EM is here to talk about last minute tax tips for authors.
4 Last-minute tax tips for writers #taxes #author
Panicking because you aren’t ready for tomorrow’s tax deadline? Here are some last-minute tips to make the process a little less painful. To get all the deductions you deserve and plenty of tax planning and prep advice, check out EM Lynley’s book Tax Tips for Authors.
If you try to rush through a Schedule C in a day or two, I guarantee you will miss deductions and end up paying more tax than you really owe, especially if this is the first or even the second year you are filing a Schedule C as a writer. There are a lot of specialized deductions you may not know about, and it’s worth the effort to keep good records and allow enough time to properly prepare your tax return.
1. Didn’t get organized in time? File an extension. If you haven’t got your expenses tallied in time to get all the deductions on your Schedule C, don’t worry. You can file an extension that gives you until October 15 to file your return: another six months to get your act together. Most tax software has an extension option, or you can go to the IRS website and download the PDF at the link below. Fill it in and mail it to be postmarked by April 15.
The caveat here is that the IRS expects you to pay what you owe now, even if you haven’t completely figured it out! If you have a refund coming, don’t worry, you don’t have to do anything. But if you have a balance due, or you aren’t sure, make sure that between withholding and other tax payments that you pay as much as your tax liability from LAST year. Then you won’t get an IRS penalty. You may owe interest on the difference, but it’s far less than the penalty for under-withholding during the year and not paying anything by April 15.
Tax liability is on Line 61 of Form 1040 for last year.
2. Owe money to the IRS and you can’t pay it by April 15? That’s not as big a problem as it sounds. Go ahead and file your return on time, and send what you can afford now, even if it’s just $10. The IRS is happy to send you a bill for the remainder, and that letter will have instructions for setting up a payment plan. You can take up to 5 years to pay any balance due, at a monthly payment that’s affordable for you, as low as $30 or $50 a month.
Remember: the penalty for NOT filing is 5% of the balance due per month, up to a maximum of 25% of the amount you owe. But the penalty for paying late is only 0.5% per month, just one-tenth of that amount. File, then figure out how to pay later and you will save yourself a lot of money and a lot of stress.
3. Realized you forgot to claim something after you filed, or are you missing a vital receipt for a deduction? Not a problem. You can file an amended return up to three years after the due date. For 2013 returns you have until April 15, 2017 to correct anything you forgot to deduct. You’ll file a Form 1040X (Amended Return) for the specific year you need to correct, after you’ve redone your return with all the deductions you are entitled to.
4. Want to reduce your 2013 tax liability? The only way to fix what you owe for 2013 now is to put some money in a traditional IRA account by April 15. You can deduct up to $5,000 of traditional IRA contributions, depending on your income level and whether you or your spouse is covered by a retirement plan at your day job. Roth IRAs aren’t deductible. They are made with post-tax dollars, so they’re completely tax free when you take the money out in retirement.
NOTE: IRA contributions only reduce your income tax liability, not your self-employment tax liability.
Get more useful tax prep and planning advice in my book Tax Tips for Authors. It will help you get all your deductions for 2013 and get organized in advance for 2014 tax filing, with lots of essential bookkeeping advice.
Want even more information? Sign up for my Tax Tips Newsletter, or visit the Tax Tips for Authors website. Best of all, pick up a copy of my book Tax Tips for Authors 2014. It’s got new information for filing 2013 returns, a Schedule C walkthrough, chapters on self-employment taxes and quarterly payments, and a whole lot more.
EM Lynley is a former investment analyst and White House economist. For the past five years she has been much happier writing gay erotic romance. She loves books where the hero gets the guy and the loving is 11 on a scale of 10. Her Precious Gems series is best described as “Indiana Jones meets Romancing the Stone”—only gayer. The Delectable series is Gay Romance with Taste. Her books are available in print and e-book from Amazon & other book distributors.