Taxes

taxes

the big slice of your advance that you owe to the government

How much of my advance will I owe in taxes?

First, a disclaimer: I am not a tax expert by any means and you should ask an accountant about everything in this post. Also, I live in the US and can tell you nothing about taxes in other countries.

Onto the bad news. Writers are considered independent contractors, which means they have to pay both the employers share of taxes AND the employees share. Yeah, you’re going to pay TWICE the amount you would if you were using a W2. This seems totally unfair to me, and frankly kinda enrages me. Hang on while I go do some pushups or something…

To be safe, you should set aside one third (or even one half) of your advance to pay taxes. I know–that’s a lot!

Is there any way to mitigate the horror of paying such high taxes?

Yes!

You can deduct business expenses! Get an accountant to help you, because this will really ease the pain of owing so much of your writing income to the government. Meanwhile, keep your receipts for things like books, conferences, swag, etc.

Also ask an accountant if you can put some money in a retirement account to offset what you owe in taxes. I don’t really know how that works, but I heard a savvy writer talk about it once and it sounded like something I should look into?

Depending on which state you live in, you might also be required to pay a business tax or risk getting hit with a fine. BUT you might be able to file for an exemption from this tax if you don’t make a ton of money from your writing. Yay for exemptions!

And if you want to avoid yet another fine, pay taxes on your writing income quarterly as opposed to yearly. Who knew that some of us are required to pay before April?? But it’s true–self-employeds gotta watch out for this.

How will I get my tax forms and whatnot?

Your agent should send you a 1099 in January. But like I said, you’re technically supposed to pay quarterly (unless your writing income is pretty low), so ask an accountant for help with that.