Thursday, December 27, 2012
The Taxman Cometh
Because I'm a sadist.
Actually, I'm just someone who doesn't believe in waiting until the last minute.
This post isn't about how to convince the IRS that writing is your business. I wrote about that on March 25, 2010.
Nor does it talk about deducting your home office expenses. That post was dated December 23, 2010.
It's about Social Security taxes.
Last spring a writer friend e-mailed me because he didn't want to believe what his accountant told him. Unfortunately, his accountant was right. My friend had to pay Social Security taxes on the advance from his debut novel.
Actually, the technical term, and the one the accountant probably used, is "self-employment taxes." The self-employment tax is a Social Security and Medicare tax for self-employed individuals. And when you write as a freelancer, you are self-employed.
If you make more than $400 from your writing business, you must pay the self-employment tax. This is in addition to your income tax.
Fortunately, the $400 floor is net, not gross, so you don't have to pay when you have some income but still lose money. But if you make enough, you have to pay even if you are already receiving Social Security benefits.
Because Uncle Sam will get you if you don't.
Kathryn Page Camp