Financial strategies
It's income tax season in the US, which poses certain challenges to the self-employed creator. For those who have income, what strategies do you use to accommodate your business activities?
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Nowadays I keep receipts for everything and have a bookkeeper and (once a year) an accountant. Which has driven home that I am running a small business.
I will say this - I genuinely didn't realize before I got everything for this year's taxes how much money went to comic business related stuff. It adds up, and it's easy to not keep track.
Like Eastwood said, a man has got to know his limitations. And then outsource then. I'm pretty sure that's what he said.
Well, for US federal taxes, if you haven't done anything like incorporating, you should be using Schedules C and SE to report your income and expenses and figure out your self-employment tax for Social Security.
Don't claim a home office as an expense unless you've discussed it with a tax expert to make sure you're doing it – and everything else – right, because that's a red flag for an audit.
Four people in my family do taxes for a living, so I've got some ancillary knowledge here. More importantly, I've been reporting income as a freelancer and journalist for 20-plus years, so here's what I can tell you.
1. If your Schedule C business isn't turning a profit in 3 out of 5 years, it's a hobby and not a self-employed business. The IRS takes that ver seriously.
2. Keep receipts for everything related to the business. I claim my comic book purchases, DVDs (legitimate research at times), mileage, hotel stays during cons, food, parking, postage, Internet service, cell phone service and office materials and equipment. It's easy to do with a spreadsheet, and Trevor does that. Me, I simply staple all the receipts in chronological order in a notebook so they're easily reviewable if I need to do so.
3. I don't bother with a separate bank account, because my income from comics pays my home bills. Other people have the luxury to separate, but I don't.
4. Do not fuck around with the IRS. We once made a minor adding mistake on a return and got penalized a few hundred bucks, even though we offered to pay the diference immediately. Repeat: DO NOT FUCK AROUND WITH THE IRS.
5. My wife says the Turbo Tax type programs are rubbish if you have serious expenses and are itemizing, but they're OK if you have a simple return.
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I'm assuming that the more specific the info, then the more help it will be to everyone, so here's exactly where I stand now:
I co-host a podcast called The Next Issue, and receive no income from this. For that I review comics which I have purchased (not all expressly for the show, but everything on the show I've paid money for), talk to creators, and occasionally travel to shows for interviews/coverage. I also pay the webhosting bill for our episode site. I've also had business cards made for myself that are show-related.
I will be starting a webcomic in the next year or so, but will certainly start spending money/doing work on it this year, and I assume will receive no income from it until well into next year, if ever.
The extent of my tax knowledge is I collect the End-Of-Year statements/forms I get in January and take them to my guy at JH and he does my taxes. I am not incorporated or LLC'ed or anything like that. I live in Maryland.
What jumps out at you guys in terms of "You should do this..." or "Why the hell did you not do X already?" (preferably the former than the latter 8D )?
@Jimmie_Robinson - I haven't actually written any of this off on my taxes before because, like Russell said, I figured it was just a hobby. But since I'm starting up the webcomic (I.e. something that might actuall bring money IN) (hahaha) this year, I thought I'd throw out everything I have going and get some feedback for moving forward.