Navigating Taxes for Writers: Essential Tips and Resources
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Chapter 1: Understanding 1099s for Writers
As writers contributing to platforms like Medium and Vocal, we will receive a 1099 form at the end of the year. This form requires us to report our earnings from these sources as part of our taxable income.
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Section 1.1: Filing Taxes as a Business
If you operate your writing endeavors as a business, it's essential to attach a Schedule C to your tax filings. Before proceeding, consider applying for an Employer Identification Number (EIN) online at www.irs.gov. This allows you to deduct various business-related expenses such as accounting, marketing, new laptops, internet costs, and phone bills from your taxable income.
Subsection 1.1.1: Benefits of Schedule C
Having a Schedule C means that your business income or losses will directly impact your personal tax returns. If you’ve published a book, you will also receive a 1099 from Amazon and other distributors. Keep in mind that you need to report any currency exchange gains or losses and account for any fees withheld by these platforms.
Section 1.2: Sales Tax Considerations
When selling books at events like signings, remember that you are not required to charge sales tax again, as Amazon has already collected it. Retain your invoices from Amazon as proof of tax payment to avoid penalties in case of an audit. It's wise to keep all purchase receipts organized, particularly if you establish your writing as a business.
Chapter 2: Seeking Professional Help
The first video discusses tax filing for self-published authors, including deductions that writers can utilize.
When preparing your Schedule C, the process is usually straightforward. However, for complex situations—especially those involving foreign currency sales and value-added taxes—consulting a Certified Public Accountant (CPA) is advisable. I prefer investing in professional help to ensure my taxes are accurate rather than face potential penalties later.
The second video explains the intricacies of 1099 forms and the process for business owners to send them correctly.
If you encounter difficulties, visit your local IRS office for assistance; they are more than willing to help, aiming to prevent errors on your tax return. I recommend avoiding tax preparation chains, as they often employ temporary staff who may lack the necessary expertise.
I hold an MBA in Accounting and Finance, yet I still rely on professionals for my tax preparation, particularly due to foreign currency issues. For accounting, I utilize QuickBooks to manage journal entries while my accountant handles the rest.
Here’s a glimpse of how my transactions are tracked, which I find incredibly useful.