Few writers make a lot of money. Many writers make a little money. But however much or little you make (or even if you haven’t made any money at all as yet), let me offer some advice.
TALK TO AN ACCOUNTANT!
WHATEVER THE ACCOUNTANT TELLS YOU TO DO, DO IT.
Seriously, accountants serve two extremely useful functions:
- They can save you money.
- They keep you out of trouble with the tax collectors.
For example, a good accountant will tell you what expenses you can and can’t deduct from any income you receive. Deducting valid expenses is good: you pay less tax on whatever is left over. Deducting non-valid expenses is bad: if the tax agency finds out, you could be in serious trouble. (See All Capone.)
Now it’s true that consulting an accountant may cost money. If you have no income from writing, maybe it’s too early for you to go to that expense. But it’s never too soon to start keeping track of your finances. Here’s what I’d recommend for anyone who hopes to make money from writing some day:
- Starting right now, keep every scrap of paperwork that might possibly be relevant to your writing.
- In particular, keep receipts for expenses. You don’t have to get fancy; I used to just have a plastic freezer bag labelled with the year, and I put every receipt inside. Also keep any paperwork from household expenses—eventually you’ll want to claim the expenses in connection with having a home office, so now is the time to get into the habit of keeping relevant records. If receipts are purely digital (e.g. charges emailed to you), consider printing them out so that you have a hardcopy record.
- Keep a spreadsheet (e.g. in Microsoft Excel or Google Sheets) recording income and expenses.
- When recording an expense, separate the cost of the item from any sales tax paid on top, and record both. Try to be consistent in the terms you use. For example, don’t use “Printer paper” for one purchase and “Paper for the printer” for another. You want to be able to sort your data so that lines for similar expenses are all collected together. By the way, you should also use a spreadsheet to record mileage and/or other car expenses related to your writing.
The point here is to develop good habits of record keeping sooner rather than later. The more you record, the more information you have. You can see how much you’re spending on your writing, and that knowledge may be useful.
BUT…eventually, talk to an accountant. They’ll tell you if your jurisdiction requires that you keep records in a particular format. They’ll tell you which of the expenses you’ve recorded are actually deductible. They’ll tell you how long you need to keep receipts. And much else beside.
So tl;dr: start keeping receipts and records now. It’s good practice. Consult an accountant as soon as you can justify the expense, and definitely as soon as you make any income.
(By the way, I have a friend who’s an accountant and she says she doesn’t charge for initial consultations. She’d rather help potential clients keep proper records right from the start than to go through the hassle of trying to clean things up later on. You may or may not find someone who’ll talk to you for free, but I suspect a lot of accountants won’t charge very much for an initial get-together. For them, it’s a good investment of their time to avoid headaches later on…and accountants love good investments.)