Today is Monday and time to answer your questions.
Jo, You came from a business background. I got a shock when I took all my 10-99s to a tax professional this year. I am a business! How do I prevent my sticker shock when filing for 2013? JG
Most indie authors and traditionally published authors have the problem of not looking at themselves as a taxable business operation according to the IRS (Internal Revenue Service). AND if you are lucky enough to live in...
- South Dakota
The 10-99 gives a specific amount you earned from your publisher(s). This amount is the taxable income you have to pay taxes on if its over $500. Believe me, I've prepared and gotten a few thousand of these every tax season for 15 years.
Think you can just not claim them, nope a copy is mailed to the Social Security Administration and sent to the IRS before the middle of January each year. They will send you a nice letter, at first, reminding you that you forgot to claim this income and they want their money. If the government OWES YOU money, they don't care, but if you OWE THEM money, they'll hound you about it and even seize your bank accounts.
I always thought it was wrong that you could only file 3 years worth of back taxes for returns, but they can demand payment for up to 7 years on back taxes. This year, I finally disposed, shredded and composted the last of my business consulting records from when I was in business. I was required to keep all documents for ten years!
I live in Georgia and I know my tax rate. Between state income tax and federal combined, the percentage is roughly 13.7%. Find out your state's tax percentage. Now for 2012, the federal tax rate changed taking a bigger chunk out of everyone's pocket. We found ourselves in a larger tax bracket. Higher bracket equals higher tax rates. So much for Obama's campaign promise of only taxing the rich. <sigh>
That's why as a general rule, every time I get a royalty check or payment for services rendered I withhold 20% of that income. It gives me a cushion for increases. I put it in a savings account to draw interest but I do not withdraw any until tax time. I'll round it up to the nearest dollar if need be. For a simple wedding I may have gotten paid $25, but $5 went into this account religiously.
As a published author, I am self employed. I run a business. Whether you use your Social Security number and set up as a DBA (doing business as), in other words, a sole proprietor or LLC (limited liability corporation), or S Corp (incorporated under sub-chapter S of IRS code). There are various tax advantages for each LLC or S Corp that don't apply to a sole proprietorship.
Why am I talking about this now that tax season is almost over? To give you time to plan for 2013 tax season, of course.
Keep writing and loving the Lord.