if you have a 600 sq. ft. den in a 2400 sq ft home that meets those requirements, you can deduct 1/4th of all your housing expenses as costs of business.
Now, the money kicker is this: There is no magical income level but to claim business deductions you must show a profit at some point or else your 'writing' will be considered a hobby. When I was an independant contractor in financial planning a decade ago the rule was you had to show a profit any two years out of any 5 year period to NOT be considered a hobby and I'm fairly certain this has not changed. If you don't have enough income this year to cover anticipated expenses you can defer those expenses and take them in the next year - of course, hoping you'll have the income then!
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J Waltz
~ Read My Reviews @ www.vondarkmoor.blogspot.com
~ Take The Challenge @ www.finepoll.com/display-poll.asp?poll=124 |
| Posted By : von Darkmoor - 10/19/2006 10:08 PM | Christopher_Heath said...
Anybody know how much you have to earn through writing before you have to claim it on your taxes? Or to stay legal do you have to claim even the smallest amount.
You don't have to claim any income until it hits the $600 threshold. And that's cumulative, from all sources. AS LONG AS YOU DON'T CLAIM ANY EXPENSES.
If you want to claim (and it is highly recommended you do this) the costs of paper, ink, books, seminars, conventions, travel and lodging for such things, classes, memberships, phone bills, internet access, square footage in the house . . . all the things you can remotely connect with your writing you can claim as expenses BUT you have to report income to gain that right.
IF you don't care about the expenses, then you don't have to claim any income. Technically you could escape ever reporting income if you never reach the $600 level with any one source since no one is required to 10-99 you until they've paid you $600. If you reach $600 from six separate $100 sales from different outlets the IRS will never know - more than likely 
I plan on claiming expenses, I just never thought of creating a writing entity for myself. So I was curious what the majority of you did, sole proprietorship or partnership?
-------------------------------------------------------
J Waltz
~ Read My Reviews @ www.vondarkmoor.blogspot.com
~ Take The Challenge @ www.finepoll.com/display-poll.asp?poll=124 |
| Posted By : Gloria Weber - 10/20/2006 10:30 AM | | Thanks for the info... I figured I couldn't but a 1 in a million shot is always a shot. |
| Posted By : erazmus - 10/22/2006 8:52 AM | Gloria,
All it takes is one lone sale. My first sale showed up as taxable income, but since I make so little from writing or 'real life' it didn't cause me any problems. But if I made those sales more frequently I would certainly start paying more attention to my expenses.
Mike
Michael D. Turner
"Psyched Up" in _Turn the other Chick_-ed. E. Friesner-Baen books
www.baen.com
"Dutchman Rescue"in Continuum SF #6
www.continuumsciencefiction.com/orders.htm
"An Incident at Black Tongue Tavern" in _Bash Down the Door and Slice Open the Badguy_ from Fantasist Enterprises |
| Posted By : Edward Knight - 10/22/2006 11:03 AM | Okay, no expert but I do have some knowledge here.
1. It's easy to create a DBA checking account at your bank. It's just a personal account with a business name attached. The IRS really likes it when you separate your personal and business accounts. I treat my writing, publishing, and online bookstore as one business. Journey Books. I also have a business license in TN, which means if I sell anything in TN directly I have to collect sales Tax on that item. All of this gives my DBA some legitamacy. It's imporatant to make your business and personal finances at least appear to be separate intities. My business is a sole proprietorship. So in the end my business and personal income are all lumped together anyway, but for IRS purposes I keep my accounts separate and keep a good record of the expenses I intend to deduct.
2. How much do you have to make? Most of what I've read states that a startup business can operate at a loss for 3 consecutive years before the IRS gets very supicious. At some point they expect to see a profit. After a given time the IRS may look at your books and determin you never had a business but a hobby. Then they can go back and charge taxes on all those expenses you claimed in previous years. So at some point, you have to show a profit. (Though GM, Ford, United Airlines etc. have been showing loses for several years and the government hasn't claimed them to be hobbyist yet.) So technically if your expenses for writing are greater than your income as a writer you could show a loss and write it off on your taxes if you were set up as a business. Of course if you're making a fair amount of money you would certainly want to be able to deduct your expenses from your taxable income.
3. One bit of advice: Be careful of the deduction allowed for home offices. This one is tempting and can work well. If you work from home you can deduct a portion of property taxes, utility and phone bills, insurance costs, repair bills... all kinds of stuff as a business expense. Say if one tenth of your home is used as a home office then you can deduct one tenth of your utility bills as a business expense. That sort of thing can really help in reducing your taxable income. BUT, if you ever sell your home you'll be required to pay Capital Gains Taxes on that portion of your home (I think that's 15 percent). The home office deduction can be a two edged sword. As I plan to sell my home in the next five-ten years, I don't use it. Now, If I were renting my home or never had any intention to sell, the home office deduction would be pretty sweet.
Edward Knight
Editor
Journey Books Publishing
Amazing Journeys Magazine
http://www.journeybookspublishing.com
http://www.journeybooksonline.com |
| Posted By : nathan - 10/22/2006 2:51 PM | Now this is a great thread, keep those tips coming!
VIEW IMAGE"Writing the wet dreams of teenage boys" - Lindsey Llyod, Tangent Reviews
Tarantino himself has been forward and unapologetic about his influences. In a 1994 interview with Empire magazine, he said, "I steal from every single movie ever made. If people don't like that, then tough tills, don't go and see it, all right? I steal from everything. Great artists steal, they don't do homages." |
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