Sunday, October 17, 2021

Thinking Taxes

Not all writers are Planners and Plotters. Some are Pantzers and some are Puzzlers. However, as some of us prepare for NaNoWriMo (National Novel Writing Month), early October is also a good time to prepare for taxes.

Why is that?

If you have an account with a stockbroker such as Charles Schwab or Fidelity (to name two at random), they will have to send you a 1099 Composite. The later in the year you sell stocks, the later in the following year you will have to wait for them to finish their corrections.  Take gains and losses in October if you want to file early in the new year.

Also, if the current Administration gets everything they want, Capital Gains taxes could be assessed at whatever the new rate is retroactively on every trade since September 12th.

If you have any worthless stock that is really unlikely to rise from the ashes, and that you cannot sell any more, you can call your broker and have it taken out of your account. The removal of the stock will not be documented by your broker on your 1099 Composite, so you will have to document its disappearing act (with a before and after set of statements) on your own tax return.  Since you need the "after" month, you don't want to do it in December.

If you are a successful writer on Medicare, or likely to be eligible for Medicare in the next couple of years, know that your total earnings (including capital gains on stocks) could affect how much Medicare claws back from you to pay for your Part B two years after your successful year.  So, you make a lot in 2021, and you pay for it in 2023.

Think about that, because writing is a volatile business.

Don't forget to pay your self-employment taxes.  If that is news to you, an old article by Writers Weekly has a good guide geared to writers.

Bear in mind, although a writer can deduct a business meal at a convention or book signing, one must be careful not to claim that a delightful celebratory night on the town at a restaurant with writer friends may not qualify as a business dinner.

Also, claiming all the running expenses of a room in your home (home office) tends to arouse suspicion. One can only claim for a room used exclusively for the business purpose, and it is wise to document that. Keep a Writers Log (Captain Kirk-like), every day, marking start time, break time, finish time. It can be ledger form, or a word document.  You can also use your daily log to note when you called your editor or received a call from your editor, and what you promised.... and when you drove to the post office to mail your manuscript. and when you got back.  You can deduct travel time and postage. It would help to buy a splash of gas for further proof  (scan and keep the gas receipt).

Know that gifts to charities that sell fund-raising lottery tickets are not deductible as gifts to charities. You got something of value, namely the theoretical chance of winning a Corvette or whatever.  You thought the lottery ticket purchases were deductible. The charity blurb might have suggested that, but the IRS might not agree, and the IRS is likely to be really scraping the proverbial bottom of the barrel.

However, you can give at least $10,000 to charity and be able to deduct it, as long as you can produce receipts to prove that you gave what you say to a legitimate charity, and received no benefits in return. 

For anyone terribly disappointed that there is nothing about copyright today, Andrew H. Bart and colleagues at Jenner and Block LLP have a really great article about the scope of copyright in the USA

All the best,
Rowena Cherry 

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