EDITOR’S NOTE: Please consult with your accountant for your specific bookkeeping questions.
To dislike making the shift from the vocation of your choice to bookkeeping is a common characteristic of any self-employed individual. Here is a minimal plan for keeping financial records with which your accountant can work.
You should have a checking account devoted exclusively to your freelance writing business. Freelance writing is an art but it is also a business. A freelancer should process all income through the checking account. If you have to put personal money into your business, put the money in your business checking account. Why? Because your accountant or you can find your income and expenses all in one place. You should process your expenses through your checking account, also.
Take a blank, bound notebook and, on the left hand page, record your income from writing. On the right hand page, record the money you spend to earn your money from writing. You can avoid this step by completely filling out the stubs on your checkbook but the limited space on a checkbook stub oftentimes discourages completeness.
Little things add up. What about the fifty cents you spent out of your pocket to buy an extra postage stamp for the SASE you sent out, or the out-of-pocket dollar you spent at a flea market to buy a book on writing, or a research book? If you can get a receipt, get it. If you cannot get a receipt, write a note telling what you bought, where, and how much. Staple these “little things” notes and receipts to full-size sheet of paper.
When the paper is filled with out-of-pocket receipts (or you need the cash now) write a check to reimburse yourself for all the expenses saved on the page. You can then summarize the page into its various expense categories if you want or you can let your accountant summarize the page.
If you had to spend money on food or entertainment to research a story, keep a receipt and label it as to why it was a necessary part of your writing. If the money came out of your pocket instead of the checkbook, reimburse yourself as indicated in the previous paragraph.
If you use a portion of your home as a home office, you will have to provide your accountant with a summary of your utility and maintenance bills. If you converted anything such as desks, chairs, rugs from personal use to business use, you will have to supply your accountant with at least an estimated cost of them. Remember, in order to deduct home office expenses, you must use that portion of your home regularly and exclusively as an office.
You will want to deduct the use of your automobile for your business. The trips to mail a manuscript, to the library, to the bookstore, and other writing related trips are deductible. You need a record of them. I post those trips on a calendar, noting my destination on it. You need to include dates in your recordkeeping.
I know how many miles it is to frequent destinations, so I record the destination. At year-end, I count the number of trips to the post office, the library, and other frequent destinations and compute the total mileage used. For unusual destinations, such as a one-time trip to interview an individual, I record the individual’s name and the often-estimated miles traveled on the calendar. You don’t have to add up the miles yourself. You can let your accountant do it but remember, the more you have your accountant do, the more he has to charge you.
Tuition, books, supplies, and transportation to courses, workshops, conventions, etc. for the purpose of “maintaining and improving” your writing skills are deductible expenses. Make sure you tell your accountant about them.
If in doubt about an item, supply your accountant with the info. and let him/her decide whether it is deductible.
William Pepe is retired from a dual career as a teacher and as an accountant. His wife and he collaborated to write three Postcard History Series books – Weymouth, Quincy, and Boston – for Arcadia Publishing Company. Mr. Pepe now pursues his life-long ambition of writing short feature articles and short fiction.
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