WRWA Newsletter.pub - Wisconsin Writers Association

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Anticipate that you will get a call from someone at the Internal
Revenue Department; and hope it never happens. But just
in case, have those records ready.
To reduce the possibility of an IRS audit, you should establish
a business entity. It really is not difficult to establish, depending
on what option you choose. You have the choice of
doing business as a proprietorship, a partnership, an LLC
(limited liability corporation), or an S or C corporation. Social
Security payments and some deductibles are handled differently
depending upon the entity you choose.
Most writers do business as proprietorships or partnerships.
When you’re self-employed as a proprietorship, you have to
pay double the Social Security contributions you would pay as
an employee of a company. It’s often referred to as a selfemployment
tax, which is currently 15.3%. That doesn’t seem
fair does it The good news it that you can deduct half that
amount on your 1040 federal tax return.
Operating your business as a sole proprietor requires only
an address, phone number, and e-mail address. If you establish
a partnership (with your wife, for example), you can employ
your children and not be subject to Social Security taxes for
them, provided they are under the age of 17. The child must
perform services for the company and be compensated accordingly.
What you pay them is a deduction for the business. If
the child’s total income is under the standard deduction
($5,150. for 2006) no federal income tax is due.
There is no requirement for you to obtain an Employee
Identification Number (EIN—Form SS-4, see http://
www.irs.gov/pub/irs-pdf/fss4.pdfportlet=3) so long as you
operate your business as sole proprietor and have no employees.
Doing so, however, firmly establishes your writing enterprise
as a business and eliminates the need for you to give
your Social Security Number (SSN) to everyone who pays
you for work. You can give them the EIN instead, thus reducing
the risk of identity theft.
A partnership does require an EIN, and unless you're part-
nering with your wife, whom you trust dearly, I would recommend
a partnership agreement, one prepared by legal council.
Another option in Wisconsin is to form a limited liability
corporation (known as an LLC). The filing costs just $135
(www.wdfi.org), which can be taken as a business expense.
An LLC limits your personal liability for losses and damages
caused by you or your employees and agents. There’s less
paperwork—annual reports and such—with an LLC than with
an S or C corporation. With an LLC or corporation you must
apply for an EIN from the federal government. When a publisher
asks for your social security number, you give them
your EIN instead.
As an LLC or an S or C corporation, the company pays
one-half the Social Security tax and you pay the other half in
your wage deductions. If you are the only shareholder, you
can see that both halves are still coming out of your pocket. If
you’re the only employee, this means a lot more paperwork
for you compared to being a sole proprietor or a one person
LLC. In addition, S and C corporations are liable for unemployment
taxes. On the other hand, if you’re doing business as
an S or C corporation, the corporation is not relieved of the
child’s Social Security tax. It’s generally not the way to go as
a writer.
If you are earning income from your writing, you should
seriously examine the value of taking writing-related tax deductions
and the benefits of establishing a formal business
identity. Other than S or C corporations, it’s pretty easy—
something you can do yourself, without the help of a lawyer.
But tax laws change; so you should always get advice from a
good tax accountant. That’s deductable, too, by the way.
[Editor’s Note: This article is based on information in Chapter
28 (Income and Expenses) in John Campbell’s book, Writing
in Retirement (www.writingretirement.com), which covers
the subject in greater depth. Copies may be purchased from
John at cera@execpc.com.] #
I don't like morning—it starts too early in the day. Yesterday
morning was worse than most and started out bad from
the get go. I always know it's going to be a lousy day when it
begins with getting out of bed. I've had bronchitis for over a
week, and to make matters worse, I awoke with a migraine the
size of Hoboken, New Jersey. I was crabbier than a seaside
restaurant.
I'd had surgery on my hand and was taking pain medication
that made me lethargic, so I just wanted to veg out, watching
Gilligan's Island reruns and old movies. But right in the middle
of "It's a Wonderful Life," my TV died. (Merry Christmas,
Bedford Falls!) I don't know what went wrong with it, but it
may have had something to do with the flames shooting out
the back like fourth of July fireworks.
Do you know how boring and frustrating it is to be cranky,
tired, and sick but not have a TV for distraction I had to put
up with my own company. That's as much fun as spending the
day in a phone booth with a Pitt Bull that has PMS.
Limburger Attitude by Marsha Jordan
I decided to make Christmas cookies, but that endeavor did
not go well. The first bowl of dough was runnier than my
nose. The second batch was as sticky as used gum on a hot
sidewalk, and I burned the third batch blacker than a grease
monkey's finger nails. No wonder I hate to cook. After three
flops, I gave up and vowed never to touch an oven mitt again.
I think I'll become a commercial cook, cooking only what can
be heated in the microwave during TV commercials.
I grabbed the pitcher of juice and bumped it on the counter.
The bottom exploded like an overcooked Johnsonville brat. A
geyser of juice and shattered glass sprayed the cupboards and
floor. After cleaning that up, I went into the den and slid
across the room on a pile of dog vomit, smearing it all over
the rug. Another mess to clean up.
[Editor’s Note: With apologies to Marsha and to readers for
having to chase the completion of her story across several
pages. But that’s one way to use extra space.]
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