I decided it was time to add to what I’ve learned about keeping track of writing business expenses. You can see my initial post here.
First, I have a checking account dedicated to my writing business. This makes it easy to use my writing account debit card for business expenses. My expenses still go into a spreadsheet, but I have easy backup and confirmation with those debits on my banking statement.
Same goes for income. Writing income gets deposited into that account (or it’s related savings account). I’ve also got an income spreadsheet which shows what I earned. It includes when, where and/or what, and I have them classified by categories such as my teaching income for the Institute of Children’s Literature (ICL), book royalties or flat fees, magazine and online articles/stories, critiquing, and speaking. Having a column for an entity such as ICL makes it really easy to compare the total to my 1099 after year end.
But the last few years I started some additional spreadsheets to help me keep track of mileage expenses. One is a writing day/morning spreadsheet. It shows date, where we met, and who I met with. The second is a critique group spreadsheet. Besides the previous information, it also shows what manuscript I brought for critique, or if none, it says NA. This adds validation to my expense spreadsheet and gives me a double-check. If I start looking at either of these sheets and see blank spaces where there shouldn’t be, I check my email since most of our arrangements for these meetings are confirmed via email. And I throw those emails into a “Finances” folder. Again, backup if I ever get audited.
And speaking of mileage, each year at the beginning of the year I note the mileage on my car in a spreadsheet. For example, in 2017 the total mileage for my little car was 4704. (As a family we drive the other car most of the time.) 1274 miles were writing related! The total mileage and business-related mileage are questions the IRS wants answers to. It’s good to be prepared before you go to fill out the tax form.
Back to my debit card. Someone once asked me about the validity of using my writing account for beverages at a coffee shop when I’m having a writing day. Or a meal for another type of writing event. If I stayed home, I would not have those expenses. The IRS only allows 40% of those expenses deducted. But 40% helps. For example, in 2017 I had almost $500 in meal expenses. The majority were for out-of-town trips. 40% of $500 is $200 deducted.
Something unavailable to us in 2013 when I wrote my original post was email receipts. Many restaurants and businesses will now email you your receipt or at least offer that option. I’ve found a number of coffee shops use Square which automatically emails the receipt based on my debit card number. I just have to update the info when I get a new card.
I also have a separate PayPal account for writing related income and expenses. This is very helpful when I’m collecting from individuals for paid critiques or editing. It shows the payment from my client and the fee for receiving payment via PayPal. But then I don’t have to worry about a stranger’s check bouncing after I do the work. (Although I do collect 50% in advance when I haven’t worked with someone before.)
It’s work to keep track of all this information, but I’ve definitely found if I keep up on it, it’s not very time-consuming. And since spreadsheets can be set up to do automatic calculations, it sure makes tax time easier.
If you have any tips to share, I’d love to hear them. Just enter them in the comments.
