October 29th 2013
The Skill List Project: Money-Handling
This is another post in The Skill List Project: an attempt to list all the skills involved in writing and selling fiction, particularly science fiction and fantasy. Two months ago, I decided that we’d covered most the skills directly associated with creating a story (plot, characterization, etc.) so it was time to look at other aspects of the writing life. Last month, I backtracked to look at comedy, but this time around, let’s get back to what we might call management skills: dealing with the things that a writer has to do in addition to writing stories.
So let’s look at how money enters into the equation.
I am not an accountant. Even if I were, laws vary from place to place, and from time to time, and even from person to person. Right now, I am writing in Ontario, Canada, October 2013; this time next year, the taxes and laws that I have to observe are bound to have changed at least a little…and if (let’s hope!) I have a big increase of income in 2014, then I may be subject to different legal requirements than I am right now.
When you read the rest of this posting, bear these facts in mind. If there’s a chance you may make income from your writing now or in the near future, I strongly urge you to talk to a real accountant who knows the law in your jurisdiction and who can tell you what you should or shouldn’t do with income and expenses.
Do not believe anything you read on the Internet (including this posting) and do not believe any advice you might hear from friends or other amateurs! I’ve been at SF conventions where people have said, “You can deduct Expense X” or “You don’t have to declare Income Y”. Often I’ve thought that those people didn’t know what they were talking about. At best, they were describing something that might be true in one jurisdiction; almost certainly, they were wrong about the laws elsewhere.
So talk to a professional accountant in your own jurisdiction, and do what the accountant says! If you don’t, the consequences may be severe—you may have to pay fines or even go to jail. Remember the golden rule: it’s stupid to be stupid.
On the positive side, it used to be difficult to find an accountant who understood the business of writing. Most fiction writers work at home; incomes may arrive from many different sources, not just from a single “employer”; sales and payments may be uncertain until the check actually arrives in the mail (or more and more frequently now, in your PayPal account); incomes may vary substantially from year to year. All of this used to be uncommon compared to other professions, and few accountants were familiar with the best way to deal with these aspects of a writer’s life.
Now, however, a lot of people work at home in similar situations: web designers, contract programmers, artists who sell their work on Etsy, eBay and the like. Most accountants now have experience with this kind of self-employment and will understand the “best practices” for managing such businesses.
Record, Record, Record
When it comes to money, paperwork is your friend. Record all income; record all expenditures. When in doubt, write it down.
Your records probably don’t have to be fancy—I just use an Excel spreadsheet. (But remember, jurisdictions differ; wherever you live, there may be specific requirements for how records must be kept. Get advice from a professional!) I record every expense that’s directly or indirectly related to my writing. Since I work at home, my expenses include a percentage of my home heating, water, electricity, property tax, mortgage interest, phone bill, Internet, and more. The percentage that’s applicable for you (if any) will depend on a lot of ifs, ands, or buts that you really really need an accountant to sort out. Also, your accountant may inform you that in your jurisdiction, certain types of expenses can’t be deducted from your writing income, or can only be deducted in certain circumstances.
Whatever. The point is to keep records of absolutely everything that might conceivably, possibly be relevant. At the end of the year, your accountant will tell you which are actually valid. If you don’t write it down, it can’t help you…but it might well hurt you. (Remember that tax departments collect information from many sources. If somebody says they paid you money, but you haven’t recorded that money as income, the tax people will give you a world of trouble.)
Don’t forget to record things like car expenses, e.g. mileage to and from business appointments. Here in Ontario (and maybe in your jurisdiction), car expenses can get complicated, especially when they have to be apportioned between work travel (e.g. trips to SF conventions) and the travel you do for everyday life. That means you have to keep detailed records—as detailed as your accountant says is necessary.
Don’t just say, “This is too much trouble; I’ll just ignore it.” As I mentioned previously, you really really really don’t want to break tax laws…but there’s no point in paying extra taxes when you don’t have to. Never disregard the costs of developing and maintaining your writing career.
For example, most (if not all) books you buy are likely deductible. As I said in a long ago post, reading is necessary to your art and your career. Just as doctors are professionally obliged to read medical journals, writers are professionally obliged to read fiction and relevant non-fiction. The cost is therefore a professional expense. (But of course, you should verify that with your accountant.)
Other possible deductible costs: business-related software; reference materials; reference travel (hey, if you’re writing about New York City, the cost of a trip to New York is totally a relevant expense); stationery (that’s a no-brainer) including printer ink; postage on every query and manuscript you send out; maybe even sources of inspiration from comic books to video games to movies. (Hey, I wrote a Lara Croft novel—buying Tomb Raider games was indisputably work-related.)
Again, there are many ifs, ands or buts. The list I just gave was intended as food for thought, not the gospel truth of what is legitimate for you personally to deduct. If you write comics, then comic books are totally legitimate expenses; if you’re writing a novel about superheroes, comics are likely legitimate too; if you write historical romances, maybe not. Ask your accountant! Get a professional opinion! If your accountant says it’s okay…well, it’s not 100% certain that the tax department will agree, but they’re unlikely to send you to jail if you follow professional advice in good faith.
The Fly in the Ointment
One important caveat: in most jurisdictions, you need income before you can deduct expenses. Until someone pays you for some piece of writing, your expenses don’t count. (But laws differ from place to place—ask your accountant!) Even so, it’s good to get into the habit of keeping records, even if you can’t use them right away.
Furthermore, you never know what’s going to happen in future. Suppose you sell a story before the end of 2013. Then depending on your local laws, all your writing expenses since January 2013 may be deductible against the income from that story. (Maybe. Ask your accountant!) If you haven’t been recording your expenses, you’ll end up paying more taxes than you should.
So start recording your expenses now. If you don’t actually sell anything in this fiscal year, it’s still good practice…and if you do sell something (congratulations), you’ll be ready to run your career in a business-like fashion.
Closing the Books
That’s it for this time. Next time around, let’s continue on writing-management skills and look at going to SF conventions. See you then!
James Alan Gardner
James Alan Gardner got his M.Math from the University of Waterloo with a thesis on black holes...and then he immediately started writing science fiction instead. He's been a finalist for the Hugo and Nebula awards, and has won the Theodore Sturgeon Memorial Award as well as the Aurora award (twice). He's published seven novels (beginning with "Expendable"), plus a short story collection and (for street cred) a Lara Croft book. He cares deeply about words and sentences, and is working his way up to paragraphs. Visit site.
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