Contrary to internet rumor, the tax reform bill running through Congress right now does NOT eliminate business expenses as an offset to business income. That doesn’t mean, however, that you can’t either help or hurt yourself a LOT when it comes to managing your taxes as a publisher. As a disclaimer, I’m not a CPA or any other sort of tax expert, but I can share a few things that my tax guy shared with me:
- Incorporating doesn’t matter for taxes. If you’re a sole proprietor of your business, the business income and expenses flow right through and get taxed the exact same way whether you are just running the business as yourself or as, for example, a Limited Liability Corporation (LLC). Incorporating as an LLC may make sense for legal protections, but it can also be expensive; business liability insurance may well be cheaper.
- Dedicated home office space counts. If you can devote a room in your home to your business, you can write off a portion of your rent or mortgage, utilities, and similar expenses against your business income (or your personal income, for that matter).
- Keep your receipts! Even if you aren’t sure about a particular expense, tracking it and talking to a tax professional about it might generate more business expenses and reduce your tax liability.
- Watch out for contractors. Probably the most useful and surprising information I got from my CPA is that I needed to get W-9 information and provide 1099 statements to any artists or other contractors if I paid them more than $300. I would NOT have thought of that one on my own. He recommended getting the W-9 up front before any payment for services, to minimize the possibility of losing track of the artist later.