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The Freelance Writer and Taxes

You’re on this web site because you enjoy writing and hope to earn money from it. Assuming you make money you’ll need to pay tax on your earnings.

Freelancers are considered independent contractors, so in addition to Form 1040, you’ll use Schedule C (or C-EZ), “Profit or Loss from Business,” to report your writing income and expenses to the Internal Revenue Service. You’ll also need Schedule SE, “Self-Employment Tax.” If your state has an income tax, you’ll need to report your income to the state as well.

If you earned enough money (currently $600) from a single publication, such as Readers’ Favorite, the publishers will send you a Form 1099 showing the amount you earned. The publication also reports this information to the IRS.

You’ll lower your tax burden by keeping careful records of your expenses and reporting them to the IRS along with your income. Some expenses you can deduct (assuming you were not reimbursed for them) are:

Paper and envelopes
Office supplies used in your work (pens, notepads, etc.)
Mileage to and from interviews or other research (The amount you can deduct per mile changes from year to year. Check the IRS 1040 instructions for the exact amount. You may also choose to deduct actual car expenses rather than mileage.)

You may also be able to utilize the home office deduction. The IRS has strict and complicated rules about this, though. One of the most important bits of information is this, which is from an IRS web site: “There must be exclusive use of a portion of the home for conducting business on a regular basis.” See this web page for the details:

A simple spreadsheet will help you to track your income and expenses. All you need is the date, the type of expense or source of income, and the amounts.

To deduct car mileage, you must include the date, starting and ending mileage, the reason for travel, and total mileage. Also, keep a record of tolls and parking fees. Any tolls or parking fees you incur as a result of writing activities are deductible.

You’ll want to save your records for several years just in case the IRS audits you.

As a freelancer, you won’t have taxes withheld from your pay, so you may need to make quarterly tax payments to the IRS. Each payment should be one-fourth of the total taxes you expect to owe that year. The trouble is, it’s impossible to know how much money you’ll make in a particular year, and hence how much you’ll owe in taxes. Your best bet is to pay one-fourth of last year’s tax bill. As long as you pay 100 percent of your previous year’s taxes, you won’t owe a penalty to the IRS, even if you end up owing money at the end of the tax year.

As a self-employed individual, you’ll also need to pay Social Security taxes on your net earnings. Actually, you’ll pay twice the Social Security taxes that an employee pays because in an employer/employee relationship the employers contribute half of the total Social Security tax and the employee the other half. As a self-employed person, you must pay both sides of the tax.

Note: I am neither an attorney nor a tax accountant. I’m just a writer who reports his writing income and expenses to the Internal Revenue Service. I advise you to check with your tax attorney or accountant for more information.

Written by Readers’ Favorite Reviewer Joe Wisinski