Taxes in the United States

I live in the United States, so what I do applies to the US.  Whatever your country’s rules are might be different.

First of all, I go to H&R Block to do my taxes.

Tax Vouchers

I fill out tax vouchers.  I pay the federal taxes and state taxes.  Some states don’t require state taxes, but where I live, they do.  My H&R Block representative told me if I made over $30K a year, I should start doing vouchers, which are quarterly payments to the state and federal government based off an estimate of what your annual income will be.  This can be tricky because you’re having to guess what you’re going to make, but if you are way off, you can make up for any discrepancies in your January payment.

You will want to keep a copy of the check when it’s cashed by the federal and state governments for your records to prove you paid them.  I go online to my back account and print out the copy of the check (front and back) with the government’s stamp to prove they deposited it.

Have a Separate Checking Account for Writing-Only Income

The easiest way to keep track of your income is to have every place you upload books to put all royalties into a checking account that is designated for writing-only income.  So if you use Amazon KDP, PubIt, Smashwords (PayPal), etc, have all of that income go directly into that checking account.  This will make life easier for you down the road, especially since Amazon never sent out a form for their International stores.  I got the 1099 for the U.S. store, but I didn’t for the UK and German stores where I made a few sales.

It’s a good idea to print out your income deposits every month.  That way you have it along with the 1099s sent out to you.

Have a Folder for Everything

I keep an expanded file with dividers where I put my receipts during the year.  In this file, I keep my vouchers with proof the government deposited them.  I also keep print outs of my income when it comes into the checking account.  I’ll also put the 1099s in it when those come in around February of next year.  So this is the “everything file”.

Expenses

In this file should be enough dividers where you can include income, vouchers, and expenses.  Expenses will be everything you need to purchase for writing-related expenses.  This is not a comprehensive list, but some expenses will be writing software (ex.  Word 2012), computer, ereader (for proofing purposes), paper, printer ink, stock photos for covers, cover artist fees, website/blog fees, editors, proofreaders, ads, conference fees plus travel expenses related to the conferences, contests entered, etc.  Keep all receipts in a divider or two.

Tax time

When tax time comes, you go in with your file and hand out the information as your tax representative needs it.  If you do your own taxes, then the information will also come in handy.  Either way, by keeping everything in one location will save on time and make filing taxes much easier than trying to dig it all out at that time.

Categories: Business Plan, Writing as a Business | Tags: , ,

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10 thoughts on “Taxes in the United States

  1. This warms my accounting heart. LOL

  2. I’m already linked in with PayPal for editing services, and eventually through that to Amazon. I’ll have to look more at the idea of setting up a seperate in-house bank account.

    • I’d like to say that I was on top of all this before this past summer, but the truth is, I didn’t. I just realized a couple of things from Amazon has been trickling in on another account, and I can’t tell where it’s from. It’s a few dollars (not much), but I don’t even know where to go to make the update in my bank information.

      I have heard it’s a good idea to take money out of the account linked to PayPal to an account PayPal doesn’t have access to because some people have ended up with money removed from their bank account. I’m not sure why, but when I get money from PayPal into my bank account, I transfer all but a small amount. (It probably is rare, but even so, I get wary.)

  3. Thank you for the advice! Will look to do this next tax season.

  4. This is fabulous information. Wow, I am so glad to find this. I’m just starting into the world of self-publishing, and I’ve got so many things to figure out – but taxes are definitely one of them! I love how you broke down so many pieces of advice (have a folder for everything, have a separate bank account) and gave reasons for each one. I also like your point in the comments above about PayPal. Thank you, this will help tremendously!

    • I wish I could say I did so well early on, but I was so clueless that I believed if I didn’t make a certain amount, I didn’t have to report it. The IRS let me know otherwise, and I’ve been careful to keep track of all sales (even the small ones since I don’t sell much in paperbacks at all). I also go to H&R Block because taxes are such a headache for me. My mind doesn’t think in that direction. I’d rather leave that to the pros. :D I also didn’t get a separate bank account until this year (wish I had done it sooner), so I spent a lot of time printing out information from a couple of my bank accounts and sorting through them. It was a hassle. This way is so much easier.

  5. Ruth, I think I’ve linked half of your website from several different book publishing groups on Facebook. Thank you for the wealth of practical and useful information.

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