Sunday, 1 December 2013

MIND YOUR OWN BUSINESS! A HELPFUL POST by VALERIE LAWS

Why writers don't see themselves as businesses? No bird-feeding or kite-flying.


Following on from Catherine Czerkawska’s excellent post the other day, asking why creative writing courses don’t prepare would-be writers for the business side of writing and promoting, I’m going to come out now right here in front of you all.

I am a business.

There, I’ve said it. Many of you are already businesses, but perhaps you don’t know it yet. Perhaps you are in denial. You don’t want to photocopy your bum at office parties or wear boring suits or behave like Mr Banks in 'Mary Poppins'. Or as a writer, you work mostly alone, and think of yourself as an individual, a maverick, a wild card, a free spirit, and anyway your office parties would be embarrassingly sparse.
Not that businesslike, really.
But think about it, if you get royalties (sometimes, and often not much, but still...) from book sales, fees for performances or talks or play commissions or other writery things. If this is the case, you may be a business, and there are benefits out there in the form of paying less tax (yay!) and having less bother (woohoo!) which you might as well have, whether you’re struggling to afford a new ink cartridge or deciding on which model Audi to buy.

Yes, despite my unbusinesslike demeanour, I’m self-employed which makes me a business called ‘Valerie Laws’, and I’m also a ‘sole trader’ which sounds more romantic and a bit piratey. I’m sure you’d like to be that (paging Julia Jones!)
Wouldn't mind photocopying HIS bum..

How can you tell if you are self-employed? First of all, you say you are. You don’t have to get a t-shirt printed or owt. Then you become ‘self-assessed’ for your taxes (even if you are also employed a bit as well by someone else) and hopefully you pay some NI contributions at the fairly low rate of the self-employed. The self-assessed bit is important as it’s how you prove you’re a business to tax people and Amazon. It cuts no ice with them that you want to be alone like Greta Garbo, a creative soul in a garret forgetting to buy cornflakes. You can do all that in your spare time.

I said you DON'T need a t-shirt!
Why is it worth dipping your tootsies in the vile river of commerce?  Now for another confession. For years, I was a complete fool. An idiot. Yes, me, with my first class maths degree. I filled in my own tax return, shaking in my shoes, terrified of making a mistake, so stressed out that I just declared my income as a writer, made a cup of tea, and collapsed sobbing in front of the TV. I ignored the bit about business expenses as I just couldn’t cope with that as well.

As a result, for years when I was, surprisingly, making a living as a writer, I paid far more tax than I should have, from a not very big income. You see? Stupid. I’d heard you could claim things like heating your study and the like, but it all seemed a bit scary and complicated. Then I found an accountant, through a writer friend.There are some who specialise in writers and artists, and know what we are entitled to claim as business expenses, some of which may surprise you. You can do your own tax return without one, having learned all about the exact details of how much of each category you can claim for, but it may be worth paying (perhaps about £350 per year) for an accountant to do it.

If you are a professional writer (‘sole trader’ remember) you can claim as business expenses all or part of such things as: phone/internet/mobile bills, equipment like anything computerish or paper or stamps or ink cartridges... but there’s much more. If you are a writer, a lot of your life is research for writing, and you can claim all or part of that. All the books you buy in whatever form.

'Not now, I'm working.'
Tickets to theatre, literary events, films; petrol/mileage/capital costs of car/tyres etc to all of those events; travel to work-related trips away from home too(performances, festivals, signings, meetings with other writers/publishers/agents/potential payers for your services, research for novel/play; including hotel bills, all food and drink and cups of tea, taxis, railfares...)

If you appear in public (signings, readings, talks) you can claim for clothes, shoes, accessories, hair do’s; subscriptions to charities or writing-related bodies; costs of producing your books (editors, books you buy from publishers to sell at your events...): all this and more can be totted up by the accountant and the total is subtracted from your income, effectively ignored for tax purposes.
It might save you thousands a year. You need to be strictly honest of course and to have proof, in the form of receipts and tickets, so start collecting them now (all of them!). Start listing your trips and mileages, or just get them from your calendar/diary.

That’s just a brief glimpse of the world of business expenses, the honest kind, not duck-houses and moats and second homes down the road from first homes, we’re not MPs! Some of you will already be doing this, and wondering if such innocents really exist, making voluntary presents to the Revenue. But I was one such. And I believe many other writers are too, from what happened when we Brits faced our tax situation in the US. If your books sell on amazon.com, yes even a few of them, the IRS over there will grab 30% of your earnings before that cheque with ‘Wells Fargo’ incredibly printed on it (cowboys and sole trader pirates! How cool are we!) plops through your door. 

MY ROYALTIES FROM AMAZON.COM ARE A-COMIN', YEE HAH!

Very nice people really.
They go on doing this until you have proved you are actually paying tax over here, and would rather give it to UK Revenue bods, especially as it would be a lot less, because we are actually exempt from paying tax in the US once we’ve proved who and where we are. When I began the Byzantine process of proving this to the IRS, we had to do it all ourselves, now Amazon are helping with some of it, as you will know, as we had to declare our tax position in October. Forms had to be filled in, definitions had to be learned, categories decided.

In order to do all this you need a special number. This number could be gained in two ways, one (ITIN) as an ‘individual’ and one (EIN) as a ‘business’. The first one involved not only filling in forms but actually travelling to American embassies and all kinds of bother. The second could be done in half an hour and a nice chat on the phone with a lovely lady at the IRS. Yet even I, knowing I’m a sole trader, nearly chose the ‘individual’ route, so powerful is our self image as writers. Doh! Quite a few people did it the hard way though, and on facebook some very successful best-selling writers were lamenting about having to do that until I broke the news that they are in fact businesses. There’s a very helpful blog post for doing all this which may still be useful to some of you. So it’s not all briefcases and pinstripe trousers and gold fob watches. Being a business can be a Good Thing. And you still have plenty of time to languish, create, write, mess about on facebook, and forget to buy cornflakes to your heart’s content. And to go fly a kite. 



Visit my website to see my books (crime fiction, comedy fiction, poetry,several on Kindle), plays, installations, etc at www.valerielaws.com 
Follow me on Twitter @ValerieLaws 


  
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10 comments:

JO said...

I know you're right.

For years I was a self-employed play therapist/consultant - so understood the whole administrative package, and had a wonderful accountant who did the tax-thing for mr (so wonderful that, when I went travelling, he was my power of attorney, so made sure there was always money in an account I could get at

But now - that felt like work. And writing is such fun I find it really hard to take the admin side of it seriously. I know ... must try harder.

Chris Longmuir said...

Thanks for this post Valerie. I'm one of the dumbos who has an ITIN, but I'm wondering whether I should change my status with the IRS and apply for an EIN. I've been increasingly wondering what will happen to my earnings if I am no longer here. I know that banks freeze all bank accounts (when someone kicks the bucket!), so Amazon will have nowhere to deposit my earnings, and I'm not sure how the US tax situation applies if you make yourself a limited company. But turning myself into a small business might be the answer. Must put that on the list to ask accountant when he does my accounts next year!

julia jones said...

Well done Valerie - the 'how-to' post par excellence. Am printing this one for the files NOW. Thank you

Bill Kirton said...

Excellent advice, Valerie. For years I, too, shied away from the complexities of expenses, even though I knew I was spending money on things specifically related to my writing. At last, an accountant convinced me that it was easy to do. He was wrong but I did most of it anyway. I know I don't claim nearly enough but at least I'm moving in the right sirection - albeit very slowly.

June said...

Thanks so much... I already do all the expenses parts of my writer/illustrator Partnership Tax returns, but the ITIN thing seemed like so much effort and expense I gave up bothering with it.
Good to know that Amazon is now helping to sort this issue and accepting an EIN.
Some online selling companies started demanding a ITIN so I quit using them, not wanting to give my 30% to America. (Though I think there is a way on the UK Tax return form to declare tax witheld by USA and get it offset somehow... that would be another worry though.)
Tax forms put me into a complete melt down with the fear of being told off for getting it wrong!
An EIN will help considerably, I'm sure.

Lydia Bennet said...

aw thank you folks! The link to the blog post explaining how to get the EIN is well worth following up, and there's useful info in the comments beneath it too.JUne, you can try for an EIN and then offer the companies that, it's the same thing tax-wise - I don't think you can get tax offset here, as the rate they take it off in the US is pretty steep at 30%, which can only be stopped by getting the EIN then filling in the form Amazon have, or via the info in the blog post link I included. good luck!

Dennis Hamley said...

Very informative, Val. I've been a sole trader since 1992 and was thankful to have successively two excellent accountants to hold my hand. Without them I would have been in a terrible mess because though I'm a serial hoarder of nice things, I've never developed the same instinct with receipts and the like and have therefore probably unwittingly lost out sometimes. But all sole traders should wish their lives away until they're 65 because on that day YOU STOP PAYING NATIONAL INSURANCE and it feels almost like being let out from prison and a life actually enjoying the fruits of what you've spent your life playing. Local Authorities and the like don't seem to understand this and to send them a copy of my certificate of exemption after I've done an event for which they paid the fee is always a sweet,though minor, triumph.

Catherine Czerkawska said...

I'm going to be busy sharing this with everyone. Brilliant post and absolutely true. My demon accountant next door neighbour (I swear she had a hot line to the revenue!) use to do my accounts until she retired in her late 70s! Then she vetted my current accountant to make sure she approved. I pay him a fairly small sum monthly and he's wonderful. It amazes me - it really does - how many people seem to feel threatened by the very idea of being a business. I have just been talking to a friend who can't seem to understand that it would be in her best interests to sort out her tax status with Amazon. She seems to think it's Amazon being nosy and intrusive. It's driving me nuts!

Lydia Bennet said...

Thank you so much CAtherine, it was your last AE post which inspired me to cover this. I do understand how scary it is to take on the whole US tax thing, but as you know, they keep a huge amount of earnings until you do - she needs to realise it's not actually amazon doing this really, though they need to know you've got the 'exempt' status with the IRS. The IRS website takes you through how to fill in the form before you ring them up and I found them really helpful.

Jane said...

Sorry to rain on your parade, but I'm afraid that I think some of the advice about what you can claim for is very misleading. In particular, I would be very wary of claiming for clothes and hair cuts. (My Sister in Law has been advised that she cannot even claim for uniform, although I think this is wrong.) I would also suggest that theatre tickets may be difficult to justify. Books are a grey area, so I claim 50%. My sister was self-employed and the tax man caught up with her after they found her accountant offering this advice. They targeted all of the accountant's clients. My sister had to pay for her accounts to be re-worked - ten years worth of them - and, as well as being asked to pay over £12,000, she is still being asked to justify why did she buy that £35 pair of shoes, why did she go to the cinema, etc.