The end of January heralds the beginning of “TAX SEASON”. For the many accountants and tax preparers in North America this season brings a busy and brain-draining few months as they maneuver the ambiguous tax laws, process long lines of clients, and work ridiculously long hours.
Nothing generates more distress than one very particular type of client. This dreaded taxpayer, aka writer/crafter/artist, cannot believe, let alone accept, that they’re actually running a small business. They not only put a huge dent in the time schedule, but also push the accountant’s knowledge and skill to the very limit.
Their “hold-hands and skip through life” attitude is apparently incompatible with the idea of keeping receipts and tracking expenses. These writers truly believe the business side of their art holds only cold and practical elements that have no place in the world of creativity and talent.
They are correct – there is NO relationship between artistry and business. One is completely independent of the other. However, both are required if you earn money writing. I do have to admit, working as an accountant all those years, I have seen very creative bookkeeping and have heard some truly talented ideas on reducing taxes. Unfortunately, none were legal.
Governments agree. If your writing brings in money, it’s a business and they will tax it. When the writer does not keep the information, the accountant must use every ingenious method he can find to re-build the business transactions. Often he is amending prior years and filing multiple tax returns with income from royalties or foreign income. Most of these incomes require special considerations and cost the tax preparer even more time and research.
Speaking as a retired accountant, the writer who ignores his responsibility to the business side of writing could pay either more taxes, or hefty accounting bills, or both.
If a person plans to write seriously, then they need to understand they are now running a business. They should seek and heed advice from professionals for legal and business matters. Knowing the actual income from each project and any amounts still owing to the writer is necessary. The importance of tracking expenses cannot be overstated. Every cost, including household, vehicle, writing supplies, books and courses, travel expenses, and promotional and publishing costs, is important. Without proper records, how can anyone be sure if they are making money?
This is not a new concept. I am including parts of an article, written in 2008 by a very successful writer, John Scalzi. He wrote about money matters and the importance of treating your “business” of writing with some respect.
“UNASKED-FOR ADVICE TO NEW WRITERS ABOUT MONEY –
February 11, 2008 by John Scalzi
I made $164,000 last year from my writing. I’ve averaged more than $100,000 in writing income for the last ten years, which means, for those of you who don’t want to bother with the math, that I’ve made more than a million dollars from my writing in the last decade. In 2000, I wrote a book on finance, The Rough Guide to Money Online. For several years I wrote personal finance newsletters for America Online. When I do corporate consulting, it’s very often been for financial services companies like Oppenheimer Funds, US Trust and Warburg Pincus. I mention this to you so that you know that when I offer you, the new, aspiring and dewey-eyed writer, the following entirely unsolicited advice about money, I’m not talking entirely out of my ass.
Why am I offering this entirely unsolicited advice about money to new writers? Because it very often appears to me that regardless of how smart and clever and interesting and fun my fellow writers are on every other imaginable subject, when it comes to money — and specifically their own money — writers have as much sense as chimps on crack. It’s not just writers — all creative people seem to have the “incredibly stupid with money” gene set for maximum expression — but since most of creative people I know are writers, they’re the nexus of money stupidity I have the most experience with. It makes me sad and also embarrasses the crap out of me; people as smart as writers are ought to know better. … (see the link below for points 1 to 9)
10. Writing is a business. Act like it.
Every writer who writes for pay is running a small business. You have to create product, track inventory, bid on work, negotiate contracts, pay creditors, make sure you get paid and deal with taxes. Work has to be done on time and to specification. Your business reputation will help you get work — or will make sure you don’t get any more. This is your job. This is your business.
If you don’t mind your own business then others will do it for you — and make no mistake that you will lose out, not because the people you are working with are evil or shifty, but simply because they are approaching their end like it is a business and will naturally take anything you leave on the table. That’s business. That’s how business works.
Lots of writers miss this, or ignore it, or try to pretend that it’s different than this. Lots of writers assume or just want to believe that the only thing they have to do is write, and the rest of the stuff will take care of itself. It won’t, and it doesn’t. This is why so many writers find themselves in financial trouble: they don’t have enough money because they valued their work too cheaply, or they weren’t wise with the money they received, or they lost track of the money they were owed.
If you can’t or won’t approach writing as a business, then think about doing something else with your time. Stick with the day job as your main source of income and think about writing as a hobby or side gig. There is nothing wrong with this. Some of the best writers did their work “on the side” — as recreation away from their primary profession. Writing part-time does not lessen the work; the work is its own thing.
But if you are going to try to write as a serious profession, primary or otherwise, treat it seriously. As a writer, you’re going to make little enough as is; why give any away through negligence or lack of focus? That’s just silly. But it really is up to you. This is your work, your money, and your business. Respect the first two by paying attention to the third.
The complete article is at:
A writer needs to put all his income and expenses in order and include them in his current tax return. If he didn’t make money, he may be able to deduct losses from other income – check with the accountant. Even if the writer hasn’t earned any money YET – he files the expenses for this year, and can always carry them forward against future income.
Every writer needs to be his own CEO…