Self-Publishing Tax Preparation

I am almost half-way done with my editing pass through Peacekeeper Pathogen. If I continue this pace, I will be able to hand the manuscript over to my wife for her grammar check toward the end of February.

Tax Preparation
Tax time is approaching and it's time for me to begin gathering up the documentation and paperwork needed to file. You might think that doing taxes when you have a small business (which is what writing is) is difficult and time-consuming. Actually, it's not.

I used to do it all by hand but now there are several very low-cost tax preparation software programs available. Still, a person needs to be organized and prepared before sitting down to do your taxes. Each year, I like to post what I do to prepare for tax-time in the hope of helping other authors avoid problems. Here are a few tips to keep in mind:

  • The miles you put on your car for writing purposes are tax deductible. But, if you are audited, you must have detailed records showing starting mileage, ending mileage, date, vehicle, and the purpose of the trip. You will also need to know the mileage on your vehicle at the beginning of the year and the end of the year.
  • Business-related expenses. You would think that this is a no-brainer, but many authors fail to realize all their benefits. By using a program such as Quicken, you can track all of your expenses and automatically categorize them in a format acceptable to the IRS. Did you discuss writing with another author over dinner? The trip and the dinner are a valid business expense. So are advertising, office supplies, parking expenses, travel expenses, book purchases, etc. Other valid expenses include writer magazines, professional organization membership fees, and anything related to your business.

  • Writing income is something you must report, but how many people compare what appears on the 1099 to what was actually deposited in their accounts? If you have Amazon 1099s, you should do this comparison because there's an interesting glitch in how Amazon reports things to you. Did you know that Amazon extracts a small (about 3%) fee from your earnings as part of the cost of converting foreign currency into your local currency? If you have foreign sales, make sure you add up all of your Amazon 1099s and then compare this against what was actually deposited in your bank. You will find that your deposits are slightly smaller than what appears on the 1099. The difference is the conversion fee and this is a reportable business expense.
  • Do you have savings accounts? Make sure you get the interest you earned on all of them. Do you pay bank fees such as account maintenance fees? These are tax deductible as well. Just make you have the paperwork to back it up.
  • Do you use a part of your home exclusively for writing? This can be a small area in one room but it must be exclusively used for the business. If so, deduct it! 
Keeping track of all your business expenses, incomes, and activities in a detailed manner throughout the year makes filling out your taxes easy. The hardest part is making sure you have all your paperwork together so you can start the filing process. Being organized is the only way to properly run a business.