Guest Blog Post by: Angela Christina Fyri
For those of us in the United States, it’s that time of year again — taxes. Whether you are a writer or freelance artist, you are in business. And as such you need to keep track of expenses and income. Here are a few tips to help you through the process.
1. Keep Good and Accurate Records from the Beginning
This is especially true for starting businesses, as you may actually have a loss due to your expenses exceeding your income for several years.
2. A Hobby is NOT a Business.
The IRS will consider your ‘business’ a hobby rather than a legitimate business if you cannot demonstrate you are making a serious and legitimate effort to generate a profit.
3. Know What the IRS Expects
Don’t assume anything. Your best resource is the Internal Revenue Service. This is the best place to find good information. For those who like to see the entire picture, refer to:
4. Business Use Of Your Vehicle
If you use your vehicle for both personal and business, you MUST separate your expenses based on actual mileage. for a list of current and prior year mileage rates see the Standard Mileage Rates.
See also Publication 463, Travel, Entertainment, Gift and Car Expenses. When you eat out due to professional obligations, it is partially deductible.
Watch and Learn
If the thought of reading all those tax documents leaves you cross-eyed, consider Video. The Small Business / Self-Employed, VIRTUAL Small Business Tax Workshop offers 9 lessons on video (Closed Captions available).
Preparation Tips
- As you listen to the lessons, locate the forms, instructions and information, even if you pay someone to do your taxes. Having an idea of what and where you can deduct expenses as well as what taxes you will be liable for on your income will help you throughout the year with paperwork.
- By doing some of the legwork, your accountant will have less bookkeeping and be able to concentrate on tax and business management advice.
Standard Self-Employed Business Forms Needed
To round out the tips, I recommend you locate copies of the common forms you may need to add to your annual 1040 return.
- Schedule C (profit and loss)
- Schedule SE (self-employment taxes)
- Form 4868 (Automatic extension to FILE) * NOT extension to PAY!
- Form 8829 (business use of home)
- Form 2106 (employee business expenses) **Has some good information
Good advice and tip,Angela. As a CPA. I try to help my clients with record keeping and give them a simple form you can find on my website http://caroltoppcpa.com/services/tax-preperation-services/.
I’ve also written a book, Business Tips and Taxes for Writers, http://taxesforwriters.com/ due out this summer. It’s IRS language in simple English for those who do not like reading IRS publications!
Carol Topp, CPA
http://taxesforwriters.com/
Carol, thanks for the extra information for our readers.
— Suzanne