By: Bree NicGarran | A five-minute read
Once you’ve got your filing system organized and ready to roll, it’s time to think logistics. At some point, you’ll hopefully be earning money from your writing, and you’ll need to keep track of it. This helps with budgeting, shows you your sales trends, and will make your life so much easier when tax time rolls around. That’s where recordkeeping and proper documentation is really going to become your best friend.
I use simple Excel spreadsheets to track my royalties, expenses, and book sales from month to month. To keep things from getting too cluttered, I’ve taken to making a new worksheet tab every year. There’s really no wrong way to set up your tracking spreadsheet, so long as the system makes sense to you and properly calculates your sales totals, income, and expenditures.
Here’s a sample list of things you may want to include on your tracking spreadsheet:
You can track your sales by project (each book or story by itself), by market (online vs direct sales vs consignment), or just by overall totals (all the numbers in one place). If you only have one or two published works and one or two markets for them, it’s pretty easy. Once you have more published pieces and additional markets bringing in revenue, things get very complicated very quickly. Establish your system right from the start and make sure you update it regularly. Falling behind makes updates seem more and more overwhelming, and before you know it, you’re hiding from your own accounting, which won’t help anything.
If you ordered author copies of your book, keep the invoice. If you made a direct sale to a shop or to a reader, keep the information. Also keep track of any shipping charges, taxes, web hosting fees, and so on which are associated with your writing work. All of this information should be added to its own page on your spreadsheet. Having a running total of your monthly bills helps you plan how your writing work will fit into your everyday budget. (Pro-tip: Keep things minimal and try not to let your costs exceed your average monthly income from royalties. It’s easy to get in a hole by overspending.)
Did you go somewhere for a signing? Make an appearance at a convention? Hold a workshop? Keep the receipts for your food and fuel costs, any accommodations (hotel, etc.), table fees, and any materials used for the occasion, including books, decor, signage, swag, and so on. Additionally, if you happen to need new equipment, such as a laptop, tablet, or phone which you will use at least partly for business purposes, or a new desk or office supplies, keep those receipts too. You’ll thank yourself at tax time.
And speaking of taxes, here’s a little trick that U.S. readers are going to love. If you use part of your home as an office or dedicated workspace, you may be able to claim part of your rent or mortgage payments and part of your energy and cable bills as a deduction. To do this, you will need to add “/Writer” to your job description on your income tax return, and you will need to report the yearly income from your royalties. (Make sure you check the tax codes in your particular state to be certain, but I’ve found this to be viable in Pennsylvania and Virginia.)
To do this, you’ll need to do some math. First, you need the square footage of your home and the square footage of your workspace. Calculate the percentage of the total square footage which is occupied by the workspace. For example, if you live in a 1,000 square foot apartment and you have a 10×10 room for your workspace, that’s 10% of the total area. Accordingly, you can claim 10% of your rent/mortgage, 10% of your energy bill, and 10% of your cable/internet bill. It’s easiest to calculate an annual sum for each of these and take 10% of the total, rather than trying to find it in each month’s payment.
So here’s how it breaks down:
- 1,000 sq ft apartment / 100 sq ft workspace = 10% of total area
- $1,200.00 per month rent x 12 months = $14,400.00 per annum x 0.10 = $1,440.00
- $150.00 per month energy bill x 12 months = $1,800.00 per annum x 0.10 = $180.00
- $175.00 per month cable/internet bill x 12 months = $2,100.00 per annum x 0.10 = $210.00
- Total Workspace Deductible = $1,830.00
Mind you, your numbers will vary, but this is the basic formula for calculating your home office deductible. Add to this your expenditures for book orders, writing-related travel, equipment, and those food and fuel receipts. These now count as business expenses, and since no one’s reimbursing you, they can be counted as part of your deductible. This will be counted on your state return, not the federal one.
Keep in mind also that monthly royalty payments do not always have taxes taken out. You may need to either opt in to have taxes withheld from your monthly payout, or you’ll need to put aside whatever the state income tax percentage is in order to cover any taxes owed the following year. (For example, if your state income tax is 20%, put away one-fifth of your royalty earnings to cover those taxes.) And yes, you DO have to report your royalty earnings if you want to claim a home office deductible. Yes, even if you only made a few hundred dollars all year. Side hustles get taxed too, unfortunately.
I’ll give you all a moment to come out of that math coma. Everyone all right? Okay, let’s continue next time with Building Your Platform and Self-Promotion.