Best Tax Tips for Writers – Part 2

It’s Part 2 of our “Tax Tips for Writers” series. And yes, you have every legal right to pay the least amount of taxes required by law! Here are four more tips for you:
 
1. Paying Taxes
  • Yes, all your income needs to be declared including bartering exchanges. If you give someone one of your products or services in exchange for one of their products or services, you are required by law to declare that as income. If the product or service is worth more than $600, you’ll need to send/receive a 1099.
  • Plan to save a percentage of each payment you receive in a “tax” savings account. I recommend INGDirect for this. In addition to Federal and State Income taxes, you’ll also be responsible for paying the Self-Employment Tax (Social Security and Medicare). When you work for an employer, you’ll notice FICA and Medicare deductions from your paycheck. What you may not know is that your employer is paying the same amount on your behalf. As a self-employed person, you are responsible for both the employer contribution as well as the employee contribution (there are some reductions your tax preparer will handle). That percentage is 15.3% of your profit (not income). Your taxes are required to be paid quarterly.
  • Local Taxes – be sure to find out about these because they want their money too. Our County has a property tax assessment and the next County over has a public transportation tax for the income earned in that County only.
2. In-Home Office Deduction: This can be a very advantageous deduction to take and it must be done correctly.
  • Used exclusively and regularly for business including closets or other in-house storage. Must also be your principal place of business including any of the following criteria: where you perform tasks such as bookkeeping or scheduling, meeting clients or is a separate structure.
  • You may also be able to deduct a portion of repairs and upkeep, security system, utilities, insurance, rent/mortgage and property taxes. You may also be able to deduct cleaning services if you pay payroll taxes or to another company (can’t deduct if you pay cash) and landscaping expenses if clients come to your home.
3. Deducting Mileage expenses:
  • If you principal place of business is your home, you can generally deduct your mileage when you travel from your home to any business-related destination including another business office, a client location, bank, post office, office supply store, etc. The key is your mileage logbook!
  • If your home isn’t your principal place of business, you may also be able to deduct travel from one job to another………… 
Online Business Manager, Cindy Morus (www.CindyMorus.com) was an Oregon Licensed Tax Preparer for 4 years.