Tax record-keeping tips

Hey everyone! Welcome back to the next instalment in my blog series Mastering Money for Writers. As discussed in my previous post, we’ll be focussing on the topic of taxes for the next couple of months (something that many of my writer friends have asked me about, since it has been tax time in Australia).

So today, I’ll be discussing tax record-keeping tips.

The key principle I’ve learnt about taxes is, the more you can prove to the government that you have legitimate expenses in your “writing business” (the more examples you can show), the less tax you will pay. Because in fairness, you should only be taxed on your net profit (i.e. income minus expenses), not on your revenue (income before expenses are accounted for).

But claims without proof is how you get into a lot of trouble with the taxman. This is why good record keeping is extremely important. The better records you keep, the greater chance you have to reduce your taxes. On the flip side, if you go to your accountant in July next year with zero preparation and say, “Help me pay less tax,” their hands will be tied. Even if they are the best accountant in the world, without evidence to help your case, it’s an impossible venture. It’s better to have records you don’t end up using than have none for consideration.

Let’s now talk about the “what” and “how” when record keeping is concerned.

1. Income

Record any money you’ve made relating to your writing. Here are some examples of typical revenue streams: 

  • Royalty Income (traditional publishing)
  • Royalty Income (independent publishing)
  • Contest Revenue
  • Teaching/Workshop Facilitation Fees
  • Speaker/Event Fees
  • Mileage Reimbursement (from speaking engagements)
  • Fellowship Stipend
  • Interest Income 

Often there is some kind of email record for a lot of the above. For example, you usually get an email about royalties you’ve earned, or you’re asked to email an invoice for a speaking engagement. 

So a simple solution is to create a folder in your email program titled “Writing Income” and anytime you receive or send an email that’s income-related, put it in this folder. If you’ve received a royalty statement in the post, just take a picture or scan it with a native scanner on your phone or an app like Adobe Scan and email it to yourself so you can file it in the same place.

You also have your bank and PayPal statements that are a record of these payments you’ve received. 

2. Expenses 

File all your writing-related expenses, including receipts. 

Once again, these days, we often get our receipts emailed, so create a folder in your email program titled “Writing Expenses”. Any hard copy receipts, take a picture or scan it and email it to yourself so you can file it in this folder. 

Finally, like with your income, your bank and PayPal statements should show a record of these expenses.

In next month’s post, I’ll be discussing specific examples of expenses writers could claim as a deduction. For now, we’re just focussing on the principle of record-keeping itself.

3. Mileage

Keep track of all your writing-related travel. This could include going to:

  • Your book launches 
  • Paid gigs (speaking, workshops, etc)
  • Writing events/workshops (for networking and your professional development)
  • Meetings with a writing critique group (that helps improve your product—like market research)
  • Meetings with other authors (where you often discuss your work and support each other with input)
  • Meetings with your accountant
  • Locations for research relating to your book (e.g. settings where your novel is set)

As for “how”, pantsers, you may want to keep a notebook in your car, noting the following information about your writing-related commute:

  • Date
  • Start Point (address or name of location)
  • End Point (address or name of location)
  • Distance in km (you could note the odometer reading before and after or just use your Google Maps km estimation)
  • Business Purpose (e.g. attending writing event, meeting with writing critique group)
  • Vehicle (if you use multiple vehicles)

Plotters, you may want to make a spreadsheet that you keep on your phone with the above items.

Or even easier, search the App Store on your phone for a mileage tracking app. There are many free ones, although the paid ones tend to be more reliable.

4. Business bank account

This is an important note relating to what we’ve discussed so far. Ideally, you want to open a separate bank account for your writing business. It could be just another normal “personal transaction account”. 

Why? It just makes record keeping so much easier when tax time comes around. Let me point out the difference.

In a year, how many transactions can you expect will be in your normal personal bank account? Just coffee, petrol and rent would likely amount to over 400 transactions! Imagine needing to sift through that much data for the ones that are just related to your writing business! I feel the beginnings of a headache just thinking about it. This is why I’m a huge advocate for keeping business expenses separate from personal.

5. System or program

Once you’ve gotten into the habit of filing the above records that your accountant will love you for, it’s helpful to organise these records into some sort of system or program throughout the year. A simple spreadsheet program, like Excel or Numbers, will do if you don’t want to spend any extra money.

In a spreadsheet, categorise your income and your expenses and tally your records in the appropriate fields. For example:

Royalty Income
Contest Revenue
Teaching/Workshop Facilitation Fees
Speaker/Event Fees
Mileage Reimbursement
Fellowship Stipend
Interest Income 
Legal and professional fees
Office expenses
Other types of expenses – Advertising expenses
Other general and administrative expenses
Travel expenses
Stationary and printing
Commissions and fees

This will not only help your accountant do your tax return, it allows you to understand the financial health of your business during the year so you can make better business decisions (like when to reduce expenses because there’s less revenue coming in).

If you’re a plotter, you’ll perhaps enjoy this task. If you’re a pantser, you may find this step daunting. You could simply give your accountant copies of all your records and let them do the organising at the end of the financial year (although they may charge more for the extra time). You will be flying blind, though, not knowing how you’re tracking in your writing business until tax time. However, keeping records is better than not, so celebrate your progress towards being a more financially empowered writer!

Alternatively, there are great accounting programs you can use to keep track of income, expenses, even mileage. I use QuickBooks because it’s not as expensive as MYOB (prices start from $15/month, while MYOB starts from $27/month but with more limitations). This is less than the cost of a gym membership but saves me an immense amount of time. It allows me to save expenses as I go (scanning receipts straight into the app), have my bank feed coming through, send out professional looking invoices, track mileage, and see my business health on a daily basis. It’s a bit of a learning curve in the beginning, working out how to categorise your expenses, but getting the categories wrong isn’t a big deal according to my accountant, as long as the expense is justified.

Well, that turned out to be the longest post I’ve put out so far in this series! I hope you took away something you can apply in preparation for next year’s tax return.

Until next time, I pray your life is full of increased ease and abundance.

Raihanaty A Jalil

P.S. If you found value in this post, please share it with others. Also, I endeavour to release a post on the last Friday of every month (sometimes pushing midnight…), so tune in next month for another instalment!

Author: Raihanaty A. Jalil

Raihanaty A Jalil writes poetry and fiction and has been on a panel during Perth Festival Writers Week 2019. She has performed a reading of her work at the Wheeler Centre Melbourne during the Digital Writers’ Festival 2019. She currently sits on the board for Centre for Stories.