Category Archives: Legal Issues

Contrary to popular belief, you as a writer don’t have to keep every single piece of paper or e-mail or e-documentation that comes your way. And you especially don’t have to keep it forever. However, just like any business owner out there, you need to have a good idea as to what kind of records you need to keep, and you need to have some idea as to how long they should be kept.

This gets down to the nitty-gritty, detailed, organized, obsessive, and—dare I say it—boooooriiiiing part of being a writer. Keeping your records updated, filed, and organized is a necessity; particularly in a profession that undergoes regular and sometimes heightened scrutiny from the taxing authorities, and also has to deal with contracts.

Get Organized

Yes, you absolutely need an organized filing system. No, it doesn’t need to be very complicated, as long as it’s logical. It can be totally paper based, or totally electronic, or both. But it has to exist, and you have to maintain it, or the risk of you getting into trouble really escalates.

You can go totally electronic: scan all your documents into digital memory, even your signed contracts. There is case law now that has established that a scan of a signed contract is just as valid a record of the agreement as the signed paper original which was scanned. And there are businesses out there that destroy their originals as soon as they are scanned. No drawers full of paper, no clouds of paper dust. But there are also disadvantages: you have to stay on top of the scanning and not let it pile up, or you never get it done; you have to keep your electronic files just as organized as you would the equivalent paper files; and you have to remember to back up all the files regularly. Daily, if you work frequently. Definitely every time you add, change, or delete data. More about that later.

You can go with all paper, but in the internet age, a hybrid combination of paper and electronic is more practical: keep your most important documents in paper, but go with electronic copies of correspondence, work notes, etc. But you still have to have an organization method, and you have to stay on top of the filing, both electronic and paper. And make sure the electronic records are backed up.

The big thing is to have a method, to be organized in a manner that works for you and is efficient. But make sure somebody else knows how you do things, because there are always those odd moments where you’re not at home and something needs to be found.

This is especially important when it comes to your financial records, since they will be the foundation of your tax filings. You can use an application such as QuickBooks, or you can just build all the revenue and expense records into a (relatively) simple spreadsheet. But you have to do it. And while you’re at it, whatever method you use, make sure it’s backed up frequently.

Myself, I organize everything by the writing project. Work notes, drafts, contracts, payments, mail (both e- and paper), everything except tax documentation gets put under the header of a project. I find it a simple yet convenient structure, because 99% of the time if I need to look something up, it’s the project name I’m going to be searching under. My tax forms and supporting documentation I organize by tax year.

Back It Up

And again I say, back everything up. If your house or office floods, or burns, or is robbed/vandalized, or is in hurricane country or tornado alley, and you’re in the middle of an IRS audit or a litigation about contract compliance when the disaster happens, just how valuable would that back-up file be to you?

Even if you like the paper records, there is good reason to scan all the important ones, such as your contracts, your tax returns, and all your current income and expense records. This will allow you to back them up in a cloud service such as Carbonite. If you don’t want to trust a cloud service, then at least copy the files to flash drives or an external hard drive and store them someplace else. That doesn’t mean in your bedroom closet, either. I mean someplace miles away from your location. If you or your spouse has a day job, take them there and bring the older ones back home.

In the words of the old platitude, don’t put your eggs all in one basket. Do something to mitigate the risk.

(Be sure to come back tomorrow for the conclusion!)

U.S. Taxes: Things to Keep In Mind, Part Two

March 5, 2014

fictorians

Business Guest Posts Legal Issues Taxes The Writing Life 2 Comments

A guest post by Brenda Lindsey.

SHOULD I BE MAKING QUARTERLY ES PAYMENTS?

The rule for everyone is the same. The U.S. is a pay-as-you-go tax system. As you earn income, you must pay taxes. However, a common misconception is that every self-employed individual must make quarterly estimated tax payments. If you file your income tax return and have not paid throughout the year, you will be penalized. There are some general exceptions to the penalty: if you owe less than $1,000 in taxes for the current year; if you have already paid in 90% of what is due in the current year; or if in the previous year you have already paid in 100% of the tax due for the current year. (Look at last year’s Form 1040, Line 61.)

Not all writers are full-time writers. As a writer, if you also have a wage or salary earning job, you get an added advantage to the pay-as-you-go rule. All payments to the IRS remitted through withholding by your employer will be considered remitted equally throughout the year – even if you change your W4 at the end of the year and have large withholdings to “catch-up” on taxes for income received much earlier in the year. Also, payments to the IRS when your status is “married filing jointly” are considered joint payments and will apply to the joint taxes owed. This is why, if possible (i.e. you or your spouse have another job with an employer), you should consider simplifying the process and avoiding penalties by making all your tax payments through increased withholding by an employer.

If increasing the withholdings through an employer is not an option, you will need to make estimated tax payments on Form 1040 ES. You should estimate the taxes you need to pay (estimated self-employment income less estimated deductions multiplied by your income tax bracket + approximately 15%) and divide by 4. These payments are due on an unusual schedule – April 15, June 15, Sept. 1, and Jan. 15. You can get a refund on your income tax return and still incur ES payment penalties because you did not remit timely payments on the “pay-as-you-go” system. (You can get a waiver if you can show – via Form 2210 – the actual amounts earned by quarter. This would be used, for example, if you received a large advance in the last quarter of the year.)

CAVEAT ABOUT CLAIMING DEDUCTIONS

Be very careful about what you claim as deductible expenses. This is one of the areas where writers can most easily find themselves in conflict with the IRS. Remember, only your expenses as a writer can be deducted from your self-employed writer’s income. For example, if you and your spouse travel together to another city to attend a convention, unless your spouse is also a writer, only your travel, meal, and lodging expenses are deductible.

CONSIDER HIRING A CPA

While it is wise to understand the rules involved and the records you should be keeping, the paperwork should not keep you from your first love – writing. A Certified Professional Accountant can remind you of deadlines, file forms on your behalf and help you to avoid unnecessary penalties. Keep orderly and itemized records of receipts and expenses and consider letting a CPA worry about Uncle Sam.

Good luck with your writing!

Guest Writer Bio:
Brenda is a Certified Public Accountant and has over 10 years in public accounting experience, specializing in taxes for small businesses. She is currently the Controller of New Gulf Resources, LLC in Tulsa, OK. She is not a writer, but she is a reader, and she is related to Fictorian David Carrico, so she has a connection with the writing life.

U.S. Taxes: Things to Keep In Mind, Part One

March 4, 2014

fictorians

Business Guest Posts Legal Issues Taxes The Writing Life No Comments

A guest post by Brenda Lindsey.

You have finally finished that book you dreamed of writing. As you are showing off that first advance check from the publisher, don’t forget about Uncle Sam. He will want to see that check also.

WHERE DO I REPORT MY INCOME?

Yes, even if you don’t receive a 1099 statement from a publisher at the end of the year, you are still legally required to report writing income. Amounts received as income from writing books, including but not limited to advances and royalties, are generally considered self-employment income. The Internal Revenue Service will want to see it reported on your Form 1040, Schedule C. (The exception would be if you are fortunate enough to continue receiving royalties after you have quit writing. In that case the royalties are “passive income” and would be reported on Form 1040, Schedule E.)

In addition to tracking the income you receive, you will also want to keep track of your expenses. A good rule of thumb is any expense that you would not otherwise have if you were not in this business, is a business expense. Items such as the business use of your computer, ink or toner, paper, legal fees, subscriptions and office rent are some examples of ordinary business expenses you might deduct from the income on Schedule C. Other expenses would be things like travel, lodging, and meal expenses for attendance at conventions or seminars. Get receipts for everything, and don’t lose them. Or if you drive to a local book signing or conference, that mileage will be deductible. Make sure you write down the beginning and ending odometer readings as backup for the deduction.

WHAT IF I LOST MONEY?

After deducting all your expenses, you will arrive at your net earnings. If your expenses exceed your income (and they may), then you will have a net loss. Net losses can be used to offset income from other sources. You do not have to have net earnings from your business every year. The rule is if you have net earnings in three out of every five years, the IRS will presume you are in business to make a profit (a requirement to deduct expenses on Schedule C). However, if your business does not have net earnings for three out of every five years, you should be prepared to convince the IRS that you are operating a business and not simply pursuing a hobby. Hobby losses are only deductible on Schedule A as an itemized deduction and have more limitations.

WHAT IS THIS SELF-EMPLOYMENT TAX I’VE HEARD ABOUT?

Net earnings from self-employment are not only subject to income taxes, but they are also subject to self-employment taxes. These “self-employment” taxes are comparable to the Social Security and Medicare withheld as FICA from a “wage-earner’s” paycheck by his employer. The percentage withheld is 7.65% and his employer matches it by paying in another 7.65%, for a total of 15.3%. The employer provides a form to reconcile the withholdings and the match to the IRS.

When you are self-employed, you are your own employer. You must remit the total 15.3% as self-employment taxes. This is reported on your Form 1040, Schedule SE. (There is a cap of $117,000 on the amount of earnings subject to Social Security.) If you forget about self-employment taxes, you may be unpleasantly surprised when you file your income taxes.

(Continued Tomorrow)

Editorial Comment:

The Fictorians are aware that many of our readers are not United States citizens, and consequently conduct their lives and businesses under statutes and regulations that are markedly different from those in the U S A. Most of our posters for this month are American, and the few who aren’t are Canadian, so the perspective in this month’s posts will of necessity be somewhat limited. Nonetheless, if you are one of those readers from somewhere other than North America, as you read of issues in our laws and practices, perhaps they will make you mindful of things you should be aware of in your situations as well.

Commissioning an Artist

November 14, 2013

Colette Black

Business Colette Black Contracts Interacting With Professionals Publishing No Comments

When I decided to self-publish my novel, Noble Ark, I had no experience with self-publishing, and little information. Thanks to Superstars Writing Seminars, I knew that a professional cover, typesetting, and editing were paramount, but I went into the process somewhat blind, or so I thought. As I took each step, the next one fell into place. Let’s start at the beginning.

Why? Why should you commission an artist rather than put together artwork yourself? That is a viable option. Here are a few things to consider. Is your book’s subject matter such that you can find usable artwork online? If so, then I direct you to istockphoto, shutterstock, and bigstockphoto. If you do a search of stock photos, there are a lot of websites to choose from.

If you’re an artist or know something about art, you can probably photoshop the images you want in engaging ways and do your own cover art. If you are not an artist, don’t have typesetting training, or don’t have hours and hours to spend putting together the perfect cover then I suggest hiring someone. That cover is the first thing readers see and if it isn’t engaging, they will likely move on. Some suggestions on companies that do cover art: Ebook Artisan Design, JD Smith Design or ask around to your writing friends for their suggestions.

But what if you have one of those books that doesn’t easily fit into what can be found among the stock photos? What if one of the main focuses of your book series is an alien race that’s uncannily similar to humans, yet also vastly different. What if you believe showcasing these aliens and bringing them to life in the reader’s eye before they even open the book is paramount? That’s where I found myself, and so I decided to commission an artist.

Where? That’s the first step, isn’t it? You can’t commission an artist if you don’t know one. I know a few, but thankfully, I also knew better. About a year ago, I asked a friend of mine, a budding artist, to see what he could do with the Noble Ark concept. No promises, but if he was willing to try, I’d be willing to pay. He came back to me with the prototype, and though it was good, we both agreed it wasn’t the quality needed for a professional novel. He wasn’t quite there with his craft yet. Friends are great, but remember that professionalism counts. Only work with friends if you know that you can approach one another as professionals.

I’d learned about an art website, Deviant Art, from workshops, Superstars, and from my friend, so I decided to join and see what I could find there. Be prepared, I had to spend some time. A lot of the artwork is fantastic, but I wanted an artist who fit the style that I foresaw for my books. I perused the site on and off for weeks. I found six. Some of them weren’t accepting commissions because they already had an overfull workload. One of them was accepting limited commissions for projects that she liked, which meant I had to win her over. Don’t think that you can peruse through the artwork, pick an artist, and he/she will fall at your feet and be thankful for the work. Good artists have plenty of work and they don’t generally need unknown authors. I sent a note to Suzanne Helmigh, told her about my book and why I thought her art style would do well with my subject matter. She replied that she was interested and to send her more info. I had to hook her with my book synopsis the same way we hook readers to look inside the cover to the first page. Once we’d passed a few notes back and forth through deviant art then she agreed to the commission.

How? Suzanne recommended we do thumbnails first. The picture at the top of this post is a thumbnail. It’s a rough sketch, a type of concept art, to give the author an idea of how the finished artwork will be set up. They’re not free, but I believe they’re worth it. By purchasing the thumbnails, it gave me something to show Kickstarter investors, and it helped me cement what I wanted on the cover before moving forward with the commission.

Then came time for the contract. I’ve never put together a contract and hadn’t the slightest clue, but I’d been collecting useful websites and I have some great friends. I read this article, http://blog.gallegosart.com/2012/10/how-to-commission-illustration.html and downloaded the free book. There’s an important concept in the book, shown in the illustration to the right. Learn it. Believe it. If you look online, there are dozens of contract templates. I used this one by Kelly Nomad, and a couple of author friends let me study their contracts for a few tweaks. After showing the contract to my artist, Suzanne, she suggested a couple of changes that were mutually beneficial, so I incorporated them into the contract then used Docusign to make it easier for both of us. I highly recommend the company and they’ll let you send up to five contracts free without obligation.

A few days ago, I sent Suzanne her down payment via Paypal, her preferred payment method. It’s a little bit of work to commission an artist, but I think it’s worth it. The cover for Noble Ark will stand out and catch readers’ attention. I hope the information I’ve found is of some use to someone and I hope to see more beautiful covers on e-shelves in the future. Good luck to us all.