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Session '07, Day 38

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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


Received:
- Contrib. copy of Aberrant Dreams #8 with "Nobodies and Somebodies" in it. I actually forgot about this contrib. copy since it was also published online. I like nice surprises.
- 44-day cordial pass with detailed commentary from Trabuco Road after a hold request for further consideration. Drat.
- 82-day "does not meet our needs" after a hold request for further consideration from The Edge of Propinquity. Humph.
- Invite from OmegaCon, a convention in Birmingham, AL, to attend, I assume as a guest. However, as it's slated for mid-March (2008), right in the middle of next year's session, I'm having to pass.
- Forwarded letter from Cricket from a 9-year-old reader praising "The Snow Woman's Daughter" in the Feb. issue. *squee!* I love hearing from readers!


Reminder:
I'm conducting an online workshop, Worldbuilding for Writers: Transporting Readers Beyond the Ordinary. Register HERE. (Deadline, May 27.)

I'm feeling:
busy busy
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On April 17th, 2007 01:27 pm (UTC), scyllacat commented:
Be sure you're getting all your deductions available (work space, computer, printing, postage for MS mailings). Yeah, writers have a bitch of a time with taxes. Could be worse, you could be Asprin. Just SAY "IRS" to him and watch him snarl.
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On April 17th, 2007 01:53 pm (UTC), eugie replied:
Yep, deductions taken. Hell, I bought a new laptop last year, and I still had to gouge out my pound of flesh. Ouch.
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On April 17th, 2007 01:54 pm (UTC), random_42 commented:
They get you with that self employment tax - supposedly your share of the social security funds that are not collected on your behalf when you make a sale. I suspect an LLC will help you some but you'll still have taxation issues when your company pays you. Probably need someone who wears a CPA full time to work it out for you...

Such is the price you pay for success, eh?
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On April 17th, 2007 05:33 pm (UTC), eugie replied:
Sigh. I hate taxes.
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On April 17th, 2007 02:03 pm (UTC), melindadansky commented:
And, once again, I am pondering whether making myself an LLC would be beneficial.

A for-profit corporation is a marvelous tax-dodge. You pay yourself a small salary, and you take the rest as a dividend, which is only taxed as regular income--not self-employment.

It's probably worth it to pay a good lawyer/accountant to help you--they can help set things up so it's not only legal but of the best financial benefit. A mediocre accountant/lawyer can set it up, but they rarely take the time to make sure it's the most beneficial structure.

By the way: "Hello!" *waves* I'm back on LJ. I'm so glad to hear things are still going well for you.
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On April 17th, 2007 04:26 pm (UTC), eugie replied:
Hi! Yay, you're back!

Yah, I know that the best course of action would be to consult with a lawyer and tax accountant, but at this point in time, the fee they'd charge would most likely be more than the benefit I would expect to get from the undertaking.
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On April 17th, 2007 04:30 pm (UTC), melindadansky replied:
I know that the best course of action would be to consult with a lawyer and tax accountant, but at this point in time, the fee they'd charge would most likely be more than the benefit I would expect to get from the undertaking.

I know that feeling. I hear you can do the easy version by yourself with very little hassal. Good luck!
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On April 17th, 2007 03:04 pm (UTC), keesa_renee commented:
I think it must be beneficial, because I've heard successful writers say that they do it. I've never been successful enough to have to worry about it (although that may change come next year, thanks to Constant-Content...actually, I think I've already made enough this year that it will. Rats.) Anyway. I would ask an author who has done it or hire a good lawyer to look into it.
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On April 17th, 2007 03:14 pm (UTC), eugie replied:
I've bugged successful writers about it--ones who make their primary income from writing, unlike me--and I remain perplexed. It's an obvious thing to do if you make a significant amount of money and all of your income from writing, like Laurell K. Hamilton or Stephen King, but I'm not sure at what point it becomes worthwhile for a writer who doesn't earn all or most of their primary income from it.

Argh. I have a head for words, not numbers!
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On April 17th, 2007 04:22 pm (UTC), keesa_renee replied:
My guess would be...it becomes beneficial at the point where the fee to set it up and keep it going becomes less than the amount you're paying in taxes. :-) But I don't know when the paperwork becomes worth it, because I don't know how much paperwork is involved.

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On April 17th, 2007 05:59 pm (UTC), eugie replied:
Yes, I had figured out that ratio of cost and benefit, silly. But being a corporation requires tax complexities and other forms and filings that I don't grok (yet), which leaves me with a big ole question mark. Stupid federal tax laws . . .
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On April 20th, 2007 12:50 am (UTC), basletum replied:
Love to help, but all I know is how to handle taxes for sole proprietorships. Those are easy. 1040, Section C, with loads of expenses that most people don't think of (of which I only use half in case the IRS tries to be a-holes like they were last year. I sooo loved putting egg all over their faces. MWAHAHAHAHAHA! Too bad some [expletive deleted] robbed me blind after stealing my bank account number. Argh!)
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On April 17th, 2007 03:42 pm (UTC), safirasilv commented:
Taxes are a stone bitch. I'm just glad I have a) a house with a home office, b) a husband who has a nice, normal, W-2-producing job, and c) a sister-in-law who gets this self-employment stuff and did our taxes for us for the price of a good dinner. Almost all my income is from some kind of freelance, 1099 activity...
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On April 17th, 2007 05:37 pm (UTC), eugie replied:
You're very lucky to have a sister-in-law who'll do your taxes for you! I wish I had an altruistic relative I could consult. Sigh.
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On April 17th, 2007 04:43 pm (UTC), klingonguy commented:
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).
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On April 17th, 2007 05:56 pm (UTC), eugie replied:
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.
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On April 17th, 2007 06:11 pm (UTC), klingonguy replied:
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. :)
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On April 17th, 2007 06:39 pm (UTC), eugie replied:
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 . . .
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On April 17th, 2007 08:10 pm (UTC), wishwords replied:
If you lived in Houston I could recommend you to my CPA, whose sister is a tax attorney. She charges me $75 to do my return. It's worth every penny.
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On April 18th, 2007 05:29 pm (UTC), kaasirpent commented:
This is completely off-topic, but I wanted to comment and say that I've friended you because I've been listening to Escape Pod in catch-up mode and have enjoyed one of your contributions ("The Life and Times of Penguin") and am about to listen to another ("My Friend Is a Lesbian Zombie"). I'd be listening to it right now were it not for work. Pesky bills. When Steve mentioned you were local to Atlanta, I did a search and there you were.

So...hi. :)
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On April 18th, 2007 08:05 pm (UTC), eugie replied:
Hi and pleased to meetcha! Thanks for your kind words re: "The Life and Times of Penguin," and I hope you enjoy "Lesbian Zombie." Damn that work thing, keeping you from listening to podcasts of my fiction! How dare they?
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On April 20th, 2007 12:42 am (UTC), basletum commented:
"I'm conducting an online workshop, Worldbuilding for Writers: Transporting Readers Beyond the Ordinary. Register HERE. (Deadline, May 27.)"

Already heard about it. Already planning to register, hopefull with next paycheck. If not the paycheck after.


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