Welcome to the latest edition of The Digital Writer newsletter where I share tech tips and other useful info.
With the year coming to a close, now is the time to start planning your taxes. (Actually, you should have started planning this year's taxes in January of this year, but starting in December is still better than starting on 14 April.)
I had been wanting to do a newsletter on taxes some time in December, but I recently attended a workshop on tax law for freelancers. That presentation convinced me that only professionals should give tax advice. It scared me away from writing a long and detailed newsletter, but I still want to bring your attention to something I had to learn the hard way,
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For the past ten years I have been self-employed, first as a blogger and then as a Wordpress expert. In all that time I have been using online tax prep services to do my taxes every year. This type of service is great because it walks you through the process of filing your taxes, saving a lot of mental energy and stress. The service will walk you through the process step by step, asking you for each type of income, expense, and deduction.
That's great, but it is also a problem. When this type of service uses its own process and not the standard forms, it can be easy to miss important steps. That's what happened to me, and I ended up over-paying my taxes for several years.
My mistake was that I let the service use the standard deduction on my federal taxes when I should have also have been deducting my business expenses. As a self-employed freelancer, I can deduct many of the expenses that an employer would deduct. This lowers my taxable income, which means I have to pay less in income tax.
The IRS form I should have filled out was the Schedule C, but I didn't know that so I didn't think to insist on getting all my deductions. This cost me a lot of money until I got it straightened out.
Don't make my mistake; check with a tax professional, and see if you can deduct the expenses you incurred in writing, publishing, and marketing your books.