Tax tips for authors: 3 Simple steps to organizing your business expenses

Tax Tips for AuthorsWhile it is understandable that most writers would prefer to concentrate their time on their writing, writing is a business and you will need to spend some time keeping the business of your writing organized and making sure you’re taking care of all of the tax deductions that you should be. The worst way to track your business expenses is to throw everything in a shoebox.

Here are three simple steps to staying organized so that at the end of the year you or your accountant can easily get the information needed for your tax return–from the fewest number of sources–to summarize the income and expenses related to your business.

  1. Have a separate business checking account. Deposit your writing income in this checking account and use it exclusively for business expenses.
  2. Designate one credit card as your business credit card. Use this card to pay for business expenses when it’s not convenient to pay by check. At the end of the month, your credit card statement will have all of your business expenses on it, which makes it much easier for you to keep track of expenses that are exclusively for your business than searching for them on your personal credit card statements.
  3. Withdraw a set amount of cash each month from your business checking account. This “petty cash” can be used to pay for smaller business-related items, such as purchasing a coffee when you’re out researching something, or having a meeting with someone. There’s no need to document your use of this petty cash, just keep the receipt and put it in an envelope. At the end of the year, seal the envelope and label it “2014 Petty Cash Receipts.” If you withdrew $100 per month, for example, you would have spent $1,200 on petty cash at the end of the year. That envelope hopefully contains approximately that much money, and in the unlikely event that you’re audited by the IRS and the auditor says, “Well how did you spend $1,200 in petty cash?”, you can show them this big, bulging envelope. Nine times out of ten the agent won’t really want to go into that envelope–they’ll be satisfied.

Robert Pesce

Robert M. Pesce, Partner, Marcum LLP, provides significant tax saving strategies and business advice that enables his clients to become more profitable and efficient. robert.pesce@marcumllp.com

 

What strategies do you use to track your business-related expenses?

Read the other installments in this series:

Learn how your agent is reporting your writing income

Understand foreign taxes, tax credit and tax certification

LLC or S-Corporation?