The Business of Writing: An Author's Corporate Taxes with @circlelegal

Venice, Italy-February 26th, 2011.
Person wearing Venetian Carnival mask,
c2011 by razvanphoto.
Depositphotos ID 9047805, Editorial license.

Psst! 

Pssssst! I'm talking to you from behind this mask.  Today I need to speak to you about… the dreaded t-word: 

Taxes.

If you have established a corporation for your writing business, and you haven't already filed your annual corporate tax return, now is the time! They are due March 15th.

Yeah, I know; we're in the same boat. I have get cracking on mine soon too. :D

If you haven't incorporated, you will need to report your writing-related income (all those bazillion 1099-MISCs generated by KDP and other book e-tailers) and expenses on your individual IRS form 1040 by April 15. But first ask yourself: do you have a hobby or a business?

There's no room for fudging the answer, and an incorrect (or "wishful thinking") assessment can be shockingly expensive.

Kelly Keller, president of Circle Legal law firm, offers some excellent advice in this article published on the She Owns It blog. I encourage you to read the entire article, but if you're in a hurry, the biggest takeaway is the application of the "3 of 5 Rule"—to whit, you'll be far less likely to raise flags at the IRS if you have earned income from your writing activity in 3 out of 5 years.

I checked out the Circle Legal web site, and their home page gets my immediate thumbs-up for starting out with, "We've heard the jokes. How many attorneys does it take to screw in a light bulb… We get it." They advertise a presence in all 50 states as well as worldwide, so if you have any specific questions about tax preparation for authors or other legal issues, please open a dialogue with Ms. Keller.

If you live in Virginia and would like to consult with my corporate attorney instead, leave a comment below, along with a way you may be reached, and I'll be happy to get you in touch.

So, to be clear, I am not an attorney of any stripe, a CPA, or a tax specialist, but I do have more than 20 years' experience owning and operating my S-corporation, including handling the ledgers and taxes.

Although I established System Support Services, Inc. in 1995 for the purpose of invoicing my computer-consulting clients (my first was a multimillion-dollar client who insisted upon being invoiced by a corporation rather than an individual; go figure :D), I found that shunting my publishing income and expenses through my S-corporation was the single easiest way to convince the IRS that I am serious about making a profit.

And although that gives me twice as many reasons to dread "tax season" each year, I have never looked back.

Should you, as an author, incorporate your business? This post of mine may give you some additional insight. But ultimately, only you and your attorney can answer that question.

Meantime, good luck with your foray into TurboTax Land, or whatever your tax preparation software, company, or individual of choice!

***
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