Money, Tax and Legal Matters

If you are a good writer, and you are willing to work hard, you will make money.  Writers who are willing to compose web content articles with various subjects do quite well in today's writing world, but a lot of work needs to be done.  If you are able to secure some larger paying jobs then you will make even more money, but this does not mean that you will be working any less. 

WATCH YOUR CASH

If you're talented, you will inevitably start to make money.  There is a lot of money to be made by writing, and if you are good at what you do and can meet deadlines then you will eventually reach a point where you are regularly turning down job offers because your plate is already full.  Although it is often slow-going in the beginning, you will find that as you get more writing credits and work for more people you become more in demand. 

This does not necessarily mean that you can quit your day job immediately in anticipation of the great writing income you may someday make, but you should know that if you do a good job you may be able to actually make your living from writing alone.  So if you are starting to make some good money from your writing, take heed…there is more money to be made if you have the gumption to earn it.

Set up an account to put a portion of your money away. 

Whether you want to set up a retirement account, a simple savings account, or just an account to stash money for next year's taxes, you may want to consider setting up a bank account which only holds earnings from writing.  When your writing income intermingles with your other family income, it has a tendency to get spent easily.  If you keep the money separate you may be able to get a better view of how much you're bringing in with your writing, and this may make you a bit more frugal with your work income. (It also simplifies things at tax time!)

It can also be extremely motivating to watch your bank account grow more and more each month, knowing that it's only your writing that is making the balance increase.  It may be best, however, to have the account at the same bank as your main family account.  This way you can quickly transfer funds to your main account if need be.  Otherwise, you will pay expensive wire transfer fees if you need your money to go into your main account quickly in order to pay a bill or something else.

Sooner or later, you'll have to stop thinking of it as "Fun Money." 

You may already have a full-time job doing something else, or maybe you stay hoe with your kids while your spouse heads off to work everyday.  When money from writing jobs starts rolling in, it is tempting to consider it Fun Money and use it to splurge on things.  This is fine if you are picking up occasional jobs amounting to a couple of hundred dollars a month, but if you start to make substantial money from writing then inevitably you will have to start treating this money as bona fide income.  That means that you should set up a budget just like you should have with your other family income to figure out where the money goes every month and how it should be used. 

If you have credit card debt, you might decide to earmark half of your writing income to it.  If you are planning a vacation, maybe you should put your writing income into an account for it.  Whatever you do with your money is up to you, but just because it may be an extra income that you weren't expecting does not mean that you should spend it freely as though it's nothing.  Remember: you worked hard for that money, so you should make the money work for you.

TAX CONSIDERATIONS

The IRS wants to know it all. 

This means that if you write an article for someone and receive a five dollar check, the IRS will expect you to declare that income in addition to any other writing income you receive.  Even if the five dollars is handed to you in cash and does not go through any bank account, you are still expected to make a record of it and declare it on your taxes.  If you work as a freelancer you will have to be extra careful to record all your income because the companies and individuals who you work for are not going to do it for you. 

Figure out whatever you need to do to keep accurate records of every single penny you make from your writing.  Your personal income records will augment any tax forms you receive from the various employers you worked for throughout the year.  You might want to consider opening a bank account which is used solely for your writing income because this will help you keep your financial records in order.  It's a lot harder to keep your writing income straight when it's commingled with the other money your family brings in.  A word to the wise: don't even think about trying to hide some of your writing income from the IRS.  It's always best to file an honest return and then not have to spend the next few months holding your breath in fear of an audit. 

Put some money away every single time you get paid. 

Along the same lines of making sure that you keep accurate records of your writing pay, you should also make sure that you put away a portion of your pay for taxes without fail.  That means that every single bit of money you make - even if it's two dollars - should have a portion put into a specific bank account used solely for the purpose of eventually paying your taxes.  Remember: when you work as a freelance writer, the companies you work for are not sending a portion of your income into the government to pay your taxes.  You're expected to claim the income at the end of the year and pay your taxes accordingly. 

Instead of making a mad dash to scrape up the cash to pay Uncle Sam, you should already have the money sitting in an account.  Decide on what portion of your pay will go into the account to await tax season - 25% is a good amount - and religiously deduct that amount from your writing income immediately and without exception.  It may be that when tax season rolls around you find out that you don't even have to use any of that money on your taxes, and in that case you have a nice bonus sitting in your bank account.  In the event that you do owe some taxes, however, the money is available and you don't have to stress over where to get the money to pay your taxes.

Know what you can deduct, and know what you can't. 

One of the great things about being a writer is that in many cases you will be self-employed.  Unless you find a steady job where you go into an office everyday to do your writing, you will probably work from home and have some sort of home office established.  The advantage to this is that there are plenty of things you can deduct from your taxes for your writing: your monthly Internet bill if you do some work online, paper for your printer, gas mileage for car trips related to your writing, and anything else related to your work.  You should talk to a competent tax professional before you start deducting things, but it is worth it to look into it when the time comes to file your taxes.  

Consider hiring a CPA. 

When you start making substantial money from your writing, you will probably want to consult with a certified public accountant to make sure that you are doing everything you need to do with respect to your taxes.  In some instances you will need to file a quarterly tax statement and send in a payment to the IRS.  You want to make sure that you are doing everything you need to do in order to cover all your bases.  Since taxes can be so confusing, it is a good idea to at least consult with a tax professional and find out if there is something you are supposed to be doing which you aren't already taking care of.

 LEGAL ADVICE

Read and understand your contracts. 

This advice bears repeating several times over: you really need to read and understand every single contract you receive before you sign it and return it to the person or organization employing you.  You should never think of contracts as irrelevant documents, or merely as formalities which don't necessarily mean anything. 

Contracts are important legal documents which really do mean something, and if you don't understand them you might do something unknowingly to break the contract and wind up in a lot of trouble.  You don't want to tarnish your reputation as a writer, and you certainly don't want to wind up in legal trouble.  If a person or company that is paying you to write on a regular basis does not offer you a contract, you may want to request one.  This way everyone involved knows what is expected of you, and what is expected of the people paying you for your writing.

Verbal contracts are only worth the money they are written on. 

In the beginning, when you are taking on low-paying jobs for various people and companies, you probably want to steer clear of writing for someone based solely on a verbal contract.  Even a simple e-mail from the person hiring you can suffice as long as the person acknowledges the intention of paying you a certain amount in return for a specific piece of writing from you.  In the absence of a contract, this type of information is enough for you to reference when it comes time for you to demand your payment. 

If you don't receive anything in writing, however, such as when the agreement is made over the phone, you really don't have very much to fall back on if you never receive payment.  It's hard to prove that someone agreed to pay you a certain amount if you don't have any sort of proof of the agreement.  If you negotiate something over the phone you can always shoot a quick e-mail to the person hiring you and briefly outline the terms of the agreement; try something like this:

Hello, I want to make sure I have the terms of our agreement clear.  You will pay me .25/word for the 750 word article for your September issue.  Kindly confirm that this is correct.  Thanks.

Even if the person replies with a simple, "Yes, that's correct," then you have all you need to prove that you agreed to do the work for a certain amount of money.  Of course, be sure to save every correspondence like this for future reference, just in case it does come down to you having to demand payment from someone who conveniently forgot to send you a check for your work.  Hopefully, you don't run into this problem very often, because nagging someone for a payment is a real pain, in addition to taking up a lot of your time. 

Plagiarism is not okay. 

Surely you already know that you can't take someone else's work and pass it off as your own.  If you have heard the saying, "there is nothing new under the sun," then you know that sometimes it can be difficult to come up with completely original ideas which are unique to you as a writer.  This can be particularly difficult if you are commissioned to write articles about a topic which is already well-covered; consider the task of writing a 500 word article about refinancing a mortgage… it's been done hundreds, if not thousands of times already, and your job is to put a new spin on it without sounding like anyone else. 

It's not an easy task.  You must be careful to avoid sounding too much like any other writer, intentionally or unintentionally.  Editors have many simple ways of checking for plagiarized pieces.  There are many different software programs available which quickly check for plagiarism, and sometimes a quick Google search will work just as well.  If you are caught plagiarizing you will probably not only lose the job you have, but your reputation as a writer will be tarnished.  In the Internet writing community, word spreads.  In other writing communities, word travels just as fast.  You don't want to earn a reputation as a plagiarizer. 

Don't plagiarize yourself either. 

Yes, it is possible to plagiarize yourself.  There may be phrases which you use often in your writing without even realizing it, and sometimes you may use similar wording when explaining certain things.  In the instance of the mortgage refinancing article, you may have a strong stance opposing cash-out refinances, and maybe you explained it in a particular way for an article for one company and then again for an entirely different company. 

Even though it is your own writing, it's technically plagiarizing (especially if the first article was ghostwritten and has someone else's name on it) because you aren't giving the buyer original content.  If the original buyer for an article gives you the full rights to resell it, and if the new buyer doesn't mind that it has been published elsewhere that's one thing.  Trying to pass off a previously-written piece as an original one is another.  Watch yourself and make sure you don't inadvertently plagiarize yourself or someone else. 

Once the money starts rolling in there is so much more to consider than where to get your next writing gig.  You will need to come up with an efficient system which keeps all your contracts in one place, your tax receipts in another, and everything else you need easily accessible and well organized.  Even if organizing things is not your forte you should still devote some time to keeping everything straight because it will certainly save you time and effort in the long run. 

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