# If you made $10k in 2016 you could owe over $3,000.00 in US taxes.



## Marti talbott (Apr 19, 2011)

You saved a third of what you made, right?

My first year, I didn't and what a rude awakening.  Don't panic, you've got three more paydays before April 15 (US)

Find a free tax calculator online, and see what you're looking at before tax day. You'll be glad you did. Also check to see if you should be making quarterly estimated taxes. It's a way for the IRS to get paid early, true, but it's the law. I am not sure what the max amount is before you have to send them a check every three months, but you can google it. 

Just trying to avoid April 15th Indie Author heart attacks. )

Marti


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## Brad Clark (Jan 3, 2017)

If you will end up owing more than $1000, you should always plan on paying quarterly taxes.  

This bit me my first year and fortunately my second-year royalties helped cover it.  Now I'm saving 35% of my royalties each month and stashing it away and making my quarterly payments.  I did 30% last year and it wasn't enough, so I upped it to 35%.  Hopefully, that'll be enough to cover this year...


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## Amanda M. Lee (Jun 3, 2014)

Yeah, I have to pay more like 40 percent. Check with your state, too. I have to pay quarterlies to the State of Michigan so you can get nabbed with fines by the state if you don't pay quarterly.


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## Anne Pottinger (Oct 9, 2011)

Don't forget, there are also many ways to reduce that tax amount. Every expense you genuinely incurred while pursuing your writing, providing it's properly documented, can be used to offset tax due. Monthly web hosting for your website, programming, the space you use in your home (office space) to do your writing, depreciation of equipment, costs of promotion, subscriptions, research, insurance, outsourcing, and travel are likely write-offs that immediately spring to mind.


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## Not any more (Mar 19, 2012)

40% is what you should set aside. 12.5% self employment tax (FICA), Fed, State, Local, Medicare. Health insurance? If your author earnings are a drop in the bucket compared to your day job, then it's not a problem. Let your CPA sort it out. If you are making a living off your writing, I assume you have a CPA and are paying quarterlies. There are easier ways of researching prison novels than actually living in one.


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## Amanda M. Lee (Jun 3, 2014)

Anne Pottinger said:


> Don't forget, there are also many ways to reduce that tax amount. Every expense you genuinely incurred while pursuing your writing, providing it's properly documented, can be used to offset tax due. Monthly web hosting for your website, programming, the space you use in your home (office space) to do your writing, depreciation of equipment, costs of promotion, subscriptions, research, insurance, outsourcing, and travel are likely write-offs that immediately spring to mind.


Be very careful if you try to write off your office space in your home. That means absolutely nothing can happen inside that office besides work.


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## Guest (Jan 6, 2017)

Even people who make a little bit of profit can get bit by FICA tax. Not fun. And don't think because your state doesn't have an income tax that they won't tax you in some other way.


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## Anne Pottinger (Oct 9, 2011)

brkingsolver said:


> 40% is what you should set aside. 12.5% self employment tax (FICA), Fed, State, Local, Medicare. Health insurance? If your author earnings are a drop in the bucket compared to your day job, then it's not a problem. Let your CPA sort it out. If you are making a living off your writing, I assume you have a CPA and are paying quarterlies. There are easier ways of researching prison novels than actually living in one.


LOL, your remark immediately brought Jeffrey Archer to mind.


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## Not any more (Mar 19, 2012)

Amanda M. Lee said:


> Be very careful if you try to write off your office space in your home. That means absolutely nothing can happen inside that office besides work.


My CPA refuses to deduct my office. He says that is an automatic IRS audit.


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## Rick Gualtieri (Oct 31, 2011)

And while we're at it, don't forget to send your 1099's to all vendors you paid more than $600 to in 2016.


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## Amanda M. Lee (Jun 3, 2014)

brkingsolver said:


> My CPA refuses to deduct my office. He says that is an automatic IRS audit.


MIne won't either. I have a shoe closet attached to my office, lol. My guy was like "nope." The last thing I want to do is mess with the IRS.


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## Rick Gualtieri (Oct 31, 2011)

Amanda M. Lee said:


> MIne won't either. I have a shoe closet attached to my office, lol. My guy was like "nope." The last thing I want to do is mess with the IRS.


"No, seriously, I don't wear those shoes in my office!"


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## JRTomlin (Jan 18, 2011)

While you may not want to deduct your office, don't forget all the other deductions. That you actually owe that much is unlikely if you spend money on your business.  I use my office space only as an office but still don't deduct it. It just makes an argument with the IRS less likely, and wouldn't add that much to deductions. On the other hand, all those custom covers, editing and Bookbub ads definitely add up.

ERA: The topic is a bit scaremongerish and not terribly realistic. You are unlikely to owe that much if you have tracked and recorded your expenses.


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## Marti talbott (Apr 19, 2011)

Out_there said:


> Even people who make a little bit of profit can get bit by FICA tax. Not fun. And don't think because your state doesn't have an income tax that they won't tax you in some other way.


Right. Washington State has no state income tax - they call it Business and Operation (B&O) tax instead. Very tricky.


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## Amanda M. Lee (Jun 3, 2014)

JRTomlin said:


> While you may not want to deduct your office, don't forget all the other deductions. That you actually owe that much is unlikely if you spend money on your business.


Despite a pile of deductions, I will still pay more than 500K this year in taxes. It is what it is.


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## thewitt (Dec 5, 2014)

brkingsolver said:


> My CPA refuses to deduct my office. He says that is an automatic IRS audit.


Change accountants.

Seriously. Home offices are perfectly legal deductions and your accountant should not be afraid of you taking your legal deductions.

I've taken a home office deduction for more than 25 years and NEVER had an audit as a result.


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## Amanda M. Lee (Jun 3, 2014)

thewitt said:


> Change accountants.
> 
> Seriously. Home offices are perfectly legal deductions and your accountant should not be afraid of you taking your legal deductions.
> 
> I've taken a home office deduction for more than 25 years and NEVER had an audit as a result.


My accountant strenuously warned against it, too. For the little money it might save me it wasn't worth it in the least. He said that with the amount of money I'm pulling in the auditors would love to take more of it.


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## JRTomlin (Jan 18, 2011)

Amanda M. Lee said:


> Despite a pile of deductions, I will still pay more than 500K this year in taxes. It is what it is.


It is highly unlikely that someone who made 10k will owe 3k, not if they are taking appropriate deductions. It has nothing to do with what your individual total bill is.


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## Amanda M. Lee (Jun 3, 2014)

JRTomlin said:


> It is highly unlikely that someone who made 10k will owe 3k, not if they are taking appropriate deductions. It has nothing to do with what your individual total bill is.


Sorry for commenting. I'll go elsewhere.


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## Marti talbott (Apr 19, 2011)

JRTomlin said:


> While you may not want to deduct your office, don't forget all the other deductions. That you actually owe that much is unlikely if you spend money on your business.


Such as:
What you paid that CPA or any tax prep person/company
Advertising
Cover art / banner maker
Website/blog costs
proofreading/editing
Last years state taxes (In some cases)
research books on marketing and writing, etc.
Office supplies
Office equipment
paperbacks purchased to give away for marketing purposes
Business license
Registered agent (If you register yourself as a company, your state might require that you have a registered agent. They keep track of where you are in case you get sued. Used to work for one.)

What am I forgetting?

In the end, however, expenses don't lower your tax liability that much. This is not a very expensive profession like it would be if we had to rent office space and keep inventory in a warehouse.


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## Not any more (Mar 19, 2012)

Amanda M. Lee said:


> My accountant strenuously warned against it, too. For the little money it might save me it wasn't worth it in the least. He said that with the amount of money I'm pulling in the auditors would love to take more of it.


^This^ I decided a long time ago that paying a little extra to avoid an audit hassle was worth it. YMMV.


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## Marti talbott (Apr 19, 2011)

JRTomlin said:


> It is highly unlikely that someone who made 10k will owe 3k, not if they are taking appropriate deductions. It has nothing to do with what your individual total bill is.


Huh? I think the word you missed in my message is "could." single, no dependents, no other income....it could, it truly could.


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## Rick Gualtieri (Oct 31, 2011)

brkingsolver said:


> ^This^ I decided a long time ago that paying a little extra to avoid an audit hassle was worth it. YMMV.


I hate to attribute luck of the draw to anything, but I think there are always those who will do something and never show up on the radar and then there are those who will be flagged for even thinking such thoughts.

That said, I can understand a CPA saying to avoid something like this because it raises flags, but calling it an "instant audit" strikes me as a stretch.


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## Ann in Arlington (Oct 27, 2008)

National Association of Enrolled Agents: www.naea.org

National Association of Tax Professionals: www.natptax.com

The above are two organizations for tax professionals. You may NOT need a CPA. Tax prep is NOT accounting: it's knowing the tax laws, being able to explain options and risks to taxpayers, and doing the best for the client within the tax law. A CPA may specialize in tax, but may not. If you're shopping, you might ask them how much Continuing Education they do each year, and how much of it is in tax, vs auditing or some other branch. That'll tell you if they are keeping up with rapidly changing tax laws.

To say that claiming a home office is an "automatic IRS audit" is false. I've done many returns over my 30 years where I claimed home office expenses for my clients and, to my knowledge, none have been audited. The key is to Kkow the usage and recordkeeping requirements and abide by them.

Now, I have had clients who, once I explained the rules and restrictions, decided that, after all, it wasn't something they wanted to worry about -- it does mean a fair amount of attention to detail on the part of the client and they felt it was more than they wanted to bother keeping track of. But it's their choice: not MINE. 

I've had others who, when I explained it all, said, "yep, I want to do that" and were able to provide detailed records of expenditures. My responsibility at that point was to do the return for them so as to get the best answer I legally could.

Bottom line: you need to do what YOU are comfortable with, and you need to be able to work with your tax professional. And I STRONGLY encourage anyone for whom this is the first year you will be reporting income from writerly pursuits to, as a minimum, visit the IRS website and read the various small business related publications. Even better, set up at least a consultation with a credentialed tax professional who can advise you as to risks, requirements, and recordkeeping that you need to be aware of to make informed decisions.

Disclaimer: I'm an Enrolled Agent with 30 years experience in US personal income tax preparation. I'm a member in good standing of both organizations linked above.


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## Marti talbott (Apr 19, 2011)

Ha, I just paid $164.00 in late fees to the IRS for a $300.00 mistake my accountant made back in 2013. I've been dealing with this mess all year. They know who I am, so I'm not taking any chances by claiming anything that might look suspicious. It isn't worth it...trust me.


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## JRTomlin (Jan 18, 2011)

Amanda M. Lee said:


> Sorry for commenting. I'll go elsewhere.


How did I imply you shouldn't comment? Disagreeing with you is hardly that.


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## JRTomlin (Jan 18, 2011)

Martitalbott said:


> Such as:
> What you paid that CPA or any tax prep person/company
> Advertising
> Cover art / banner maker
> ...


I spend a lot on my cover art.


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## Gentleman Zombie (May 30, 2011)

Amanda M. Lee said:


> My accountant strenuously warned against it, too. For the little money it might save me it wasn't worth it in the least. He said that with the amount of money I'm pulling in the auditors would love to take more of it.


Out of curiosity -- because I really want to know. If you are making a lot of money - would it be worth it to rent an actual office space and hire an actual live assistant to work in it? I mean you are spending so much on taxes anyway... I'm wondering if a physical office with a real office person staffing it would be helpful.

Forgive me if my question is ignorant or offending. It's not meant to be.


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## PermaStudent (Apr 21, 2015)

Martitalbott said:


> Such as:
> What you paid that CPA or any tax prep person/company
> Advertising
> Cover art / banner maker
> ...


Ugh. And I just realized I need to *order* the 1099 form from the IRS and have it delivered. I need to give one to my editor. I'm off to mark this fun formality on my calendar for next year so I'm not scrambling...


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## blubarry (Feb 27, 2015)

PermaStudent said:


> Ugh. And I just realized I need to *order* the 1099 form from the IRS and have it delivered. I need to give one to my editor. I'm off to mark this fun formality on my calendar for next year so I'm not scrambling...


If you pay your editor by PayPal you don't need to send a 1099. It's one advantage of going through a payment service like that.


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## PermaStudent (Apr 21, 2015)

blubarry said:


> If you pay your editor by PayPal you don't need to send a 1099. It's one advantage of going through a payment service like that.


I've heard (granted, not from a tax professional, so everyone research and decide for themselves) that not having filed the 1099-Misc may cause problems in an audit if you try to claim the deduction. Tax law is complicated; just trying to cover my bases.


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## Not any more (Mar 19, 2012)

PermaStudent said:


> Ugh. And I just realized I need to *order* the 1099 form from the IRS and have it delivered. I need to give one to my editor. I'm off to mark this fun formality on my calendar for next year so I'm not scrambling...


Unless your editor is considered in some way a contractual employee, you probably don't need to send a 1099. If you are paying for a service that he/she provides to many others, then it's just like paying Staples for paperclips. You deduct the payment from your taxes and let the editor keep his/her own books.


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## thewitt (Dec 5, 2014)

I won't harp on it, but I will say again if you have an accountant who is telling you NOT to take a deduction you are legally allowed, you seriously should be talking to another accountant.  I will take every legal deduction - that's why they exist after all - and expect my accountant to tell me what I'm forgetting to take, not to tell me not to take something I'm allowed.

I've have run a number of side businesses as well as been self-employed in the last 40 years, and have no fear of the IRS.  They have a set of rules they follow, and they are clearly published. Hire the right professional help and do the right thing for record keeping and even an audit is not an issue.

Do what you are comfortable with, but don't operate out of fear and simply give the government more than they are due.

Enjoy tax season.


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## Guest (Jan 6, 2017)

PermaStudent said:


> Ugh. And I just realized I need to *order* the 1099 form from the IRS and have it delivered. I need to give one to my editor. I'm off to mark this fun formality on my calendar for next year so I'm not scrambling...


Actually, you don't need to order them. I use https://www.1099online.com/. They will confirm the accuracy of the SSN, send the 1099s, and efile the returns for you. It is one of the authorized e-file services through the IRS, and you can use it for one person or a 1000. And they are extremely reasonable.


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## Guest (Jan 6, 2017)

brkingsolver said:


> Unless your editor is considered in some way a contractual employee, you probably don't need to send a 1099. If you are paying for a service that he/she provides to many others, then it's just like paying Staples for paperclips. You deduct the payment from your taxes and let the editor keep his/her own books.


Employees get W-2s. Contractors get 1099s. If the editor is a registered business, then you would not send a 1099. If the editor is simply a freelance editor, you should send a 1099. But chances are if the editor uses their own SSN instead of an EIN, you need to send a 1099 for anything over $600. And remember, it is only $10 for any royalties (for those of you that do royalty splits with other authors and such).


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## 75845 (Jan 1, 1970)

Amanda M. Lee said:


> Be very careful if you try to write off your office space in your home. That means absolutely nothing can happen inside that office besides work.


For UK residents its the opposite. If you claim the whole room against tax you are liable for Capital Gains Tax when you sell the property and given UK house prices that could be a lot of money. So HMRC recommend charging a proportion of heat and lighting and not claiming for a room.


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## Guest (Jan 6, 2017)

thewitt said:


> I won't harp on it, but I will say again if you have an accountant who is telling you NOT to take a deduction you are legally allowed, you seriously should be talking to another accountant. I will take every legal deduction - that's why they exist after all - and expect my accountant to tell me what I'm forgetting to take, not to tell me not to take something I'm allowed.


I agree. If you have a legitimate dedicated office that is used for business, you should most certainly deduct it. If, on the other hand, your office is just a computer desk in your bedroom and you use your computer for non-work related activities (like, you know, gaming lol) then don't do it. It has to be a dedicated space. Insofar as having a closet in the room...well, just don't include the square footage of the closet. Problem solved!


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## 10105 (Feb 16, 2010)

Those accountants probably have a guarantee in which they must accompany you if you get audited. They don't want to have to do that so they take every "safe" measure.

I've been deducting home office expenses and a lot of other stuff for the 38 years I've been self-employed. Never been audited. It doesn't mean I never will. But I keep records of everything and my deductions are legit. There's no reason to fear an audit when you haven't tried to defraud the IRS. But I try to keep _good _records. Throwing receipts in a desk drawer for "just-in-case" is slip-shod.


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## Marti talbott (Apr 19, 2011)

Bards and Sages (Julie) said:


> Actually, you don't need to order them. I use https://www.1099online.com/. They will confirm the accuracy of the SSN, send the 1099s, and efile the returns for you. It is one of the authorized e-file services through the IRS, and you can use it for one person or a 1000. And they are extremely reasonable.


Good to know. I'm going to use an online service this year because it's easier to have a ecopy which I didn't have last year.


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## thewitt (Dec 5, 2014)

Lynn is a pseud--uh said:


> I just can't legitimately say I don't do other things in my office space. It's in my home and we wander in there all the time. Heck, I journal at my desk when I'm feeling antsy and stare out the window thinking about what to buy friends for Christmas.
> 
> Then there's the time I watched a whole bunch of Castle DVDs on my computer as a way to avoid the open document hiding behind the video.
> 
> If I thought for a moment I didn't use the space for personal stuff, I'd deduct it in a heartbeat. But I just can't say that and not be lying at least a little bit.


Business use does not have to be exclusive, only primary.


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## 10105 (Feb 16, 2010)

The "exclusive use" rule is not inflexible. If you make or take a personal call from your home office or your family interrupts your work for some personal matter, the rule forgives the business owner just as it would if those things happened in an office building. You can get lots of information about such matters from the TurboTax webpages that address them.
https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/The-Home-Office-Deduction/INF12067.html


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## LindsayBuroker (Oct 13, 2013)

brkingsolver said:


> My CPA refuses to deduct my office. He says that is an automatic IRS audit.


Ugh, that's horrible. That's a legitimate business expense. I've been self-employed since 2001, have written off the home office every year, and haven't been audited yet. Writing off a lot of travel expenses is the kind of thing that's far more likely to get you into trouble. Or having so many "expenses" that you don't end up owing any taxes.


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## 10105 (Feb 16, 2010)

thewitt said:


> Business use does not have to be exclusive, only primary.


Better check on that. The tax code is quite specific about exclusivity.


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## 10105 (Feb 16, 2010)

LindsayBuroker said:


> Ugh, that's horrible. That's a legitimate business expense. I've been self-employed since 2001, have written off the home office every year, and haven't been audited yet. Writing off a lot of travel expenses is the kind of thing that's far more likely to get you into trouble. Or having so many "expenses" that you don't end up owing any taxes.


You aren't in "trouble" if the expenses are legit. Taking a loss isn't "trouble" either unless you do it year after year, in which case the IRS might call your business a "hobby." Getting audited in itself isn't "trouble." It might be a PITA, though.


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## PermaStudent (Apr 21, 2015)

Bards and Sages (Julie) said:


> Actually, you don't need to order them. I use https://www.1099online.com/. They will confirm the accuracy of the SSN, send the 1099s, and efile the returns for you. It is one of the authorized e-file services through the IRS, and you can use it for one person or a 1000. And they are extremely reasonable.


Thank you for this. I'm checking it out now.


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## katrina46 (May 23, 2014)

JRTomlin said:


> It is highly unlikely that someone who made 10k will owe 3k, not if they are taking appropriate deductions. It has nothing to do with what your individual total bill is.


i was thinking it sounded like a lot. That's below the poverty line. I've never paid so much on such a small amount, but I support my son, so it's about a lot more than what you made. Everyone's circumstances are different. I'm head of household. Really, there's no telling what someone else owes. It's all about each individual case.


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## AmpersandBookInteriors (Feb 10, 2012)

katrina46 said:


> i was thinking it sounded like a lot. That's below the poverty line. I've never paid so much on such a small amount, but I support my son, so it's about a lot more than what you made. Everyone's circumstances are different. I'm head of household. Really, there's no telling what someone else owes. It's all about each individual case.


I agree with this. You'd have to have a full-time job that the 10k is added to to pay 3k in taxes on the self-publishing 10k.


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## Guest (Jan 6, 2017)

PermaStudent said:


> Ugh. And I just realized I need to *order* the 1099 form from the IRS and have it delivered. I need to give one to my editor. I'm off to mark this fun formality on my calendar for next year so I'm not scrambling...


I use Track1099. Very reasonable for little folks like us


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## Anne Pottinger (Oct 9, 2011)

brkingsolver said:


> My CPA refuses to deduct my office. He says that is an automatic IRS audit.


Really?? I've claimed half of the square footage of a spare bedroom where I genuinely have a desk, bookcase, filing cabinet, etc. for many years and it's never once been questioned, and I've never had an audit.


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## Alpaca Lou (Mar 14, 2016)

Amanda M. Lee said:


> Yeah, I have to pay more like 40 percent. Check with your state, too. I have to pay quarterlies to the State of Michigan so you can get nabbed with fines by the state if you don't pay quarterly.


Yup, only a few states don't have separate income taxes.

Also if one lives in certain cities they should check with them as well. NYC, LA, Chicago, Philly, Detroit, etc levy additional income taxes.


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## Marti talbott (Apr 19, 2011)

Write.Dream.Repeat. said:


> I agree with this. You'd have to have a full-time job that the 10k is added to to pay 3k in taxes on the self-publishing 10k.


Except to get a business license, you have to register as a sole proprietor (small business owner) and that's why the taxes run around 30% on your business income instead of what you normally pay in personal income taxes when you have a job. I could be wrong and you are not required to have a business license where you live, but you might want to check that out.


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## Aaronhodges (Dec 19, 2015)

Holy ****, I thought you guys were meant to have low taxes in the USA :O 
35% on $10,000 income? You've got to be kidding me?
In NZ I paid 10% last year on 10k, plus I think 5% for my ACC cover (type of government insurance).
What's going on over there



Martitalbott said:


> You saved a third of what you made, right?
> 
> My first year, I didn't and what a rude awakening. Don't panic, you've got three more paydays before April 15 (US)
> 
> ...


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## hunterone (Feb 6, 2013)

Martitalbott said:


> You saved a third of what you made, right?
> 
> My first year, I didn't and what a rude awakening. Don't panic, you've got three more paydays before April 15 (US)
> 
> ...


I always put 30% aside. That way i'm never caught with my pants down.


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## hunterone (Feb 6, 2013)

Anne Pottinger said:


> Don't forget, there are also many ways to reduce that tax amount. Every expense you genuinely incurred while pursuing your writing, providing it's properly documented, can be used to offset tax due. Monthly web hosting for your website, programming, the space you use in your home (office space) to do your writing, depreciation of equipment, costs of promotion, subscriptions, research, insurance, outsourcing, and travel are likely write-offs that immediately spring to mind.


You have to be careful with travel. Unless you can prove that it was business related, they might nab you on it. That's why some folks create travel blogs and say that its business related.


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## 555aaa (Jan 28, 2014)

While you're feeling the pain on paying that self-employment tax, remember that it becomes part of the basis for your Social Security here in the US. Even when your earned income is only a few thousand dollars, that counts towards eligibility. I know this is not the OP's point but it's something to be cautious of if you are working to lower your self-employment taxes and you don't already have credits from a regular job. You also need to be sure to hit the ten year credit number for Medicare eligibility.  If you go through life as a creative person without hitting those bottom threshold numbers (generally ten years of work), you won't be able to collect Medicare and Social Security when you're eligible, so some "strategery" in making sure you're not too over-zealous in deductions might make sense.


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## 555aaa (Jan 28, 2014)

Aaronhodges said:


> Holy ****, I thought you guys were meant to have low taxes in the USA :O
> 35% on $10,000 income? You've got to be kidding me?
> In NZ I paid 10% last year on 10k, plus I think 5% for my ACC cover (type of government insurance).
> What's going on over there


The federal tax on $10,000 AFTER DEDUCTIONS is only $1,043. But we have self-employment (SE) tax which is like your ACC cover - normally it's employer paid 50% and employee paid, but as a self-employed person you pay all of it. Marti's in a state with a state B&O tax but that's only a couple percent or so. There's a standard deduction everyone gets to take off the bat, but spread out over everything you could be at a 30% rate if you don't have any deductions, and my point was to be sure that you don't deduct too much to not show enough SE tax to get you over the eligibility threshold which I think is about $5K in earned income in a full year - that makes the tax system look like you had a regular job for a year which is important if you don't have a normal job.


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## GinJones (Feb 19, 2013)

While I'm a fan of being prepared, a safe percentage depends on a number of things, including whether it's going to cover ALL taxes (state, federal income and federal payroll tax -- Social Security and Medicare) or just federal. And it depends on whether the person has other income. 

For federal income tax, a TOTAL NET income of $10K (without having any income from other taxable sources) is unlikely to generate much, if any, federal income tax, due to personal exemptions, but it will still generate close about 15% in payroll tax (Social Security and Medicare contributions). State tax will depend on local laws, ranging from zero to ... I don't know what the top rate is. 

On the other hand, for a person with a day job, earning say $50K, and having just enough to cover tax liability deducted from the paycheck (so no refund), then the federal income tax liability is likely to be about a third of the net writing earnings PLUS there would be a payroll tax due of about 15% for Social Security and Medicare. 

Bottom line: work out the safe percentage with a qualified professional licensed in your state. 

Not giving individual tax advice other than to seek advice from a local licensed professional.


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## Ann in Arlington (Oct 27, 2008)

brkingsolver said:


> Unless your editor is considered in some way a contractual employee, you probably don't need to send a 1099. If you are paying for a service that he/she provides to many others, then it's just like paying Staples for paperclips. You deduct the payment from your taxes and let the editor keep his/her own books.


Not exactly: if you pay a person more than $600 during a year for services, you are supposed to issue form 1099MISC reporting non-employee compensation. If you do not, the IRS may disallow the expenses. Hiring people is NOT the same as buying paperclips, sorry.

If you pay through a payment service, like Paypal, you may not need to issue the document as they should get a 1099K from Paypal. My problem, as the tax professional of someone who paid an editor or proofreader that way, is how do you -- my client -- KNOW that PayPal is going to issue that. Maybe they didn't meet the threshhold for 1099K which is higher than for 1099MISC. It's a situation where I'd want to do more research and get guidance from the company research arm so as to have full support of whatever position we take. In either case, the author should keep complete information on the person they've paid, to include name, address, and social security number, as well as how much they paid them, on what dates, and what for. The author should also have a policy (preferably written) about how they keep that personal information secure.

The payee, in this case, absolutely should keep their own records in the event they get duplicate reporting documents -- 1099MISC from some authors, 1099K from Paypal, and the total ends up being more than they actually made. The only way to substantiate the TRUE, smaller amount of income, is with complete and accurate contemporaneous records.

At least, that's the advice I'd give a client of mine.


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## Ann in Arlington (Oct 27, 2008)

thewitt said:


> Business use does not have to be exclusive, only primary.


Actually, for an office in the home, business use does have to be regular and exclusive. Meaning you use it with frequency -- not just once a month or so -- and that you do not use it for anything else.

Anyone interested can review the rules in the IRS Pub 587. Note that the rules are slightly different for an employee vs for a self employed individual.


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## Ann in Arlington (Oct 27, 2008)

LilyBLily said:


> I always end up saying this, so I might as well say it again. Read the IRS rules about sole proprietorship businesses. Read all the supporting publications, not merely the Schedule C instructions.
> 
> Don't just fish for hearsay.
> 
> Keep good records, and don't live in fear.


Wise words.

And if it doesn't make sense to you . . . ask someone whose opinion you can rely on. Random people on the internet, even me, won't count if you do something the IRS decides was wrong. It's a false and foolish economy to save money by NOT hiring a professional tax person when it's not something you understand well. Same reasoning why I don't try to change the oil in my car or fix my own teeth!


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## J.A. Sutherland (Apr 1, 2014)

My two-cents. 

If you're not comfortable learning the tax rules yourself, you should definitely hire a tax professional. Tax professional does not mean whichever dude is behind the desk at Walmart that year. You're running a business -- form a professional relationship with a good tax professional who'll know your business every year. They'll be able to make suggestions as your business grows that will help minimize your tax burden.

You can also pay your estimated taxes online outside of the quarterly schedule, which is easier for some people. If it's sent to the IRS monthly, then there's no temptation to "borrow" against what you've put aside.

Quickbooks Self Employed (https://quickbooks.intuit.com/self-employed/) is a great option for record keeping and doing taxes. There's a cost, but it does a lot. You can put in your day job salary and withholding and it will calculate your estimated taxes for you based on current income and expenses. It hooks up to your bank account and brings in transactions for you to categorize with rules for the tax forms (i.e. Every charge from Facebook is Advertising). Their mobile app automatically tracks mileage for that deduction (and where you go, so turn it off if you're going to commit a crime).


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## RightHoJeeves (Jun 30, 2016)

Aaronhodges said:


> Holy ****, I thought you guys were meant to have low taxes in the USA :O
> 35% on $10,000 income? You've got to be kidding me?
> In NZ I paid 10% last year on 10k, plus I think 5% for my ACC cover (type of government insurance).
> What's going on over there


I know, right? Seems so high.


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## TheLemontree (Sep 12, 2015)

RightHoJeeves said:


> I know, right? Seems so high.


Nah, If your day job already puts you in the top tax bracket, you'd be pinged close to that here, too. Hell, I earned a miserly US$250 last year (financial year ending Mar 2016) (had only been published a few months) and now have a NZ$700 bill to pay the IRD - not because of the income itself (that was not enough to tax), but because it bumped our family up into another bracket and we have to repay 'overpaid' WFF tax credits.

Everyone commenting here saying "But if you make your deductions etc you'll be fine." is correct - but people who are on top of their taxes sufficiently to know about deductions will not be the ones showing up here in a few months SHOCKED, SHOCKED I tell you, that the tax man wants some of their money! I mean, it's not like *real* income, right? It's magic money


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## J.A. Sutherland (Apr 1, 2014)

TheLemontree said:


> Everyone commenting here saying "But if you make your deductions etc you'll be fine." is correct - but people who are on top of their taxes sufficiently to know about deductions will not be the ones showing up here in a few months SHOCKED, SHOCKED I tell you, that the tax man wants some of their money! I mean, it's not like *real* income, right? It's magic money


This is the thing. It's the person in their first year of some success, with a day job, who's going to get hit hard. I just did a talk on the business of writing and the example I use is someone with a taxable day job income of $38k after personal deductions and exemptions (single). That puts them in the 25% bracket, plus 12% social security, plus 3% medi. Even if they took some deductions against writing, if they had $10k profit, it's a big tax hit come April. And at that level of income, most people live paycheck to paycheck on the day job, so the writing income will likely be the same.

They'll be sitting there come April with a $3000-$4000 tax bill -- maybe penalties added for not paying estimated tax. And they likely didn't track deductions enough to make a difference.

Exactly 1 of the attendees of my talk had written down their mileage when getting on the road for a talk on the business of writing.


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## Marti talbott (Apr 19, 2011)

RightHoJeeves said:


> I know, right? Seems so high.


It IS too high. That's what all the small business owners in the US are screaming about.

Did you know that when you make money after you start to collect SS in the US, you have to pay taxes on up to 85% of your yearly ss income. My money - I paid into it all my working life but now I have to pay taxes on it just because I make extra money so I can survive. My SS is only $903 a month. No one can live on that. Sometime you can't win for losing. End of rant. )


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## ccasey (Feb 7, 2013)

I have a question for anyone who has been using eftps.gov to pay their estimated quarterly taxes... Will they send you a statement of everything you've paid? To file with your taxes.

After 2015 I had a hefty tax bill, which I was prepared for with my savings. So in 2016 I had to pay estimated quarterly taxes (only I wound up paying monthly because it hurt too much watch it all come out of my savings each quarter; best for me just to hand it over each month when I received it). I've been paying through eftps.gov but this is my first year using them and I'm not sure what to expect regarding reports.

I'm also a little nervous now after reading the comments. My 2016 publishing earnings put my husband and me into a higher tax bracket so I've been paying 30% monthly. We're in Texas, no state taxes.


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## Amanda M. Lee (Jun 3, 2014)

I pay quarterly but not through the website. My guy gives me stubs to send in to the state and IRS with my checks. I always round up so I'm dealing with easier numbers and keep track of it myself.


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## Usedtoposthere (Nov 19, 2013)

Martitalbott said:


> It IS too high. That's what all the small business owners in the US are screaming about.
> 
> Did you know that when you make money after you start to collect SS in the US, you have to pay taxes on up to 85% of your yearly ss income. My money - I paid into it all my working life but now I have to pay taxes on it just because I make extra money so I can survive. My SS is only $903 a month. No one can live on that. Sometime you can't win for losing. End of rant. )


Social Security is income like any other. You weren't taxed on it the first time--it came out pre-tax. Just like an IRA: you can do a Roth, where you pay tax on it at the time, but what it earns isn't taxed, or you can do a pretax IRA, which means you'll pay tax on it after retirement, when you withdraw it. You have to pay tax on it sometime.

People aren't expected to live solely on Social Security. It's supplemental. That's why everybody is scratching their heads at all the baby boomers coming up on 65 who have barely saved for retirement. We used to have pensions. Now we don't. We have IRAs & 401(k)s, but they aren't any good if people don't save into them. That's why countries like AU & NZ have superannuity, forcing people to save their $$ for retirement. Otherwise, most people simply don't. The average American aged 55-64 has saved about $100K for retirement. Total. In other words, about $300/month's worth. That's not going to go too far.

Social Security depends on how much you made during your working life, and thus how much you contributed, as well as when you start to take it. My husband gets about $3500/month, because he maxed out on his contributions every year, and he didn't retire from full-time employment until age 71.


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## CoraBuhlert (Aug 7, 2011)

If you were affected by the ARe debacle, download your report for Q4 of 2016 while you still can. I'm not sure how this works in the US, but you might be able to write off income lost to the ARe mess as a loss. 

In general, always keep invoices and receipts for any business expense (someone above made a nice list of what you can deduct), so you can document your expenses. And find out exactly, preferably from a tax professional, what you can deduct. In Germany, I can even write off every book I buy as a business expense, since I'm a writer.


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## RightHoJeeves (Jun 30, 2016)

TheLemontree said:


> Nah, If your day job already puts you in the top tax bracket, you'd be pinged close to that here, too. Hell, I earned a miserly US$250 last year (financial year ending Mar 2016) (had only been published a few months) and now have a NZ$700 bill to pay the IRD - not because of the income itself (that was not enough to tax), but because it bumped our family up into another bracket and we have to repay 'overpaid' WFF tax credits


Aha well I don't earn anything close to the top bracket.

How does that work with overpaid credits? Don't you guys just pay the higher percentages on the amounts earned over a certain point?


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## NoCat (Aug 5, 2010)

Personally, I would find a new tax accountant if they told me I couldn't take a perfectly reasonable deduction like my office. 

Remember also that tax brackets aren't flat. If you make enough from a day job to be in the 15% tax bracket but getting 10k more from writing bumps you into the 25% tax bracket... only that 10k that is over the 15% tax bracket is taxed at the 25%, not your entire income.

If you make 10k total in a year, you'll pay almost no Fed taxes at all after deductions (and depending on your circumstances etc, you could even get credits etc).

This is why it is vital, imo, to have someone professional do your taxes if you are self-employed or making anything significant (like enough to push you into another tax bracket) from your writing.  This stuff is complicated and there's a lot of headaches a professional can save you (and money potentially, also. My tax guy has found us thousands in deductions that I'd never have thought of myself- like the art hanging in my office etc.


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## Not any more (Mar 19, 2012)

"Not exactly: if you pay a person more than $600 during a year for services, you are supposed to issue form 1099MISC reporting non-employee compensation. If you do not, the IRS may disallow the expenses. Hiring people is NOT the same as buying paperclips, sorry."

OK, let me be clearer. If you are hiring someone off the street to do your editing, you need to issue them a 1099. If you are buying editing services from a business, then you don't.


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## Marti talbott (Apr 19, 2011)

Rosalind J said:


> Social Security is income like any other. You weren't taxed on it the first time--it came out pre-tax. Just like an IRA: you can do a Roth, where you pay tax on it at the time, but what it earns isn't taxed, or you can do a pretax IRA, which means you'll pay tax on it after retirement, when you withdraw it. You have to pay tax on it sometime.
> 
> People aren't expected to live solely on Social Security. It's supplemental. That's why everybody is scratching their heads at all the baby boomers coming up on 65 who have barely saved for retirement. We used to have pensions. Now we don't. We have IRAs & 401(k)s, but they aren't any good if people don't save into them. That's why countries like AU & NZ have superannuity, forcing people to save their $$ for retirement. Otherwise, most people simply don't. The average American aged 55-64 has saved about $100K for retirement. Total. In other words, about $300/month's worth. That's not going to go too far.
> 
> Social Security depends on how much you made during your working life, and thus how much you contributed, as well as when you start to take it. My husband gets about $3500/month, because he maxed out on his contributions every year, and he didn't retire from full-time employment until age 71.


Lucky you. I'm happy you were able to pay into a healthy retirement. As for me, I worked all my life and barely paid the rent. Never owned a car that didn't know when it was payday.

By the way, if you aren't making extra money you don't have to pay any taxes on social security - nope, none at all. Don't worry, there's always food banks for the elderly. It's sad to see an 85 year old woman dressed in her Sunday best waiting in line to get into a food bank, but there are people in the world who do care that they have enough to eat.

Stop hunger - Donate to your local food bank today! I used to give them $1,000.00 a month but switched last year to a charity that needed my help for a while. I probably should have saved that for my retirement instead. Oh well, too late now.


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## TheLemontree (Sep 12, 2015)

RightHoJeeves said:


> Aha well I don't earn anything close to the top bracket.
> 
> How does that work with overpaid credits? Don't you guys just pay the higher percentages on the amounts earned over a certain point?


I didn't mean tax bracket, to be clear. I meant some sort of entitlement bracket for that particular class of tax credit. Not going into details here, as it's completely irrelevant except to New Zealanders with dependent children who earned more than they estimated in any particular year.

The WFF tax credits are paid out either at the end of the financial year, based on your actual income situation. OR you can estimate your income at the start of the year, get the credits paid out fortnightly, and square up the difference at the end. My extra income (plus possibly my partner's pay raise) meant that the 'squaring up' came out of our pocket, not the other way around.


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## David VanDyke (Jan 3, 2014)

brkingsolver said:


> My CPA refuses to deduct my office. He says that is an automatic IRS audit.


We deduct it every year. No problems. No audit. I do withhold monthly via my military pension, though. We have a CPA who works at a financial law firm do our taxes.


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## David VanDyke (Jan 3, 2014)

Aaronhodges said:


> Holy ****, I thought you guys were meant to have low taxes in the USA :O
> 35% on $10,000 income? You've got to be kidding me?
> In NZ I paid 10% last year on 10k, plus I think 5% for my ACC cover (type of government insurance).
> What's going on over there


Because many expenses are shifted onto employers and hidden, when one is self-employed, they come to light.


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## Rick C-137 (Oct 29, 2016)

My first big payment arrives on January 29 and I thought perhaps setting aside 25% was enough, but now I'm concerned it's not, even though I'm the sole income earner for a family of four. It sounds like it doesn't matter if one has dependents.

I'll definitely be setting up an appointment with a CPA to get guidance on this. 

Goodbye, Earned Income Credit. I'll enjoy you one last time on my 2016 return, but miss you next year.


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## Usedtoposthere (Nov 19, 2013)

Martitalbott said:


> Lucky you. I'm happy you were able to pay into a healthy retirement. As for me, I worked all my life and barely paid the rent. Never owned a car that didn't know when it was payday.
> 
> By the way, if you aren't making extra money you don't have to pay any taxes on social security - nope, none at all. Don't worry, there's always food banks for the elderly. It's sad to see an 85 year old woman dressed in her Sunday best waiting in line to get into a food bank, but there are people in the world who do care that they have enough to eat.
> 
> Stop hunger - Donate to your local food bank today! I used to give them $1,000.00 a month but switched last year to a charity that needed my help for a while. I probably should have saved that for my retirement instead. Oh well, too late now.


This isn't quite true. If you're single and have an adjusted gross income of less than $25,000, your Social Security benefits aren't taxable. (Because you'd be below the rate at which anybody pays taxes, I think, or there are low-income rules for Soc. Sec., or whatever.) If Social Security is your ONLY source of taxable income, you PROBABLY won't owe any taxes.

"If your filing status is single, and your combined income is between $25,000 and $34,000, up to 50% of your benefits could be taxable. If your combined income is more than $34,000, up to 85% of your benefits could be subject to tax. And, if your combined income is less than $25,000, your benefits are not taxable at all."

Nothing's really simple, alas! Plus, 13 states also tax Social Security benefits--and not necessarily using the same rules as the federal ones.

Here's a better explanation if this applies to anybody else: http://www.fool.com/retirement/general/2016/04/30/is-social-security-taxable.aspx

Sorry; did not mean to be dismissive. I appreciate that folks can be in a bad situation. It's just that, once you get above the taxable level, you have to pay taxes whether it's Social Security or income. If you're in a spot where your writing income, for example, JUST puts you in the 85% tax-on-s-s bracket instead of the 50% bracket, you'd probably be better off buying a new computer or NOT releasing a new book or whatever, so you could stay under it. It's tricky stuff, but I think it's tricky no matter what country you live in. We've filed taxes in AU, NZ, & US, and noplace was it particularly easy-peasy! (Or cheap.)


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## Betsy the Quilter (Oct 27, 2008)

Jinxie said:


> My first big payment arrives on January 29 and I thought perhaps setting aside 25% was enough, but now I'm concerned it's not, even though I'm the sole income earner for a family of four. It sounds like it doesn't matter if one has dependents.
> 
> I'll definitely be setting up an appointment with a CPA to get guidance on this.
> 
> Goodbye, Earned Income Credit. I'll enjoy you one last time on my 2016 return, but miss you next year.


For those who may not have started at the beginning and read through the whole thread, I wanted to reiterate what Ann said earlier in the thread--you may not need a CPA; you need a tax expert, which may or may not be the same thing. Here's Ann's (a tax professional's) advice:



Ann in Arlington said:


> National Association of Enrolled Agents: www.naea.org
> 
> National Association of Tax Professionals: www.natptax.com
> 
> ...


Betsy


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## Lefevre (Feb 1, 2014)

Deductions will always be scrutinized, and with electronic records you cannot hide anything. With deductions you can argue, but even if the IRS is wrong, they are somehow always right. Being cagey with your books now will hurt you later because the IRS will wait until the audit is "economically feasible." Which means, the IRS will often request 3-5 years worth of financials all at once because this allows them to add penalties and interest to the assessment. Learn and follow the IRS rules.

Depending on your situation, it is smart (and totally legal) to contribute a percentage of your earnings to a tax deferred account. I.E. 401k (no taxes now, pay a penalty for withdrawal later) or to a Roth (pay some taxes now, no penalties for withdrawal later). Not only does this reduce your income (less taxes) it is an asset you can use later.


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## Nancy_G (Jun 22, 2015)

Bards and Sages (Julie) said:


> Employees get W-2s. Contractors get 1099s. If the editor is a registered business, then you would not send a 1099. If the editor is simply a freelance editor, you should send a 1099. But chances are if the editor uses their own SSN instead of an EIN, you need to send a 1099 for anything over $600. And remember, it is only $10 for any royalties (for those of you that do royalty splits with other authors and such).


I just hired a PA and obviously will be paying her over $600 within 2017, so this would be the same for her, right? Even if it's just me as I'm not registered as a business, I get a 1099?


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## Usedtoposthere (Nov 19, 2013)

Nancy Glynn said:


> I just hired a PA and obviously will be paying her over $600 within 2017, so this would be the same for her, right? Even if it's just me as I'm not registered as a business, I get a 1099?


If you pay via PayPal, you don't have to do 1099s. Verified with my accountant. I pay all my folks that way: narrators, assistant, cover artist, etc.

https://smallbiztrends.com/2015/01/1099-contractors-paypal-credit-card.html


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## Nancy_G (Jun 22, 2015)

Rosalind J said:


> If you pay via PayPal, you don't have to do 1099s. Verified with my accountant. I pay all my folks that way: narrators, assistant, cover artist, etc.
> 
> https://smallbiztrends.com/2015/01/1099-contractors-paypal-credit-card.html


I was going to do that, but I noticed the service provider pays a fee then. How does that work?

ETA: Here is what PayPal says about fees:

Goods and services - Purchase payments: There's no fee to use PayPal to purchase goods or services. However, if you receive money for goods or services (such as from selling an item on eBay), the fee for each transaction is 2.9% plus $0.30 USD of the amount you receive.


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## RightHoJeeves (Jun 30, 2016)

AriadneW said:


> Yep. That's what happens to me. My day job is just under the top tax bracket, but it means that most of my publishing income is taxed at that rate as it takes me over.


Right, yeah. That all makes sense. I can understand why there seems to be a resentment in America about high taxes and big Government. If I was paying that much tax without free healthcare and (basically) free education, I'd be pretty annoyed too.


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## Guest (Jan 7, 2017)

Nancy Glynn said:


> I was going to do that, but I noticed the service provider pays a fee then. How does that work?
> 
> ETA: Here is what PayPal says about fees:
> 
> Goods and services - Purchase payments: There's no fee to use PayPal to purchase goods or services. However, if you receive money for goods or services (such as from selling an item on eBay), the fee for each transaction is 2.9% plus $0.30 USD of the amount you receive.


Yes, the person being paid has a portion of the payment kept by PayPal. For most people who accept PayPal, its just a part of doing business. Some prefer not to deal with it though. My editor, for example, prefers checks for larger payments so I send her those instead of doing PayPal. As such, I also send her 1099s.


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## My Dog&#039;s Servant (Jun 2, 2013)

Amanda M. Lee said:


> Be very careful if you try to write off your office space in your home. That means absolutely nothing can happen inside that office besides work.


Yup. I know of a case where the IRS auditor (home office deductions catch their attention) asked if the author had a sofa in their office. Yes. Is it a sleeper sofa? Er...yes? Have any guests ever slept there? Uh...yes. Deduction denied. It was only one of many points of questioning, and certainly not what triggered the audit (which appeared to be luck of the draw) but....

And even if you do take the deduction, it will come back to complicate your life when you sell the house.

That said, I took the deduction for years and never had a problem, but I kept meticulous records. And then had more paperwork to deal with when I sold the house.

Like others have said, it's not just federal and state taxes. Hawaii, for example, requires you to pay a general excise tax quarterly. That's 4% off the top of all revenues. No deductions, though it is a deductible tax expense.


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## Ann in Arlington (Oct 27, 2008)

Nancy Glynn said:


> I just hired a PA and obviously will be paying her over $600 within 2017, so this would be the same for her, right? Even if it's just me as I'm not registered as a business, I get a 1099?


If you hired a PA -- personal assistant, I assume -- you may be an employer. In which case she would need a W2 and you need to be filing payroll taxes as well. I'd strongly suggest you consult with a qualified tax professional.

What most people are talking about here are editors, proofreaders, cover artists, etc. People who work not just for YOU, but hold themselves out as professionals for hire to anyone willing to pay their rates.

And, yes, it makes a difference whether you're paying the person as an individual, or if they have a more formal business structure. Again, consult a qualified tax professional.


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## Ann in Arlington (Oct 27, 2008)

CoraBuhlert said:


> If you were affected by the ARe debacle, download your report for Q4 of 2016 while you still can. I'm not sure how this works in the US, but you might be able to write off income lost to the ARe mess as a loss.


In the US, most taxpayers are 'cash basis'. Meaning you don't even count the income until you have it. That's why the money you earned in, say November and December from Amazon, doesn't count as income to you until 2017 when they actually _make_ those payments.

So, if you never got it, you just don't ever include it in income, even if you were supposed to have gotten it. But you may be able to deduct any expenses incurred in trying to get your full amount.

If you are one of those rare folks who are on an accrual basis, and you have already included the income for taxation, then, yes, if, in a later year, it becomes obvious that you will never actually get the money, you may have a deduction at that time.

Either way, please consult your tax advisor. 

Oh and . . . . friendly warning . . . let's avoid having this conversation veer toward the politics of taxation, thanks.


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## 75845 (Jan 1, 1970)

Ann in Arlington said:


> In the US, most taxpayers are 'cash basis'. Meaning you don't even count the income until you have it. That's why the money you earned in, say November and December from Amazon, doesn't count as income to you until 2017 when they actually _make_ those payments.


UK residents should note that you can opt into cash basis accounting, which is much simpler to handle for those of us at a simpler level of numeracy and bureaucracy. The downside is that you can no longer charge losses on that self employed business against your PAYE tax, so cash basis is not so good for occasional moonlighting. Even without cash basis this thread has reconfirmed for me how complicated the US tax system is. The UK system now pushes businesses towards incorporation by making it so easy to set up and giving it tax benefits over self employment and though the UK it split into four nations only the overall authority gets a tax take. I took cash basis as soon as it was offered because its simpler and so am I.


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## Doglover (Sep 19, 2013)

Martitalbott said:


> You saved a third of what you made, right?
> 
> My first year, I didn't and what a rude awakening. Don't panic, you've got three more paydays before April 15 (US)
> 
> ...


Er, no, I wouldn't because I am a U.K. Citizen.


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## 68665 (Mar 20, 2013)

Maybe Ann can clarify - if you take a home office deduction for a home that you own in the US, it may negatively affect the tax basis of a capital gain (if any) on the future sale of that house.  I don't know the exact details since I don't take the home office deduction.


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## vlmain (Aug 10, 2011)

Ann in Arlington said:


> Not exactly: if you pay a person more than $600 during a year for services, you are supposed to issue form 1099MISC reporting non-employee compensation. If you do not, the IRS may disallow the expenses. Hiring people is NOT the same as buying paperclips, sorry.


Exactly. Also, there are exceptions, which I learned when I was doing the bookkeeping and taxes for a local non-profit a couple years ago, such as attorneys. If you pay an attorney even one dollar, you should issue a 1099-Misc. There are other exceptions, too. The IRS website has great information on who 1099's should be issued to.


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## Nancy_G (Jun 22, 2015)

Anma Natsu said:


> Yes, the person being paid has a portion of the payment kept by PayPal. For most people who accept PayPal, its just a part of doing business. Some prefer not to deal with it though. My editor, for example, prefers checks for larger payments so I send her those instead of doing PayPal. As such, I also send her 1099s.


Thanks! Will have to think of what I'd like to do and what would work better.


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## My Dog&#039;s Servant (Jun 2, 2013)

Someone mentioned mileage up-thread.  That used to be a substantial deduction for me. I kept a small daily calendar in the car and noted start and end odometer readings, net mileage, and purpose of the trip. Driving 200 miles round-trip for a writers' meeting, 15 miles round trip to library every week, etc. adds up fast. It often ran a $700 or $800 deduction at the end of the year for that alone.


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## Ann in Arlington (Oct 27, 2008)

Morgan Lear said:


> Maybe Ann can clarify - if you take a home office deduction for a home that you own in the US, it may negatively affect the tax basis of a capital gain (if any) on the future sale of that house. I don't know the exact details since I don't take the home office deduction.


Well, you're using words in a weird way, but I think you have a basic understanding. 

Here's the thing: taxable gain for business property is calculated/reported differently to taxable gain for personal property.

The house you live in is generally personal property. . . . gain when you sell it is often largely, if not totally, excludable from tax.

Your office where you work is generally business property. . . . gain when you sell is definitely taxable.

Effectively, if you have an office in the home at the time you sell it, you have to treat it as two sales -- so you have to prorate the basis, sales price, etc. It's more arithmetic and figuring, but not actually very difficult for someone who knows what they're doing. An even if you can exclude the sale for the most part as personal property, you'll probably have to pay tax at least partially since it was part business property.

This complexity is NOT a good reason for a tax pro to recommend you NOT claim a legitimate home office deduction.


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## Anna_ (Jan 18, 2015)

RightHoJeeves said:


> Right, yeah. That all makes sense. I can understand why there seems to be a resentment in America about high taxes and big Government. If I was paying that much tax without free healthcare and (basically) free education, I'd be pretty annoyed too.


I often hear Canadians moan about paying too much in taxes, but I agree with you. To not have free healthcare and still be paying 30% or more in taxes isn't right. 

I've set aside 25% for taxes just in case, and will be taking a deduction for a home office (accountant has told me to take it and that the rules aren't so stringent on exclusivity in Canada) and anything else I can reasonably take as deductions.


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## Nancy_G (Jun 22, 2015)

Ann in Arlington said:


> If you hired a PA -- personal assistant, I assume -- you may be an employer. In which case she would need a W2 and you need to be filing payroll taxes as well. I'd strongly suggest you consult with a qualified tax professional.
> 
> What most people are talking about here are editors, proofreaders, cover artists, etc. People who work not just for YOU, but hold themselves out as professionals for hire to anyone willing to pay their rates.
> 
> And, yes, it makes a difference whether you're paying the person as an individual, or if they have a more formal business structure. Again, consult a qualified tax professional.


I used to work as an independent contractor as a medical transcriptionist for a huge company who sent me a 1099, and I had to worry about my own taxes. I thought this was the same thing? I'm confused.


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## Usedtoposthere (Nov 19, 2013)

Ann in Arlington said:


> If you hired a PA -- personal assistant, I assume -- you may be an employer. In which case she would need a W2 and you need to be filing payroll taxes as well. I'd strongly suggest you consult with a qualified tax professional.
> 
> What most people are talking about here are editors, proofreaders, cover artists, etc. People who work not just for YOU, but hold themselves out as professionals for hire to anyone willing to pay their rates.
> 
> And, yes, it makes a difference whether you're paying the person as an individual, or if they have a more formal business structure. Again, consult a qualified tax professional.


There are a number of tests for whether somebody's an independent contractor or an employee. Since I used to be both an employer and an independent contractor, I make sure my assistant stays on the "contractor" side. 

https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

One thing that helps is if she works or can work for other people. If she were full-time for me, if I bought her equipment and told her how to do all the aspects of her job, I'd be in dangerous territory. (Or any of the above.)


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## Nancy_G (Jun 22, 2015)

Rosalind J said:


> There are a number of tests for whether somebody's an independent contractor or an employee. Since I used to be both an employer and an independent contractor, I make sure my assistant stays on the "contractor" side.
> 
> https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
> 
> One thing that helps is if she works or can work for other people. If she were full-time for me, if I bought her equipment and told her how to do all the aspects of her job, I'd be in dangerous territory. (Or any of the above.)


Thanks, Rosalind. That makes me feel better. I figured as much. I can't dictate her schedule or buy her equipment, etc. She is strictly IC status. That's how it was when I was an IC before.


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## Overrated (Mar 20, 2015)

If you don't like or understand taxes, go to someone who does. I recommend that it's someone who works with self-employed SBOs. I had an accountant for years when I ran my other SBO before writing, and it helped me to understand so much. I would not recommend working with someone who won't answer your questions. 

I also had someone who did my taxes. My SBO is less complex now, and I do my own. However, the moment it hits the point where it's more than I can fit in my head, it's right back out 100% to the tax man. And I like doing my taxes. At this point, I do them, and then have someone else check and file them. Just to be sure.

Home offices are a big set of double hurricane style red flags. You have to be careful in that you have to understand the limitations of them, and document. 

Slightly different topic - I heard about MileIQ from another author friend, and I used it for the last quarter of 2016. It's fantastic. Easy documentation of mileage. LOL, we'll see what happens at tax time.


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## N. D. Iverson (Feb 1, 2016)

Anna_ said:


> I often hear Canadians moan about paying too much in taxes, but I agree with you. To not have free healthcare and still be paying 30% or more in taxes isn't right.
> 
> I've set aside 25% for taxes just in case, and will be taking a deduction for a home office (accountant has told me to take it and that the rules aren't so stringent on exclusivity in Canada) and anything else I can reasonably take as deductions.


Anna,

I too am in the Prairies of Canada! May I ask who your accountant is? I really need to find one that had experience with royalties. Thanks!


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## Anna_ (Jan 18, 2015)

N. D. Iverson said:


> Anna,
> 
> I too am in the Prairies of Canada! May I ask who your accountant is? I really need to find one that had experience with royalties. Thanks!


I'm sending you a PM.


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## Ann in Arlington (Oct 27, 2008)

Lisa Manifold said:


> Slightly different topic - I heard about MileIQ from another author friend, and I used it for the last quarter of 2016. It's fantastic. Easy documentation of mileage. LOL, we'll see what happens at tax time.


I was able to get a free year of that as an EA -- of course, what they want is for me to love it and refer my clients. 

It is pretty slick . . . once you set it up, as long as you have your phone with you and turned on, to logs the miles you move. Then, later, you categorize them. It's definitely a good START to the record-keeping requirements, but I'd suggest people have them send the spreadsheet/report each month -- or more often -- and add columns so you can put more detail on the travel such as WHY you went where you did and if you were meeting with anyone, etc.


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## Pnjw (Apr 24, 2011)

These are the exact words on the 1099 misc instructions form from the IRS:

"Form 1099-K. Payments made with a credit card or
payment card and certain other types of payments, including
third-party network transactions, must be reported on Form
1099-K by the payment settlement entity under section
6050W and are not subject to reporting on Form 1099-MISC.
See the separate Instructions for Form 1099-K."
https://www.irs.gov/pub/irs-pdf/i1099msc.pdf

Paypal is a third-party network transaction and this clearly states those types of payments are not subject to reporting on a 1099 misc form. In addition to that, if you issue a 1099 to your editor and she also receives a 1099K from Paypal, the IRS now has records that inflate her income and cause her issues. For me, the instructions are clear enough. I don't issue 1099s for Paypal payments.

As far as home offices go, we've claimed one for ten years. No audit to date.

(I am not a tax professional nor do I play one on TV, but I can read instructions.)


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## 555aaa (Jan 28, 2014)

Deanna Chase said:


> These are the exact words on the 1099 misc instructions form from the IRS:
> 
> "Form 1099-K. Payments made with a credit card or
> payment card and certain other types of payments, including
> ...


Thing is, she won't receive a 1099-K from PayPal unless she has more than $20,000 in payments from them and over 200 transactions per year. That's what doesn't make sense for me.


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## MacMcAdams (Dec 25, 2014)

Amanda M. Lee said:


> Sorry for commenting. I'll go elsewhere.


Speaking unofficially for the KLIPS (Kboard Lurkers and Infrequent Posters), we value your posts and appreciate you sharing your insights.


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## Ann in Arlington (Oct 27, 2008)

555aaa said:


> Thing is, she won't receive a 1099-K from PayPal unless she has more than $20,000 in payments from them and over 200 transactions per year. That's what doesn't make sense for me.


This.

I couldn't remember the figure but it's where the disconnect happens for me as well.

For a sole proprietor, the rule is that if you pay a contracted worker $600 or more -- via whatever payment method you've agreed to -- you are supposed to issue a 1099MISC and file appropriate paperwork with the IRS.

If that contracted worker receives $20,000 via PayPal, they will get a 1099K from paypal. BUT you have no way of knowing how much s/he's earned? You only know what YOU paid the person. So there's a definite area for confusion.

My concern is with MY client. I want to be sure s/he has dotted all I's and crossed all T's so that if s/he is audited/examined, the ducks are all in a row and there won't be any problems.

It is ALSO the case, that guidance has changed since 1099Ks came on the scene. And, I admit, I haven't had a client in this specific situation so have not needed to request specific guidance. If I did have such a client, I'd go with what the company research division advises so as to be covered legally.

Regardless, here's something I'm sure is true: The hiring person needs to keep complete and accurate records regarding what they pay, to whom, when, and what for -- whether they will be issuing a 1099 of any sort. "To whom" means having the person's name, address, and SSN." The person hired ALSO needs to keep track of all monies received -- from whom, what for, how much, and when. In their case "from whom" means the name of the person or company/organization who paid them. Those are pretty much MINIMUM record keeping requirements, and, if done regularly and contemporaneously with the work done/received, will go a long way toward resolving any documentary discrepancy on either side.


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## My Dog&#039;s Servant (Jun 2, 2013)

Ann...thanks for all your brilliantly understandable posts.

I haven't had any service provider to whom I've paid more than the triggering minimum in one year, but just wanted to clarify that this would include everything from cover artists to accountants to recording artists for an audio book.  (that's assuming that you're not on profit share, right? If you were, then no 1099 required?)  

What if your payment check goes to something like Susie Smith's Covers instead of plain old Susie Smith? Is that enough to assume you've hired a "business" as opposed to a person? Or do you need to ask?


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## Ann in Arlington (Oct 27, 2008)

My Dog's Servant said:


> Ann...thanks for all your brilliantly understandable posts.


You're welcome. 



> I haven't had any service provider to whom I've paid more than the triggering minimum in one year, but just wanted to clarify that this would include everything from cover artists to accountants to recording artists for an audio book. (that's assuming that you're not on profit share, right? If you were, then no 1099 required?)
> 
> What if your payment check goes to something like Susie Smith's Covers instead of plain old Susie Smith? Is that enough to assume you've hired a "business" as opposed to a person? Or do you need to ask?


So, the first thing is my advice to anyone hiring people is to request name, address, SSN before committing. That way you have the information IF you need it. If they don't want to give you a tax ID number, a red flag should go up!  And, I have definitely heard of cases where people were asked for this information after having done the work and gotten paid and they refused to provide it because they didn't want to pay tax on the money they made. Obviously, this presents problems for the legitimate sole proprietor who just wants to get the deductions they're legally allowed.  My position is that I pay my taxes, and you should pay yours -- so I don't want to do business with someone who's trying to cheat and not pay what they should.

This would include anyone doing work for you: editors, narrators, cover artists, proofreaders, etc. Even an accountant or tax professional if he's a sole proprietor accountant and NOT a corporation.

As to whether it's an 'individual', which generally requires a 1099MISC, or a 'company', which generally would not, it's sometimes hard to know without asking. Even if Susie is operating as "Susie Smith's Covers", if it's just her, she's probably a sole proprietor and you should provide the 1099MISC. If she gives you an SSN -- I'd do the 1099MISC for sure. If the Tax ID number she gives you is an EIN -- which is a different format, but still 9 digits -- then you would probably be o.k. not doing the 1099MISC as long as you have all the other records.

Other records includes: invoices -- the person should submit something to you letting you know what you owe -- and receipts -- you should get something from the payment service, your credit card, your bank, or the person you paid acknowledging that the payment has been received and accepted. These should be somewhat formal -- not just a scribble on a piece of paper with no copy of any sort, but on a paper that clearly shows the names of the individuals involved (you and her with business names and addresses) and the work that is being paid for.

For those not aware, a US SSN is xxx-xx-xxxx and a US EIN is xx-xxxxxxx. Both are refered to as TINs -- Tax Identity Numbers.

But, N.B. Notwithstanding everything I've said here . . . . none of this is can be relied upon as any sort of substantial authority if you are questioned by the IRS. Everything I've said in this thread, and every thread on taxes that I've commented in, is based on very general guidelines. YOU (generic you meaning anyone who has questions) really REALLY ought to consult a tax professional in your area who can advise you on the specifics of your situation. Forge a relationship with someone who will be able to go to bat for you if the IRS questions anything on the return. Legitimate professionals generally have some level of accuracy guarantee and Will help you sort things out even if they make a mistake. Their good reputation depends on it.


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## My Dog&#039;s Servant (Jun 2, 2013)

Thanks, Ann. That's VERY helpful.  

I've never even considered asking for that tax and payment info, but will in the future. I used to have a business operating under an EIN, and it could make my head spin trying to sort through the regulations (taxes aren't the only thing to drive a person crazy). Now I see why some companies I did business with sent me a 1099 and some didn't. I could never figure that out. when I asked, the answer was always "that's our policy". 

The discussion here about Paypal was an eye-opener. I'd been blithely assuming that was all taken care of because it was, you know, PayPal!


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## Guest (Jan 8, 2017)

There a lot more to it. Self-employment tax also applies. Add an additional 15.3% to the first $118,000.I believe it goes down to 2% after that. 
The good new is that you can write off your home office, editing fees, cover art, or anything else used in production. You can write off your hotels if you travel to a conference or convention as well as the airfare or driving miles. If you buy a new PC or anything to do with your writing, that's deductible. Advertisement and promotional materials are also good deductions. 
If you are making significant earnings as a writer, you need an accountant.


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## Guest (Jan 8, 2017)

brkingsolver said:


> My CPA refuses to deduct my office. He says that is an automatic IRS audit.


Mine does. And no audit after four years. It's a pretty damn big deduction. and if you are self-employed, the IRS expects it. Home office send warning bells if you are NOT self-employed.


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## PhoenixS (Apr 5, 2011)

***********


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## Pnjw (Apr 24, 2011)

555aaa said:


> Thing is, she won't receive a 1099-K from PayPal unless she has more than $20,000 in payments from them and over 200 transactions per year. That's what doesn't make sense for me.


I know that, but there is no way for me to know if Paypal is going to send her one or not. It's none of my business, really. I'm just reading the rules of the 1099 misc form and following them.

P.s. I have a business Paypal account and never pay for services as if they are friends and family.


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## Pnjw (Apr 24, 2011)

Ann in Arlington said:


> This.
> 
> I couldn't remember the figure but it's where the disconnect happens for me as well.
> 
> ...


Support 
I understand the IRS created a huge loophole. At the same time, the IRS instructions seem clear enough to me. In addition, I know at least three authors who called the IRS asking for guidance on the Paypal issue and were told they do not need to send 1099m's for Paypal payments.

Last year was the first year I stopped sending 1099s because of the double reporting issues independent contractors had to sort out. *shrug* People should do whatever they feel is the right thing to do. I keep records of everything and feel comfortable I am acting in good faith.
Even Quickbooks recommends not sending 1099M for third party payments: http://support.quickbooks.intuit.com/support/pages/inproducthelp/Core/QB2K12/ContentPackage/Payroll/1099/popup_1099_exclude_text.html


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## KMatthew (Mar 21, 2012)

I pay monthly. It makes things a lot easier. As soon as I get paid, the IRS gets paid. 

The first year I self-published, I ended up owing because I didn't save back enough. Around the middle of the year, I had gone to H&R Block and spoken to a tax expert about how much she thought I would owe. By the end of the year, I had jumped into a higher tax bracket without knowing it. These days, I make sure to send the IRS 1/3rd of what I make regardless of how much I'm making. I'd rather get a huge check back during tax season than have to worry about underpayment penalties.


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## 555aaa (Jan 28, 2014)

LilyBLily said:


> The other issue I see is that if I demand an SSN from a potential supplier in order to do an 1099-MISC, that person might rightly not want to trust me with what is a very personal number and the key to identity theft.
> 
> Not all business relationships end pleasantly, and as a freelancer, I would not want someone I was mad at or stiffed by to have my SSN. Many freelancers report being stiffed, which is why they ask for partial or even full payment in advance. If I, as the person hiring the freelance work, ask for an SSN in advance of paying--which is my only leverage to get the SSN--I'd be going around in circles because the freelancer would be right to refuse.
> 
> ...


That's why it's better if they have an EIN. EINs are essentially a public record - they are on the public 10-K filing for example of every corporation, and when you get a W-2 as an employee, your employer's EIN is on that form. It's a safe number for businesses to exchange with each other for tax purposes.


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## Rick Partlow (Sep 6, 2016)

Man, this has got me worried.  I'm about to hit my first really big earning year---and let me make clear that by really big, I DON'T mean like the woman who posted she as paying FIVE HUNDRED THOUSAND DOLLARS in income tax this year...holy crap!  But still, it'll be six figures.  I honestly didn't expect earnings this big and I guess it's too late to organize myself as a small business for this year at this point.  Or is it?  I don't know, I've never been in this situation before...the most I've earned in a single year as an author before today was about $7,000.


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## Speaker-To-Animals (Feb 21, 2012)

> Except to get a business license, you have to register as a sole proprietor (small business owner) and that's why the taxes run around 30% on your business income instead of what you normally pay in personal income taxes when you have a job. I could be wrong and you are not required to have a business license where you live, but you might want to check that out.


Just a note, but having a business license doesn't affect your taxes in any way.


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## Magda Alexander (Aug 13, 2011)

RIK Writer, if you're making six figures, you really need to have an accountant do your taxes for you. Mine's been a godsend, coming up with deductions I never thought of. Last year, he suggested I open a SEP-IRA which reduced my taxes by $15,000.


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## Rick Partlow (Sep 6, 2016)

Magda Alexander said:


> RIK Writer, if you're making six figures, you really need to have an accountant do your taxes for you. Mine's been a godsend, coming up with deductions I never thought of. Last year, he suggested I open a SEP-IRA which reduced my taxes by $15,000.


I guess I'll have to.


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## J.A. Sutherland (Apr 1, 2014)

RikWriter said:


> Man, this has got me worried. I'm about to hit my first really big earning year---and let me make clear that by really big, I DON'T mean like the woman who posted she as paying FIVE HUNDRED THOUSAND DOLLARS in income tax this year...holy crap! But still, it'll be six figures. I honestly didn't expect earnings this big and I guess it's too late to organize myself as a small business for this year at this point. Or is it? I don't know, I've never been in this situation before...the most I've earned in a single year as an author before today was about $7,000.


Okay -- deep breath.

You probably should consult a tax professional ASAP, definitely before 1/17. The reason for this is that 1/17 is the deadline for 2016's estimated tax and you want to make sure you've paid enough of that to avoid penalties. Bring last year's tax returns with you to the consult, along with your last paystub (estimate of your day job income and withholding) and an estimate of book income and expenses.

Consult with someone who does business taxes, not one of the "Get $1800 Today!"-sign people.

Your immediate concern should be to do everything you can at this point to avoid an underpayment penalty (https://www.irs.gov/taxtopics/tc306.html). You're _probably_ okay on that score if you have a day job and paid the same amount of tax in withholding as last year, so don't have a heart attack about possible penalties, but do not delay meeting with someone and finding out for sure.

After that, you want to get your taxes done sooner rather than later, even estimated before you get your w2s/1099s, so that you can plan for April when you'll have to pay whatever you owe. You'll have the next three months of royalties to pull the tax from and make that payment, even if it becomes tight for you -- but that's better than being surprised in April.

Get an understanding of your tax situation for 2017 now, because you won't have the leeway of avoiding that penalty next year if you make the same this year -- you'll have to pay either 90% of what you'll owe for 2017 or 100% of what you paid in 2016.

If you don't have it already, go get a separate bank account for your business income/expenses. This is not necessarily a "business" account -- just a separate account that has only business transactions run through it. If you are going to spend royalties on a personal item, transfer the fund's to a personal account first -- same if you're going to put money into the business, transfer from personal to "business" account and pay from there.

At six figures, you _might_ have a tax savings by incorporating (but that's a 2017 question) -- it's very dependent on what other income you have and what tax bracket you wind up in for everything, so this is something a tax professional can help you decide (and why you should find one who does business and who you can work with year after year and throughout the year). A good one can make some recommendations ahead of time, rather than just doing your taxes after the fact.


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## Ann in Arlington (Oct 27, 2008)

RikWriter said:


> Man, this has got me worried. I'm about to hit my first really big earning year---and let me make clear that by really big, I DON'T mean like the woman who posted she as paying FIVE HUNDRED THOUSAND DOLLARS in income tax this year...holy crap! But still, it'll be six figures. I honestly didn't expect earnings this big and I guess it's too late to organize myself as a small business for this year at this point. Or is it? I don't know, I've never been in this situation before...the most I've earned in a single year as an author before today was about $7,000.


You absolutely should make an appointment with someone sooner rather than later . . . chances are you'll be able to reconstruct some records and a reputable tax professional will be able to advise as to deductions you may not even be aware that you can take.

J.A.'s comments are on point . . .definitely discuss these things with your tax pro.


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## Betsy the Quilter (Oct 27, 2008)

Ann in Arlington said:


> National Association of Enrolled Agents: www.naea.org
> 
> National Association of Tax Professionals: www.natptax.com
> 
> The above are two organizations for tax professionals. You may NOT need a CPA. Tax prep is NOT accounting: it's knowing the tax laws, being able to explain options and risks to taxpayers, and doing the best for the client within the tax law. A CPA may specialize in tax, but may not. If you're shopping, you might ask them how much Continuing Education they do each year, and how much of it is in tax, vs auditing or some other branch. That'll tell you if they are keeping up with rapidly changing tax laws.


Quoting this for RikWriter....

and, from discussions over lunch with Ann, I know you need to get on someone's schedule sooner rather than later, as it's a busy time of year for tax professionals.

Betsy


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## Ann in Arlington (Oct 27, 2008)

Speaker-To-Animals said:


> Just a note, but having a business license doesn't affect your taxes in any way.


Yes . . . . a business license is just a piece of paper. What affects your taxes is whether you are operating as a sole proprietorship or you have incorporated. Note that forming an LLC does NOT mean you have incorporated.

If you HAVE actually incorporated, you will not be reporting your income on your personal return -- your corporation has to file a return and some income from it may flow to your personal return.

This situation is absolutely something more complex than the average return and I can't advise strongly enough that, if you have a corporation, you need to be working with a credentialed tax professional.


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## Tulonsae (Apr 12, 2015)

Content removed due to TOS Change of 2018. I do not agree to the terms.


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## Marti talbott (Apr 19, 2011)

Speaker-To-Animals said:


> Just a note, but having a business license doesn't affect your taxes in any way.


In my state, it is required. If your writing income is minimal, then your probably don't need one, but when it climbs into the higher numbers, you can get dinged for not having one. As a sole proprietor, you can still use your SS number, but remember, when Amazon sends that 1099 to you, they also send one to the IRS and to your state.


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## Marti talbott (Apr 19, 2011)

RikWriter said:


> Man, this has got me worried. I'm about to hit my first really big earning year---and let me make clear that by really big, I DON'T mean like the woman who posted she as paying FIVE HUNDRED THOUSAND DOLLARS in income tax this year...holy crap! But still, it'll be six figures. I honestly didn't expect earnings this big and I guess it's too late to organize myself as a small business for this year at this point. Or is it? I don't know, I've never been in this situation before...the most I've earned in a single year as an author before today was about $7,000.


My best advice, start reading IRS rules such as "who has to pay estimated taxes, how much can I make before I have to call myself a business?" You can probably come up with better questions than I can. Try not to panic, you can get an extension if you have to.


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## Marti talbott (Apr 19, 2011)

It's good advice is to find a tax guy, but some of them are not that swift, so find a "good" consultant. Remember, this Indie Author thing is relatively new and some go by rules that don't apply. in my state, they don't even have a category set up for filing as an author. 

By the way, my books are wide and with the way the 1099s are reported for each, it is better to find your total by what actually went into your bank account. Just a thought.


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## KylieG (Oct 30, 2015)

RightHoJeeves said:


> Right, yeah. That all makes sense. I can understand why there seems to be a resentment in America about high taxes and big Government. If I was paying that much tax without free healthcare and (basically) free education, I'd be pretty annoyed too.


We have a really awesome military though and a lot of great corporate subsidies.


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## Ann in Arlington (Oct 27, 2008)

Folks . . . . let's not stray off topic: whether the taxes are high, low, fair, unfair. . . . . . that way lies madness!


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## 10105 (Feb 16, 2010)

Martitalbott said:


> It's good advice is to find a tax guy, but some of them are not that swift


I fired the first and last one I ever hired. He gave advice which was dead wrong and cost me money at tax time. In the meantime, I'd read the laws that applied to my situation, which was why I questioned his advice. He called his boss in, who agreed with him. I pulled the lawbook off his shelf and read it to them. They both said, "Gee, I didn't know that." And this was a reputable Maryland accounting firm in the DC area. (Don't ask who; this was in about 1980.) They just shrugged it off. I shrugged them off and have done my own taxes ever since.

I agree with those who recommend that you consult a professional. But before taking their advice, particularly something that has money consequences, do your own research. It's all online.

Remember, nobody cares as much about how much you pay in taxes as you do.


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## 10105 (Feb 16, 2010)

Martitalbott said:


> By the way, my books are wide and with the way the 1099s are reported for each, it is better to find your total by what actually went into your bank account. Just a thought.


However, if there are discrepancies between what you file and what the 1009s report, and your numbers are lower than theirs, you will hear from the IRS. I've had that happen on several occasions, usually when the 1099 reported income that wasn't actually paid until the following year. If you find yourself in that situation, try to get the payer to file an amended 1099. And then make sure they do it correctly.


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## Betsy the Quilter (Oct 27, 2008)

Al Stevens said:


> Remember, nobody cares as much about how much you pay in taxes as you do.


Well, except maybe the IRS.


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## Marti talbott (Apr 19, 2011)

Al Stevens said:


> However, if there are discrepancies between what you file and what the 1009s report, and your numbers are lower than theirs, you will hear from the IRS. I've had that happen on several occasions, usually when the 1099 reported income that wasn't actually paid until the following year. If you find yourself in that situation, try to get the payer to file an amended 1099. And then make sure they do it correctly.


On this same topic, long story short, B&N sent the 1099 to me personally and deposited the money in my business account all year. I was able to prove with company bank statements what happened and the IRS accepted it.


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## Ann in Arlington (Oct 27, 2008)

Martitalbott said:


> On this same topic, long story short, B&N sent the 1099 to me personally and deposited the money in my business account all year. I was able to prove with company bank statements what happened and the IRS accepted it.


Which is why -- this whole 1099K vs MISC discussion notwithstanding -- YOU need to keep your own records about what you receive. Not just what gets deposited in the bank -- print whatever reports are available from various vendors showing what books were sold and how many. Note things sold in other countries where there might be currency exchange fees. KEEP TRACK OF IT ALL as the money comes in so that, if there are discrepancies -- the more you make, the more sites where your book is offered, the better the chances of that happening -- YOU have thorough records that will substantiate YOUR position.

The above paragraph applies equally to authors, cover designers, editors, proofreaders, etc. ANYONE operating their own business, needs to keep complete and accurate contemporaneous records of all reportable income and allowable expenses. If you do, you've got nothing to worry about.


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