A good chunk of us prefer to use letters and words everyday and not have to worry about crunching the numbers that businesses must worry about. Unfortunetly, we are technically a business. If we give services in exchange for money, we're a business. Therefore, we must crunch the numbers.
Happily, crunching numbers can be a good thing. Keeping good records of our income and costs as writers will help with taxes. And bonus! we can even get tax deductions! Everyone likes tax deductions, right? It takes a little work, but writers can deduct such things as paper, printer ink, long distance phone calls, postage and mailing supplies, computer/internet costs, and even mileage!
There's a tricky bit, though... If you're not a writer full-time, you can only claim part of these costs. It's best to ask an accountant for those details. But never fear, as long as you keep records of the full amounts of everything, your tax guy can work it all out from there.
So here's how to go about making a cheapie and very basic bookkeeping plan:
-2 (two) Excel files (Download them FREE below!)
-3 (three) paper file folders for each month of the year (total of 36)
-Stapler with staples
-Black marker or thick pen
Mark 12 folders with the name of a month, Jan-Dec. Then, put two folders in each of those, one labeled IN and one labeled OUT. You should now have 12 folders with two folders inside, right? Good. Put them all in the file box in month order.
You've got a file system now! Yay for you! So what do you do with it?
Say it's January and you enter a short story competition online. The fee to enter is $10. Put your returned check copy or a credit card statement with the expenditure hightlighted into the OUT folder inside the January folder.
Say you want to send out 10 queries in February and so you go out and buy a ream of paper for $5, fifty envelopes for $5 and 10 stamps for $4.20. Put the receipt (with items highlighted) into the OUT folder for February.
Now say it's March, and YAY! you win $50 for 10th place in that short story competition that you entered in January. When the check arrives, you put that check stub into the March folder, in the IN folder.
At the end of every months, or every three months if you have little going in and out, take an hour (usually less) and put the data into your excel files. Having the data in an excel file is not necessary, but it helps with organization down the road. Plus, if you know the little doodads that add up your columns, you'll be that step ahead.
To do this, open the first excel file. (Click here for FREE download). Save it as "IN" or "INCOME". Label 9 columns for each of these categories: Date, Name, Address, Website, Email, Phone, Amount, Service, and Details. Then, as your income comes in, you can add the details here.
(for Service: label what the service was, such as short story competition, editing of six chapters of a novel, etc.)
(for Details: give specifics here, such as hours worked at how much an hour, or whatever it was you did to earn that money. And be as specific as you can. Those cell will stretch to fit it all in.)
Finally, open the second excel file. (Click here for FREE download). Save it as "OUT" or "EXPENDITURES". Label columns for each of these categories: Date, Product, Use/For, Cost, and Misc
(For Product: list what it was you bought, like a a new box of staples or an entry fee.)
(For Use/For: list what you use the items for, like for your stapler or for webuystoriesfromyouDOTcom.)
(For Misc: if this was an entry fee, describe what you entered, such as their 29th annual short story competition. Include a website link if you've got one. If it was to have someone edit your latest six chapters, include which chapters they were. Be very specific with any details you might have.)
In specifics, using the three examples listed before:
For January, you spent money. So open the "OUT" excel file and fill in the columns as follows:
Date: January 12, 2009
Product: Entry Fee
Misc: 29th annual short story competition, webuystoriesfromyouDOTcomSLASH29competition, NAME OF SHORT STORY
In February you also spent money. Open the "OUT" excel file and fill in the columns as follows, doing three entries:
Date: February 23, 2009
Misc: Package of 500, HP Bright white, 30% recycled.
Misc: Package of 50, size 10.
Misc: 10 stamps at $.42 each
Notice with the stamps, I included all ten in one entry. As long as everything's the same, you can lump them like that, it's ok.
And that's it, you're done! See how easy that was!?
Now come tax time, you can potentially use the cost of paper, printer ink, long distance phone calls, postage and mailing supplies, computer/internet costs, and mileage as tax deductions and get your money back. You just have to keep on top of it. If you make a long distance call to an agent in New York and it costs $3.76, make a copy of your phone bill, highlight the charge and put it in the OUT folder. If you query by email, list the cost of your internet service. Make a copy of the bill and put it in your OUT folder.
There's also an extra bonus for the environment if you have a scanner/copier machine. SCAN your receipts, checkstubs, bills, etc and keep them in computer folders instead of paper folders (just set up a file folder tree like you would paper folders), then recycle your paper ones. This also saves on space in your attic that you won't be filling with large file boxes and keeping for seven years.
Happy Tax Season!