Taxes for Writers 2016 Version

It's THAT time of year again!

First, I’ll give you links to my standard Taxes for Writers post from last year, and another post on DBAs that you may find helpful.

http://travelswithkaye.blogspot.com/2015/02/taxes-for-writers.html

http://travelswithkaye.blogspot.com/2015/02/writers-and-dbas.html

Second, here are some of the changes to the tax code for 2015 taxes. I hope I got the most relevant ones.

Increased penalty for not having health insurance. Here are exceptions to the penalty:

https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/ACA-Individual-Shared-Responsibility-Provision-Exemptions

A new tax credit for getting health coverage through state-run exchanges. You can either claim this with your insurance company to lower your premiums, or can claim it on your taxes.

FSA (Flexible Spending Account) limits have gone up. There are also changes in rollovers. If you roll over into next year the $500 you were previously permitted, you can’t do an HAS (Health Savings Account). (You can still carry over FSA money for specific expenses and those include caring for a relative at home, which is nice.)

Bitcoin income will count this year, back to 2014. (Is that crazy or is it just me?)

401(k) limits have gone up. If you’re under 50, you can contribute $18,000, an increase of $500. For those over 50, the limit went up $6000 to $23.000. Sometimes it’s good to be older.

The income brackets changed. Here’s a 22-page IRS link. Page 5 is the beginning of the bracket information.

http://www.irs.gov/pub/irs-drop/rp-14-61.pdf

IRA rollovers—only one per year.

Standard deductions up (I would hope so, don’t they always go up?), but not much. $100 for single and $200 for married filing jointly.

See the first link below for some odd deductions, in case you’re taking clarinet lessons to correct an overbite, or you give business gifts, or your doctor is treating you for weight loss.

Basic information from:

http://www.csmonitor.com/Business/2015/0112/Tax-season-here.-7-changes-for-2015-and-9-of-the-weirdest-deductions/Affordable-Care-Act-Increased-penalty-PTC-credit

More information is also here, on myRA, foster care of relatives:

https://www.taxact.com/professional/resources/articles/2015-tax-law-changes-that-affect-your-clients/

And, of course, here:

https://www.irs.gov/uac/Latest-News

Disclaimer: I am not giving professional legal, tax, or accounting advice. The above are what have been helpful to me as a writer, filing taxes, looking at this as a formal tax professional.

Writers and DBAs

Another post about taxes. It’s that time of year! You probably haven’t finished them yet if you get any income from Amazon, since they say they sent out erroneous 1099s and have only recently sent out corrected ones. If you have income from several countries, good luck figuring out which new 1099 is the correction for which old 1099. Here’s a bit of help. Look at the EIN. I don’t recall who posted this on what list, but I copied it:

83-0417755 = Amazon US, CA, and IN
46-2971461 = Amazon Australia
46-2796183 = Amazon Mexico
98-0429507 = Amazon Services Europe - UK sales
98-0480990 = Amazon Media EU Sarl - DE, FR, ES, IT sales

This is incomplete, as that person doesn’t get income from all possible countries, but maybe this can help you figure it out. This seems to be secret information as I can’t find anywhere that Amazon discloses their EINs.

Now, to my actual topic. If you aren’t incorporated and don’t want to go to the expense and trouble of creating an LLC, you would probably benefit from setting up a DBA. It stands for Doing Business As. If you use a pen name, you would obviously want to do business as That Name. If you’re using your own name, you can use Your Name Writing, or something more creative. Maybe—Your Name Books, Your Name Literature.

Why do you need a DBA? If you want a separate bank account for your writing, you need one to set up a DBA bank account. From there, it’s convenient to create a PayPal account for your pen name or DBA and connect it to the bank account. I find it helpful to be able to take payments to my pen name. Also to pay for conferences with my PayPal account in my pen name. In the past, things have gotten confused when an account for Real Name pays and Pen Name shows up and people say Pen Name isn’t registered. Too complicated!

What you need to know about this is that the rules are very different depending on what state you live in. For instance, when we lived in Texas, I needed to file, for $15 at my county clerk’s office. When we moved to Tennessee, all I had to do was go to the credit union and tell them I wanted an account for my DBA. (I recommend credit unions over banks. It’s much easier to get a small business account with no fees from them.)

This may help you find out what your state requires:

http://dbafilingonline.com/dba-by-state/

Here’s another one, but with limited state information:

http://www.legalzoom.com/sitemap-dba-state-requirements1.html

Good luck with your taxes this year!

TAXES FOR WRITERS

I put the topic in caps because this is important! You don’t want to miss out on what is, as Lucy says, “only” your “fair share”.

Some writers, even a lot of tax accountants, think the IRS hobby rule applies to writers. It doesn’t have to, if you’re serious about your writing.

To begin with, take a look at this IRS publication: http://www.irs.gov/irs/article/0,,id=186056,00.html

If you’re starting out as a full-time writer, you don’t have to declare income 3 of the last 5 years if you satisfy some requirements.

The important points for you, as a beginning writer (not making any money), from this article are:

• Does the time and effort put into the activity indicate an intention to make a profit?
• If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
• Do you have the knowledge needed to carry on the activity as a successful business?
• Do you expect to make a profit in the future from the appreciation of assets used in the activity?

You can report losses on a Schedule C for quite a few years before the IRS will take a look at you. See this article, which elaborates on the above:

http://taxsolutionsforwriters.com/2014/02/16/a-special-provision-for-writers-in-the-tax-law/

This link gives some checkpoints to make sure you’re fulfilling the requirements:

http://writerinterrupted.com/2012/03/13/hobby-loss-interpretation-for-writers/

You can see that it’s important to be keeping records of submissions, classes, time spent, and to conduct writing as a business in every way you can. Also, of course, keep track of what you can deduct.

This article goes into exquisite detail: http://www.eclectics.com/articles/taxes.html

This one includes some forms to help you keep track if you don’t already have some that you like: http://www.artstaxinfo.com/writers.shtml

I hope this helps. Don’t lose out on loss deductions that you’re entitled to. And may you someday be declaring a profit! I did last year for the first time in 12 years. It was a small 3-figure profit, but maybe someday it’ll be more.