Posted: July 10, 2017
Updated: June 24, 2020
When you start making income as a writer, there’s good news and there’s bad news.
The good news is: you’re getting paid to write! Congratulations! This is a dream come true for so many people. Take a moment to relish that thought before moving to the next paragraph.
Done relishing? Okay.
Here's the bad news: if you’re making income as a writer, then your tax return may not be as simple as filing a 1040-EZ anymore.
It’s commonly agreed upon that the American tax code is complicated and confusing.
As a result, companies like H&R Block, Jackson Hewitt, and TurboTax make their bread and butter not just from complex money management, but from filing the taxes of average Americans too fearful of making a mistake to file for themselves.
And if people with nine-to-five jobs, married, filing jointly are nervous about paying their taxes, a writer who has to declare self-employed income on a Schedule C may be all the more anxious.
In response to the bad news, I'd like to offer one more splash of good news: there are professionals available to help, so that you can focus on what matters most: writing your books and building your brand.
Here's what accountants bring to the table for writers and self-employed individuals of all shapes and sizes:
Accountants know federal, state, and local tax laws better than we do.
To become a certified public accountant (CPA), one must attend a four-year college program and then sit a sixteen-hour exam on auditing, regulations, and other fun topics. Many go on to complete a master’s program, and all CPAs must engage in continuing professional education in order to maintain their certification.
In other words, these guys and gals know their stuff.
What that means for you, the dutiful, tax-paying writer, is no more guesswork. No more Googling, hoping you understand the legalese on the message board you found (last updated five years ago).
Paying an accountant to file your taxes gives you peace of mind.
Accountants can help writers sort out their estimated quarterly taxes.
Estimated quarterly taxes are filed with the IRS by check or electronic payment four times a year, with prescheduled due dates in April, June, September, and January.
This may sound like a drag, but come Tax Day, you won’t end up owing four or five figures to Uncle Sam.
Rather, you will have paid what you anticipated owing in smaller amounts throughout the year and will come close to breaking even when you file your annual return.
There are countless guides to calculating your estimated quarterly taxes online — I’ve added to their ranks here — but if you file your annual tax return with an accountant, they know your personal and business finances well enough to recommend a personalized estimated quarterly tax schedule to you.
Sounds good to me!
Accountants can tell writers which of their business expenses qualify as tax deductions.
For instance, if you hired a freelance editor to provide manuscript critique or proofreading/copyediting feedback, a graphic designer to create your cover art and book layout, or a publicist to provide promotional support, you may be able to write these expenses off as deductions.
Many accountants can even help you form a sole proprietorship LLC, if you wish to turn your business into one.
Please note: most writers won’t need an LLC. Read legal expert Helen Sedwick's informative article to learn why.
In short, the reason writers benefit from hiring accountants can be found at the crossroads of simplicity and peace of mind.
If you're convinced and want to find an accountant, there are two things I recommend you look for:
An accountant with experience helping small business owners and freelancers. Remember, you won't file the same tax return as someone who sells widgets, much less someone who runs a multimillion-dollar conglomeration that sells widgets.
If you don't live in a city known for its publishing, the source of your self-employed income may throw one of the big box chains for a loop.
If you opt for a small business accountant, however, you'll know you’re in good hands. (Shoutout to Chad Shultz in Jacksonville; Startups CPA is fantastic!)An accountant whose fee structure fits your bottom line.
If you’re not making beaucoup bucks yet but still make enough to warrant hiring an accountant, consider approaching a professional who charges a flat fee instead of an hourly rate.
Are you a writer who loves their accountant? An accountant who works with writers? I’d love to hear from you! Share your thoughts in the comments below.
Furthermore,
If this article helped you and you think it’ll help your friends, share it via email and social media.
If you're a reader with related advice to share, I'd love to hear from you! Share your thoughts in the comments.
I look forward to chatting with you soon!
Cheers,
Jessica
Jessica Hatch is not a Registered Investment Advisor, Broker/Dealer, Financial Analyst, Financial Bank, Securities Broker or Financial Planner. The information in this blog post is provided for informational purposes only. It is not intended to be and does not constitute financial advice, is general in nature and not specific to you. Ms. Hatch is not responsible for any investment decisions made by you. You are responsible for your own investment research and investment decisions.