It’s that time of year again. Yes, I’m talking about April 15th, the tax deadline!
I realize that tax season is stressful for many, but seriously, I kind of enjoy it. No, I’m not a STEM studies kinda gal. Math is not my thing. I’m humanities all the way. But tax season isn’t really about the mathematics and with do-it-yourself tax software these days, the math is taken out of your hands.
For me, tax season is all about reckoning the past year’s successes… and considering any potential failures. You do this by pulling out all of your receipts for expenses, (and I am very good about keeping up with expenses) and tabulating the net gains of the previous year.
This is the part of the blog where I insert a disclaimer: Nothing here should be construed as tax advice. This is one person’s methodology for tracking those troublesome bits and bobs involved in the calculation of taxes. I am neither a lawyer nor an accountant, and this should not be construed as legal or accounting advice.
Okay, now on to the fun bits. Yes, I said “fun” in a blog post about doing your taxes.
In years past, I have had to account for several small businesses. While they are essentially the same, requiring slightly different forms, I’m only concerning myself with The Business of Writing – for the purposes of this post.
Each businesses accounting must be kept completely separate – expenses as well as any profits. To do this, I’ve found the easiest means is to start a notebook for each year that contains sections that are based on the U.S. Federal Tax form, Schedule C.
Depending upon how large the business, I might have different notebook sections that align to the different line-items on the schedule C under expenses and gross income. Basically, when money comes in from that business, you log it in the section labeled “Gross Income.” When money goes out related specifically to that business, then a receipt for that expense gets pocketed in the corresponding “Expenses” pocket. For some of my larger ventures, I have separate sections for each of the common Schedule C expense categories. Some of my favorites are:
- Commissions and fees
- Contract labor
- Legal and professional services
- Office expenses
- Repairs and maintenance
- Taxes and licenses
There are other categories you can consider – just look at the schedule C under “Expenses”. Some of the other expense categories may apply to you and your business.
Then you just subtract the expenses from your income. Hopefully, the income is bigger than the expenses. If so, the difference is the amount of money on which you will have to pay taxes. (Not the amount of tax you owe. That would be bad.)
So you see, this isn’t a bad thing. First, it forces you to consider the overview of your business. Is it really a viable enterprise? Did you show a loss? Well, lucky you, no taxes on that income, but you might want to reconsider your business model. Profit? Well, pay your taxes on that profit and then think about what you did that was successful and how you might top it the next year… and consider putting aside 1/3 of your gross income next year for taxes… just in case.
So you see, the taxman is really doing you a favor because, let’s be honest, would you really take such a considered look at your business model otherwise?
In the meantime, don’t put it off. Do your taxes. Then make some art, read a book.
On that note, this week’s projects consisted of, as ever, writing the first half of the day, followed by the creation of a couple of decorative artsy items. The first project centered around a walnut wardrobe that I needed to get rid of, but could not give away. (Shocking how few people want to have to move a solid, walnut wardrobe.) So I took out my trusty circular saw and “brrrrzzzzzp” ten minutes later, I had created a bar for our daughter’s upcoming wedding. Still needs some work.
And then this piece of abstract art by that illusive artist, Rothko Nokov (Knock-off) was created to shamelessly color coordinate with a very boldly painted room.