Writers who act as sole proprietors can have tax situations that are more complicated than many other professionals. Hiring a tax planner for help is always recommended. Check out a few of the common mistakes writers make on their self-filed taxes.
Mistake: Not taking advantage of business-related losses after an investment.
Did you spend a lot of time and money to create a book and you had no sales? You may be able to claim a business loss on your taxes. Many writers would consider this kind of downfall is just a major loss without realizing they could get a substantial tax deduction because of it.
Mistake: Failing to recognize the extent of their expenses as a sole-proprietor.
Expenses can be far more in-depth as a writer than what you may realize. A few examples of expenses that are easy to overlook include:
- Costs associated with traveling to meet a publishing agent
- Costs associated with postage to send out your manuscript
- Costs associated with gaining knowledge for your business position
Mistake: Not keeping detailed enough records for tax purposes.
As a sole proprietor, it is critical that you keep physical and digital records of everything you do with your business. If you go to an indie author conference, for example, keep the receipts for when you paid for gas, the email confirmation from where you paid for an entry ticket, and documentation proving what the event was about. Not keeping good records can really hurt at tax time when you miss out on a number of logical deductions. Hiring a tax planner at the beginning of the year will mean you can collect all your tax-related documents and hand them off to the pros throughout the year for safekeeping.
Mistake: Failing to figure in costs associated with third-party services.
Maybe you hired someone on Fivver to create a book cover for you. Perhaps you paid an editor to go over your manuscript. You may have even paid a group of beta readers to get honest feedback for your new book. All of these costs could be counted as costs related to running your business, but many writers fail to add these in when doing their own taxes. Tax planning services help out by reminding you of all the third-party professionals you may have paid throughout the year to help with your business as a writer. In many cases, writers leave off these costs incurred because they do not see a reasonable place to list the costs in their tax filing software.
Contact a tax planning consultant to learn more.