I’m no CPA, but I’m a far cry more competent with the bookkeeping end of Crossings today than I was when I finished writing Crossings: McCullough’s Coastal Bridges. I was such a rube. I didn’t give the financial end of things a thought in those days. I left it all up to Dick Smith whose name is also on the book. While I wrote all of it, there would have been no book without his research. The book was his dream. Together along with Bob Serra, our publisher, the three of us made it happen.
I had enough trouble trying to get a handle on the marketing end of things when I finished writing it, let alone the financial. Besides, Dick and I both thought that we’d spend at least a year selling the first edition of 500. Not so! They were nearly gone after only two months.
This was clearly going to be a bigger deal than we first envisioned. So Dick put out the money for 1,000 more. He also got some legal advice. Then we formed a partnership, registered it with the state, and formed a joint venture arrangement with Bob. And we figured that any costs in getting the books out, we could each take care of and count them on our individual taxes as “incidental expenses.”
I didn’t realize that I would put 5,000 miles on my car just in getting the book out that first year and spend quite a bit on postage. And I never thought of charging for presentations then. I was just thrilled that anybody wanted me to speak.
So I racked up lots of expenses. When I met with my taxman the following spring, he was appalled that I thought I could get away with calling all those expenses “incidental” on my personal taxes. He said that it was a giant red flag to the IRS.
He said he would run them as incidental one year, but not after that. That I had to come up with an accountability plan and make sure I get paid back on a regular basis for my postage and gas expense and possibly other expenses. And I needed to make sure I kept track of my mileage and kept all receipts, etc. It was a crash course on the bookkeeping end of a business.
It was already the first of April, which meant that one-fourth of 2012 was past and I was doing the same ole without an accountability plan. Dick realized all the expenses I was incurring and started paying me a commission from Crossings sales for every 250 books sold. By then, I was the main one doing the selling. More than once, Dick asked me if I wanted to take over the financial part, and I always put him off. I was afraid I would screw things up badly. Then Dick, nearing 90 years old, decided to bow out of many activities and simplify his life. He gave me an offer to buy him out that I couldn’t refuse.
As of September 1, 2012, I was no longer in a partnership. It had dissolved into a sole proprietorship, and I would be doing the financial part––whether I wanted to or not. So I came up with an accountability plan that I ran by Bob, since our joint venture would still continue.
The next spring, when I was preparing for my 2012 taxes, I had receipts and mileages for the whole year and had them all ready and tallied. I was so ready. But I had to do everything for Crossings over again, and because of that, we had to file an extension. It was so frustrating.
I had to divide all my back up into two periods––during the partnership and during the sole proprietorship. I also had to acquire the prior IRS filings of the partnership and some other stuff for my taxman.
To confuse the writing business part of my taxes even further, I already had an existing writing/editing business that I had had for years. And in the first half of 2012, I had taken on several editing jobs. That info and its back-up were kept separate from the Crossings stuff. Now, it was pointed out to me, it would make sense to roll this into the new sole proprietorship. It made sense, all right. I just didn’t know quite how to go about it. More frustration!
Eventually, it all worked out, and the taxes were filed––sometime in June.
In 2013, I started the monthly financial reports and the quarterly expense reports. I repaid me on a quarterly basis for my book business related expenses. And I even did an annual report.
By now, I feel like I know what I’m doing. And I felt confident enough to pay royalties a couple of weeks ago.
It hit me about then that I could pay royalties on any schedule I want, I don’t have to wait until every single book of an edition is sold. That’s how Dick did it, but I don’t have to. It is sinking in slowly, but I really can do it my way.
This past Tuesday, when I met with my taxman to go over all my preparation for 2013, I wasn’t overly confident. I thought I had it all done exactly right, but I had thought that before. . . .
I walked in with quite a large red tote filled with the necessary stuff and tons of back-up. The receptionist looked at it a little nervously. I’m sure she thought that I would be dumping if off on them and they would be searching through all of it themselves.
During the appointment, I had an answer or receipt for every question. And when I didn’t on one item, I was able to dig into my big red tote and retrieve it within seconds. When it was all over, my taxman was all smiles and said, “You did good!” That was high praise indeed! (I did have to get one receipt after the appointment, but not for the book stuff.)
It’s been three years since Crossings came out, and I’ve finally got my act together when it comes to the financial end of this writing business.