Bean Counting for Authors

By Christina Mercer

FEAR ACCOUNTING?

Though the professions of author and accountant couldn't be more different in their main functions, authors come closer to becoming mini-accountants than they realize. Why? Because once anyone becomes an official business owner, he/she crosses into the realm of accounting and taxation.

Oh, the horrors of it, right? But never fear!

Getting a handle on important basics is really not all that daunting. Allow this author and former CPA to help you get serious about your business by learning the major "must-knows" of Bean Counting for Authors and Creative Business Owners.

In this book, you'll gain insight on how to:

*Determine if your endeavor is a Business or Hobby
*Choose and implement an Entity Structure for your Business
*Set up and Keep Books properly
*Set up and manage Sales and Use Tax when and where required
*Understand the different Business Taxes
*Recognize, track, and budget for Common Expenses
*Recognize, track, and budget for Complex Expenses
*Become clear about Employees versus Independent Contractors, and handle each accordingly
*Plan and save for Retirement

Counting each and every "Bean" earned may not be the idea of fun and adventure for most, but having lots of beans in the bank is a pretty great way for writers to keep on doing what they do love most--CREATING BOOKS! And understanding some important must-knows of financial matters is a big step toward making that happen.

• Language: English
• Publisher: Christina Mercer
• Release date: Feb 19, 2016
• ISBN: 9781311619532

Christina Mercer

Christina Mercer is an award-winning author of fiction for children and young adults. Honored titles include Tween/YA Fantasy ARROW OF THE MIST and its sequel ARMS OF ANU, and YA Paranormal Romance HONEY QUEEN. She is also a once-upon-a-time CPA and the author of BEAN COUNTING FOR AUTHORS. Christina enjoys life in the foothills of Northern California with her husband and sons, a pack of large dogs, and about 100,000 honeybees. To learn more about her and her writing, visit www.christinamercer.com

Book preview

Bean Counting for Authors

© 2016 Christina Mercer

No part of this book may be reproduced in any form whatsoever without prior written permission of the publisher except in the case of brief passages embodied in critical reviews and articles.

Distributed in the U.S.A.

Cover art by Chelsea Starling

Graphic art by Rachel Allen Dillon

Formatting by Novel Ninjutsu

Christina Mercer

P.O. Box 1845

Shingle Springs, CA 95682

www.christinamercer.com

IMPORTANT LEGAL DISCLAIMER

The information provided is for informational purposes only and is not intended to be official legal, accounting, or other professional advice. In accordance with IRS Circular 230 Disclosure, and to ensure compliance with requirements imposed by the U.S. Internal Revenue Service, you are hereby informed that any tax advice contained in this book is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.

The term Bean Counting has been used playfully (or even critically) to describe the activities by those—namely us nerdy Accountants—who fastidiously count each and every bean to ensure the down-to-the-penny accuracy of financial transactions. Counting beans is not what you would call an adventurous or exciting endeavor, but it is an important and necessary one. And though accounting for every bean coming into and going out of your business may not have you twirling in the streets, paying less in taxes and saving beans for the future is pretty great, right? Plus, it can help you avoid a day when not accounting for them correctly invites our nation’s Big-Bean Counters to dip their ladles into your pot!

Okay, enough about beans . . .

I am one of those weirdly ambidextrous creatures who is both an Accountant and an Author (and, yes, I am quite literally ambidextrous and have had the occasional interest from scholars studying such anomalies). My goal here is to bring some insight to Authors who are not also weird . . . ahem . . . Accountants, and who might benefit from some help on the Accounting and Taxation side of things. Blending my two worlds is exciting for me and in fact does have me twirling in the streets. And though these two professions couldn’t be more different in their main functions, Authors come closer to becoming mini-Accountants than they realize. Why? Because once anyone becomes an official business owner, he/she crosses into the realm of, well, BUSINESS, and that includes tending to Accounting and Taxes.

Originally, I shared some of the guidance found within this book in a ten-part blog series at www.indie-visible.com. After gaining positive feedback and encouragement from fellow Authors and others in the writing industry, I compiled/polished/fluffed all ten posts, added LOADS more content, including some handy visuals, and wrapped everything up in one convenient book. Though my target audience is Authors (and Creative types), much of the information provided can be used by many other business owners. My hope is that those serious about managing their businesses will find value in what is shared, and maybe, just maybe, they will watch their beans sprout into a vibrant wealth of green.

Chapter 1: When Being an Author Means Business

Chapter 2: Structure

Chapter 3: Keeping Books

Chapter 4: The Hook

Chapter 5: Flow

Chapter 6: Essential Elements

Chapter 7: Capitalize

Chapter 8: Body and Setting

Chapter 9: Supporting Characters

Chapter 10: Flash Forward

Afterword

Resources

Glossary: Short List of Terms

About the Author

So, you’re an Author—pre-published or published—living in the land of imaginary lands and creatures and/or playing with fun and amazing facts, doing what you love best, creating all that wonderful right-brain-y stuff, until you realize that being an Author also means you have to swing over to that boring, yet oh-so important logical brain where you stick on your business hat and get serious about a few things.

Namely: Income, Expenses and Taxes, oh my!

To start this bean-counting book off right, we need to first determine what it truly means to be a BUSINESS. Yes, a bona fide Business in the eyes of IRS (and those eyes can be quite big and bulgy). So, let’s get to it, shall we?

Most of you probably know that income earned from writing is taxable, even if those earnings barely pay for an ink cartridge (not uncommon when you’re first starting out!). But does that income mean you are an official Business according to our mighty tax institutions? It would be nice. Businesses can claim expenses, and all those seminars, web sites, editors, designers, business cards, bookmarks, etc. add up. Sometimes, those costs are greater than the income you make. Sometimes you incur them with zero earnings in a year (mac-n-cheese, anyone?). So, can you still be considered a Business when your activity generates losses?

The answer: Maybe.

Being a Business owner means that you file a tax schedule known as a Schedule C-Profit or Loss From Business attached to your personal tax filing at year end.

The bottom line income/loss that you generate from your Business increases/decreases your other taxable income. Losses are common for young Businesses and also for many in the arts, and since losses reduce your tax bill there are a number of tests to pass before IRS deems your activity a LEGITIMATE BUSINESS versus what they call a HOBBY. Hobby income MUST be claimed (yes, that’s right!), but Hobby expenses (aka Hobby Losses) can only be taken to the limit of the income you made, and those have to go through an additional crunching formula on a different schedule you may or may not qualify to file.

Are we having fun yet?

Keep in mind that even though a Hobby doesn’t give you the tax advantage of writing off all of your expenses, it’s best to treat your writing this way until it becomes seriously Business-fied (I’m an Author, so I create new words).

An important principle to help determine if your writing is Business-fied is that you have a serious intent to operate your business at a profit.

Sounds pretty straight-forward. Most of us Authors want to make money over and above what we spend. So, by that definition, we are in Business, right?

The answer again: Maybe.

You MUST be able to prove your intent, and to do this the IRS has criteria—nice and complex because torturing us is their true goal. Okay, maybe not, and in actuality they do want us to strive toward a profitable Business because that means (can you guess?) more tax revenue.

A super general way to prove you have a Business instead of a Hobby is by showing a net profit (income minus expenses) three out of five years. In other words, Net Losses (when expenses are greater than income) more than two years out of a five-year span are typically a no-no. But this isn’t set in marble. There are other rules in place to justify losses and retain your Business status.

A super general way to prove you have a business instead of a hobby is by showing a net profit (income minus expenses) three out of five years.

Remember how I said their rules were complex? Stay with me!

Here is an EXAMPLE LIST