Monday, March 30, 2015

Authors & Taxes

I was privileged and honored to be featured on fellow author Tyora Moody's Written Voices Blog back in November of 2014. This was the article that I wrote for her column. I felt it was appropriate to post it on my blog now considering that April 15th is right around the corner. Hope this is beneficial.

Authors and Taxes

Many people don't know this about me, but my profession is accounting. At my day job, I conduct audits but I am preparing to start up a tax practice in 2015/2016. As an author and an auditor, I know that we are all prone to being audited by the Internal Revenue Service (IRS).

However, being a small business owner can make you more susceptible being audited. It is true that there are loopholes for authors and other small business owners, but from what I see and hear in my field there are a lot of people either taking deductions that they shouldn’t, evading taxes all together, or dodging owed back taxes.

Mistake # 1: Home Office Space Deduction
Just because you have a desk and a laptop at home does not mean that you automatically qualify for this deduction. You must meet certain criteria for the home office to be recognized and no, never claim your monthly rent for the apartment you live in as the deduction. You must be able to prove that the amount you claim is what you use reasonably in relation to the space. If you live in a home that you own, try separating the utilities—an account for the main house and another for your office space. This way, there are no questions about who uses what. The IRS is big on documentation. Be prepared.

As I writer, I don’t take the home office deduction because I spend most of my time writing/working away from home. Too bad I can't take a deduction for the coffee I drink in coffee shops.

Mistake #2: Meals and Entertainment
The only way you can legitimately take this deduction is if you're having a meal with a client while discussing business or you are traveling overnight away from your residence. Just like travel expenses, the meal cost must be reasonable. 

Mistake #3:  How You File
If you own a publishing company where you are taking on other authors, you should NOT be a sole-proprietor. Be sure to convert to an LLC or an S-Corporation. Speak to a tax and/or legal professional to help. This protects your liability and you show the IRS that you legitimately have a business and not a hobby. 

What You Can Deduct
One huge gripe of mine is someone telling me what I can’t do without providing solutions to what I can do. So below are a few things you can do to make your tax burden a little more bearable.

1.     Office Supplies – Consider printing, book mailings, postage, envelops.
2.     Travel – If you travel more than 30 miles outside of your city it is deductable. Be sure to use mileage (document in a notebook) versus gas costs. You can find current mileage rates on the IRS website.
3.     Advertising and Public Relations Costs—if you pay a publicists or buy ads you can claim these costs.
4.     Computer and Internet Services-you can use this as a deductable if you are using it solely for business.

There are plenty of deductions that you can take when you own a business. If you have questions, feel free to contact me at