Tax & Accounting Tips for Publishing Professionals
Disclaimer: This article is in no way a comprehensive list of all the accounting issues small business owners should be aware of, but its a start.
1. Self-Assessment — In deciding the best way to approach handling the finances for your business, the first thing you should do is perform a self-assessment to see which pieces you could reasonably handle yourself, and which should be offloaded to a professional. For example, if you are terrible at math or have never prepared a budget, it might be a good idea to delegate these tasks to an expert. But if you’ve been preparing your own taxes for years, are proficient in Excel, and have some business background, you might be able to manage portions yourself, while contracting out specific tasks. The two major areas that will need attention are Bookkeeping and Tax Preparation.
2. Educate Yourself — Before you commit yourself to taking on the lion’s share of work, do your research to get an overview of the whole process. What kinds of information do you need to keep track of? What is needed for tax preparation? What are the associated deadlines associated with your business? What I found extremely helpful (to start) was interviewing other small business owners, to find out how they handled their finances. Not only do you get firsthand experiences from folks who are in the same boat as you, but you might also get a handy referral out of the conversation.
3. Invest in Bookkeeping Software — Having reliable bookkeeping software can save you an incredible amount of time when it comes to generating reports and sorting information come tax time. Excel is just not going to cut it if you have expanded to the point where you have to track income, expenses, royalty payments, inventory, and Cost of Goods Sold (COGS). Find out what software programs folks in your industry are using, and invest in a copy for your business. TPC uses Quickbooks to do our bookkeeping, and it has worked out well because not only can we share our data between partners, but we can also export the entire file to send to our CPA when tax time rolls around.
4. Familiarize yourself with the Common Deductions for your Field — If you are an author or publisher, almost everything you do that pertains to producing or promoting your books is tax-deductible. This includes things like office supplies, computer expenses, advertising, marketing and promotional expenses, professional development, travel to conferences, etc. You may also be eligible for a home office deduction. It is very important to capture every deduction possible, so read up on what you’re allowed to deduct, and start throwing those receipts into a shoe box. Every penny you spend could save you money on the back end!
5. Develop a system for tracking expenses — It is very important to get into the practice of logging your expenses as they are incurred, as opposed to trying to reconstruct all your expenditures at the end of the year. Once you know the kind of business expenses that are deductible, get into the habit of logging your expenses once a month. This will not only save you a ton of work come tax time, but will also ensure that you don’t miss anything.
6. Start a Travel Journal – If you do a lot of travelling in the course of your business, a travel log will come in handy in the event of an audit. Use your journal to describe your trips, who you met with, events attended, as well as keep track of your mileage and travel expenses (everything, from parking to taxi fare, is deductible!)
7. Calculate and Pay Sales Tax — For those of you that are selling books or other products, did you know that you need to collect and pay sales tax on all goods sold? Sales Tax payments are due on December 31st for the previous calendar year. Be sure to contact the Board of Equalization for your state to apply for a Seller’s Permit, and to find out the rules for calculating Sales Tax.
8. Generate 1099-MISC forms — Did you know that if you are operating a business, you are required to issue a 1099-MISC for any vendor you issue payment to in the excess of $600? These forms should be submitted in January. Check out this article for more information.
Once again, this list is not exhaustive, but should give you a jump start on getting your finances organized. We highly recommend consulting an accountant or tax professional for guidance and advice.
Copyright © 2011 by Stephanie Casher