It’s almost that time of year again… As April 15 draws nearer, accountants from coast-to-coast are busy helping itemize, deduct, and submit tax returns down to the wire.
As a freelance self-published writer, you may not know where to begin when it comes to preparing your taxes. While it does help to consult with a CPA for professional assistance, you can start doing much of the legwork yourself with these helpful tax preparation tips.
Understand the Self-Employment Tax
If you’re working as a full-time freelance writer, you may be shocked to find that you have to pay a significant chunk of change in taxable income. If you happen to fall within the 15% tax bracket, you’ll not only owe 15% on the income that you made but another 15.3% in self-employment tax. This could hike up your taxes to a whopping 30%.
Independent authors are encouraged to set aside a percentage of their income each quarter to pay taxes at the end of the year. The large amount of self-employment tax that you pay will cover Medicare and Social Security that are normally automatically withheld from your paycheck.
As a self-employed author, it’s critical to do everything in your power to reduce your taxable income with deductions. This will help to keep the amount of taxes that you pay as low as possible to balance your return at the end of the year.
Important Tax Tips for Self-Published Authors
If you have any questions about what and how to deduct expenses from your tax return, it may be time to set up a meeting with a CPA. As a self-published independent author, you want to leave no stone unturned when it comes to submitting deductions to lower your tax payment.
Self-published authors can better prepare a tax return with the following tips:
- Make sure that your occupation is listed as writer. Since working as a self-published author is your profession, it is important to list your occupation as such, or else the IRS may not consider you a legitimate author.
- Don’t overlook additional tax forms. This again is where the help of a CPA may come in handy; a self-published author may need to attach a Schedule C to a 1040 Form in order to deduct the expense of publishing an e-book.
- Keep all receipts. If you want to take advantage of every deduction that is owed to you, it’s critical to meticulously keep receipts for all expenses. These receipts and records can then be submitted to your accountant as itemized deductions at tax time.
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