Taxes for Working Writers – Getting Organized for Income Tax Season
The downside of making money as a writer or blogger is paying income taxes; to ease your pain come April, here are eight ways for working writers and bloggers to get their taxes organized. This is important, fellow scribes, because the sooner you treat freelance writing like a business, the more money you’ll earn as a writer (and the more income tax you’ll pay — but hey, at least you’re making money writing or blogging!).
Before the tips, a quip:
“Writing is the only profession where no one considers you ridiculous if you earn no money.” ~ Jules Renard.
My goal as a working writer and blogger is to earn enough money to make paying income taxes a pain in the keister; earning no money is not an option! If you earned money writing last year, make sure you’re using tax software such as the TurboTax Deluxe Federal + State– it definitely makes calculating, filing, and paying income taxes easy (I remember the good old days, doing my taxes on paper!). But since doing taxes involves more than software, here are eight things for freelance writers and bloggers to think about as income tax season approaches…
Taxes for Working Writers – 8 Tips for Getting Organized for Income Tax Season
Jeff Staley, president of Freedom Tax Relief, LLC, advises freelance writers and bloggers to take these steps now to be ready for April 15.
1. Make a plan for filing your income taxes. Make plans now to ensure that you will be able to file your income tax return on time. If you can’t do your taxes on time, file an extension. The Internal Revenue Service (IRS) is more forgiving of those who follow the rules than those who skip filing. Even if you can’t pay your income tax debt in full on April 15, filing the required forms will result in smaller penalties. Also – get and stay organized with a few basic bookkeeping tips for freelance writers.
2. Prepare to pay tax on unemployment benefits. Unfortunately, not all working writers earn a full-time living – and unemployment income may have saved the day. But, unemployment income is taxable. If you received unemployment benefits last year, you should have received a Form 1099-G providing the total amount received. If your employer paid separate unemployment compensation, that income should be reported on your W-2 form as income. Note that the first $2,400 of government benefits received last year is exempt from tax, thanks to the American Recovery and Reinvestment Act.
3. Figure out if you’ll enjoy tax credits. Review last year’s freelance writing and blogging expenses to know whether you qualify for tax credits. The Stimulus Package included many tax credits, ranging from an expanded health coverage tax credit to new education benefits.
4. Maximize your income tax deductions. Make sure you’re familiar with what you can and can’t claim as a freelance writer. If you made donations to nonprofit organizations last year, make sure you obtain needed appraisals or valuations to list these contributions accurately in your tax forms, per IRS guidelines. Learn as much as you can about paying income taxes for working writers.
5. Contribute to your retirement plan. If you plan to contribute to a retirement plan, you can still make tax-deferred contributions for last year until April.
6. Estimate how much income tax you’ll owe. You can estimate your tax debt by reviewing a copy of last year’s tax form, completed with this year’s data. If you purchase income tax return software, it’s easy to play with your writing income, tax credits, tax deductions, etc.
7. Plan for income tax payments. If you earned more than a few bucks as a writer last year, you may have a bigger income tax bill than you can afford to pay in full by April 15! We should all be so lucky. If so, the IRS suggests taxpayers find any means possible to pay that bill – including bank loans, cash advances on credit cards, savings, borrowing against retirement or life insurance, or using equity in assets (such as a home) to pay. However, if you are in dire financial circumstances, exchanging one debt for another will not make things easier! And, putting a home at risk is almost always a bad idea. Consult a tax advisor, financial adviser, or even a savvy bookkeeper for freelance writers before making a decision.
8. Talk to the taxman about waiving tax penalties. If you absolutely cannot pay your tax bill, contact the IRS. The agency sometimes gives some leeway to taxpayers who contact them directly or pay a late bill voluntarily. The IRS might waive penalties for those who cannot pay because of a death in the family, serious illness, financial records lost in a natural disaster or another “reasonable cause.
What do you think about these tips for getting taxes organized for working writers or bloggers? Comments welcome below!
Freedom Tax Relief, LLC provides consumer tax resolution services and helps financially distressed individuals resolve IRS problems.