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We did our taxes this weekend. Despite making significantly less than the poverty level last year--me being out of work for most of it and all--the IRS is taking a gasp-inducing chunk out of my writing income. The rest of my wages (from the OLC), we don't owe taxes on due to our deductions and because of how meager they were. But my writing income, they still tax. As it turns out, no matter how little I make as a self-employed freelancer, if I make any profit, I will get shafted. There is no "you made so little last year that your taxes come to zero" for the self-employed, although there is for everyone else. Ole Uncle Sam really doesn't like independent entrepreneurs or freelance artists. Sheesh. And, once again, I am pondering whether making myself an LLC would be beneficial. It's easy enough to do. I send in some paperwork to the Secretary of State and a $100 fee (with a $30 annual renewal thereafter). The virtue of working where I do, I'm a lot more familiar with Georgia state laws and how to look them up--as well as legalese in general--but I haven't managed to wrap my mind around federal tax law. And that's the clincher. I haven't waded through all the IRS verbiage to get to the gist of whether I would gain any benefit and manage to avoid being double taxed if I incorporate myself. Sigh. A fun project for after session, maybe. Writing Stuff
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Among your deductions as an author, I hope you set aside a portion of your monthly rent/mortgage for home office expense, as well as a similar proportion of all utilities (gas, electric, water, phone). Argh! No deductions on the mortgage and utilities. Actually,  fosteronfilm and I debated this, as last year was the first one where I could realistically claim a home office--obviously I wrote from home before, but we actually set up a proper office for me to write in last year--but we weren't sure how to calculate it and figured it wouldn't make a difference because our other deductions zeroed out what we owed on everything but SE. In hindsight, I realize that was an error. I suspect my hubby, who did the majority of our taxes, didn't realize that the home office would've come off my Schedule C and not our 1040, thereby directly impacting my taxable SE. Not his fault; he's not any more tax savvy than I am, and I didn't have time to double-check tax rules and regs because of session. But yah, that would've helped. Snartleblast! Well, I'll know better next year.yep, that's what Schedule C is for (or so I believe; my accountant handles the details). In addition to a prorated portion of rent and utilities, you can also claim reasonable travel expenses (e.g., hotel, transportation, and meals at conventions), research materials (yay, deduct those books!), internet expenses (web page support costs), and assorted office expenses (e.g., postage, envelopes, photocopying). Basically, you take the allowable categories from Schedule C and create a spreadsheet that you add to throughout the year. It's quite handy, and the expenses add up fast. I won't go into the details in a public forum, but feel free to give me a call sometime if you'd like some specific examples. And note: it's not too late to file an ammended return. :) I so need an accountant . . . Yah, I knew I could deduct (qualified) travel expenses, research materials, Internet expenses, computer equipment (yay!), office supplies, etc. as a freelance writer. And I maintain a thorough and detailed spreadsheet for those. It's only the actual home office real property + overhead (mortgage and utilities) that I haven't deducted. Them's are magic words: "amended return." The hubby and I are scouring IRS forms now . . . (Deleted comment) |
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