freelancerforhire

Q&A with Finance Author Brigitte A. Thompson

In Q&As, Writer Challenges on September 6, 2009 at 6:06 am

Why is it important for writers to understand bookkeeping?

Writers are earning money and this money needs to be reported as income on their income tax return. If writers do not have any expenses to claim, their taxable income will be higher and they will owe more income tax.

Understanding what can be claimed as business expenses when you are a writer and how to properly document these expenses will help ensure the success of your business.

The most important thing you can do as a writer is to become organized. There are many books available on how to organize your writing, but this is the best book available about how to organize the financial side of your writing business.

Have you found that freelance writers require a different set of bookkeeping rules?

Many bookkeeping rules are universal such as the requirement to record income, but there are some areas of the tax law that are of more interest to freelance writers. This includes dealing with royalty payments, bartering, personal property and agent fees. My book addresses the universal tax rules as well as the infrequently discussed rules that apply specifically to freelance writers.

Learning how to document expenses and how to track income will give writers the best chance at overall business success.

What are some tax deductions that freelance writers might not be aware of?

There are many tax deductions available to writers. Some expenses are common, such as the cost of purchasing a case of paper or paying for a computer software upgrade. Other costs incurred in the operation of your writing business may not jump out at you as expenses when they could be. For example, consider the following accounts.

Mileage: Trips made in your vehicle to pick up office supplies can be counted as a business deduction if you record the proper information to support it.

Meals: Treating your agent to a restaurant meal with the discussion focusing on your next book can also generate a tax deduction when properly documented.

Shipping: UPS charges and postage used to mail a query or review copy of your book can be a small expense, but it should still be tracked. Those small deductions add up and every penny spent as a qualified business expense will reduce the amount of income tax you owe.

Bookkeeping Basics for Freelance Writers devotes an entire chapter to expenses including a comprehensive listing of expenses and detailed information regarding what documentation is required to support each one.

I’m sure you’ve observed other freelance writers making accounting missteps that cost them time and money. What are some of the most common issues and how can we avoid them?

The most common misstep I’ve seen with writers is not taking themselves seriously as business owners. This can lead to financial pitfalls. Many writers have been honing their craft for years so it’s hard to identify an official starting date for their self-employment. Without this point to mark the beginning, it is easy to put off tracking income and expenses. This can be an unfortunate mistake.

The IRS will consider you to be in business when you are actively pursuing projects intended to generate income and expenses. This means they will expect you to file a tax return to report those transactions. Keeping track of your income and expenses from day one will enable you to pay the least amount of income taxes on the money you earn.


What are some of the challenges readers face with regards to bookkeeping?

I found the most common challenge writers face revolves around what they can claim as income and what counts as a tax deduction. For example, if their first job is writing the school newsletter, is the money received really income? Do they need to do something with the Internal Revenue Service before they can be considered a business? How do they handle self- employment tax?

The second most common concern for the freelance writers is related to proper documentation. What receipts did they need to save? How should they be kept? What information needs to be recorded to prove the expense? These are all great questions and they are addressed in the book.

Obviously, your book is a great place for writers to get information on bookkeeping. Are there are any other resources you recommend?

Yes, I recommend writers visit the IRS web site (www.irs.gov) to research specific tax issues and the Small Business Administration (www.sbaonline.sba.gov) for general business information.

I also recommend joining professional associations for writers such as American Society of Journalists and Authors (www.asja.org), The Authors Guild (www.authorsguild.org) and National Writers Union (www.nwu.org). There are many groups to choose from so consider the benefits of membership before joining.

I was interviewed recently by Freelance Success (http://www.FreelanceSuccess.com) which offers an insightful newsletter for their members. There are also online groups for writers such as MomWriters (http://www.MomWriters.com) offering networking opportunities as well as camaraderie.

How can we purchase your book?

Bookkeeping Basics for Freelance Writers is available through Amazon.com and my publisher (www.CrystalPress.org). Any local bookstore can order my book by ISBN-10: 0963212389 or ISBN-13: 978-0963212382. List price is $17.95.

Brigitte A. Thompson is the founder and President of Datamaster Accounting Services, LLC in Vermont. She has been active in the field of accounting since 1986 and is a member of the American Institute of Professional Bookkeepers and the Vermont Tax Practitioners Association.

She is the author of several finance books for business owners, contributing author to two business books, and a freelance writer whose articles have appeared nationally in print and online publications. Visit her online at Writers in Business.

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