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Tax Advice for Internet Article Writers in the U.S.A.

Updated on September 17, 2014

You've Just Received Your First Check--Now What?

Congratulations! You've just received your first check from Adsense, a content platform, an affiliate, or some other source! Did you know that you are now a business owner? (No, you don't have to have a business plan, or a DBA, or anything like that, and if you don't know what those terms are, don't worry, we'll get there). Open a text file on your computer and be ready to do some copying and pasting, because here is business tax help tailored just for you!

Small Business Tax Help: How Do I Report My Income?

"Royalty" is the term used to describe payments to authors, and you sure feel like royalty the day that first check comes in the mail! So you go to declare your royalty payments on your U.S. taxes, and are presented with a confusing form about oil and gas wells. Don't worry.

Royalty income for authors is reported as ordinary income. If it's just a few dollars, add it to your ordinary income and attach your Form 1099. Once it gets to be over four hundred dollars, you'll want to begin adding a separate 1040. This is because you are not required to pay Social Security on income from a business that makes under four hundred dollars in a year.

What if you don't receive a Form 1099? It's still your job to keep track of and report all income. Don't break the law to save a few dollars, because the interest and penalties will kill you. Just be honest and report all your online income. You'll sleep better at night.

Small Business Tax Help: What About Expenses?

Yes, you can deduct expenses, but starting on January 1, 2011, it is going to be ever more complicated. First off, if you expect to deduct $600 or more from a single source (for example, your internet connection or your rent/mortgage), you will need to get a Form W-9 from each place. That's right, your bank, Office Depot, Best Buy, apartment complex, etc. will have to give you a Form W-9 because you must report those costs on a Form 1099 and send the Form 1099 to them. The large businesses (in fact, just about anyone) won't want to do it. Be insistent--it's the law! (Tax professionals are expecting this to change because of the amount of reporting involved, but for now, follow the law carefully. You don't want to wind up on the wrong side of an IRS audit, or lose valuable tax deductions!). What happens if a business refuses? First off, try to resolve the matter amicably by pointing out that it is the law. If it doesn't work, ask for the name of the Chief Financial Officer, because you are going to have to report his non-cooperation to the IRS. If that doesn't work, either plan to spend less than $600 there, or talk to a lawyer to get tax advice.

It is your right to deduct your business expenses. Don't let the laziness or ignorance of a store employee keep you from deducting legitimate business expenses.

Small Business Tax Help: Deductions

Make sure that you are keeping good records!
Make sure that you are keeping good records!

Small Business Tax Help: What Can I Deduct?

You can deduct the percentage of your home that is used 100% for a home office, so if you have a room or part of a room that is used solely for business, you can deduct rent or mortgage, utilities, homeowners or renters insurance, internet connection, phone line, etc. in proportion to the amount of space used for your business. If you have 1000 square feet, and you use 100 square feet solely for business, you can deduct 10% of all those costs. (Internet usage may be partly deductible, but then, the IRS is going to figure that you would have internet anyway, so be careful there.)

Other things you may be able to deduct: the cost of e-books, software or books about keyword research, affiliate marketing for Amazon and other sites; mileage to and from the library to check out books related to your business; costs of travel to business meetings; 50% of the entertainment expenses (if you are engaged in a collaborative project and meet over coffee or lunch, as long as the majority of the time is devoted to business, 50% of that Starbucks or restaurant bill is deductible).

As your writing business expands, when you decide to turn that unheated basement or attic or garage space into an office, the cost of renovations to make it a work space may be deductible (make sure you are making enough money to justify it, and don't forget to get that Form W-9 from Home Depot or wherever you buy your supplies, and be absolutely sure to get it from your contractor if you hire someone to do the work!). And don't forget that fees concerning your small business paid to attorneys, business consultants, CPAs, bookkeepers, or for small business tax help are completely deductible.

I have expenses that I can deduct!

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Small Business Tax Help: More Deductions

These are other expenses you may be able to deduct:

  • Self-Employment Tax: up to 50% may be deducted. (Yes, you have to pay both halves of Social Security and Medicare if you are a contractor/small business owner). However, you have to pay both halves only on income you make as an independent contractor (such as a writer), or where your employer does not pay it.
  • Health Insurance: if you do not otherwise have health insurance, you may deduct up to 100% of your health insurance premiums. This is still true, even with the Affordable Care Act.
  • Education expenses: If related to your writing career; this might include courses in English, especially spelling and grammar; courses in writing; courses in computers, software, or the internet.

Accounting Software for Small Businesses

What Else Should I know about My Taxes for My Writing Business?

Unless you are planning on getting checks issued to a company name, you do not need a DBA or a business license. If the possibility of being sued is remote, you do not need a limited liability company (LLC) or a corporation. As an individual (sole proprietor), you can outsource work to other people, have employees, and do all the things that other, larger businesses do.

If you sell e-books, or sell products to end users, such as on eBay or an Etsy store, you will have to collect sales tax for products sold within your own state. Contact your local state office to find out how to collect and report sales tax. Most states have an online form, and almost all states have a help number if you can't figure out the form.

About Small Business Taxes

Everyone should pay their fair share of taxes. Among other things, it's a form of patriotism and supporting your country's needs. However, those deductions are legal and yours to take, therefore, while you should never cheat on your taxes, taking legal deductions has already been figured into the tax code.

Call the IRS

I have called the IRS on numerous occasions, and they have always been extraordinarily helpful and polite. Here's why: they are paid to help you do things legally, so they want to find a way to advise you so that everything you do is within the tax code.

Live Telephone Assistance

When calling, you may ask questions to help you prepare your tax return, or ask about a notice you have received. Please be aware that when you conclude your discussion, our system will not permit you to return to your original responder.

Telephone Assistance for Individuals:
Toll-Free, 1-800-829-1040

Hours of Operation: Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

Telephone Assistance for Businesses:
Toll-Free, 1-800-829-4933

Hours of Operation: Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

Where to Get Individualized Small Business Tax Help

Most people go to tax firms like H & R Block, and Jackson Hewitt, or file their taxes with TurboTax or other tax software. Please don't do this! I strongly urge you to find a business consultant (not a business coach) who is also a CPA to advise you on your taxes. Here's several reasons why:

  1. Your business structure could save you thousands of dollars each year, or cost you thousands of dollars.
  2. A tax preparer who is not a CPA is under no legal liability to keep your information confidential. You could end up being the victim of identity theft.
  3. How you classify expenses could mean the difference between a deduction and an audit.

I know a business consultant who, in one year, found hundreds of thousands of dollars for just twenty clients in overlooked or wrongly classified deductions, from tax returns already prepared by CPAs and tax preparation firms. That person donating $40,000 to the U.S. Government could be you! If you think you can't afford a few hours of a business consultant's time, think again!

If your business is too small to afford a business consultant (and there are many people who own businesses that are very small), try getting help at your local library, or a senior center. And there's a place to get the last word--you can call the Internal Revenue Service; I have found that over eighty per cent of the time, the person at the Internal Revenue Service is extremely helpful and wants to help me get my tax return right! And one place not to overlook is SCORE, the Service Corps of Retired Executives. Funded by the Small Business Administration, SCORE provides free help to startups and small business owners with advice, legal consultations, and more!

And of course, you can always ask the IRS. They have numerous helpful documents and videos, and you can call their help number and ask any question you want.

Legal Disclaimer

I am not a lawyer, nor a tax professional. Each person's situation is different; therefore, this should be taken only as general small business tax help and you should consult a local tax professional about your individual situation. I will not be responsible for your tax liability.


Submit a Comment

  • Simone Smith profile image

    Simone Haruko Smith 7 years ago from San Francisco

    This is a GREAT guide on a subject that is obviously important on, but is also becoming more relevant to all sorts of writers! I appreciate the research you've done, and also the nice, organized way in which you've presented the tax issues that online writers must address. Well done!