I've been sadly neglecting my fiction WIP. Instead I've been working on my non-fiction Tax Tips for Writers articles. It's a different mindset than writing fiction. I've also been working on tallying up the costs for this years writers conferences, events and other related expenses. Let's just say it's not uncommon for those of us at the lower end of the publishing rung to spend much more than we take in with regard to our writing.
In the process of researching information for one of my tax articles I came across some information from and relating to a Government Accounting Office (GAO) audit of the IRS. Yes, even the IRS is adutied, but specifically for the way they do business. The audit addressed the Tax Gap, which is the amount of money that is not collected but owed to the Federal government. The GAO has determined that the largest contributor to the increasing tax gap - now estimated to be in excess of 300 billion dollars - is from underestimating income and overestimating deductions. The biggest offenders of this, contends the GAO, is from tax entities that do not have third-party verification measures, specifically Schedule C filers, which includes writers who earn money as independent contractors.
As a result of this audit the GAO is strongly recommending that Congress give the IRS an adequate budget to perform more audits on this and other categories to close the Tax Gap in this country. For more information on how this breaks down go to http://www.gao.gov/new.items/d06208t.pdf. You can also do a google search on "GAO Tax Gap" and you will get lots of hits. It's a hot topic!
Why is this such a hot topic? Well, as a country we are spending far more money than we are taking in and the tax gap provides a ready-made solution. After all, the gap address the money that isn't collected but that is legitimately owed, so there isn't a need to pass new tax laws. The IRS just has to collect what is owed.
So, what does this mean for writers? It means that writers need to have a better understanding of how the federal tax system works and how they can best comply with the rules of reporting and recordkeeping because based on the GAO recommendations to Congress and based on the need to bring in more money, the chance of being audited by the IRS just increased significantly.
A writer wears many hats in the course of her business - writer, promoter, travel agent, and yes bookkeeper. I hope to have a series of Tax Tips for Writers articles out very soon that will help writers navigate the thorny road of tax compliance. Yes, there is a plethora of information about taxes on the web and you should familiarize yourself with what's out there, but I'm hoping to bring a fresh approach to understanding the complexities of the federal - and some of the state - tax rules so that writers can feel confident that they are making a good-faith effort in complying with the law.