If you are making your living and building your business as a freelance writer, it might get a bit confusing as to what actually constitutes income. Of course, we understand that any direct payment made to us for a story or article is income, but what else? Here is a brief overview of the basics of freelance income:
Royalties and advances do count as income. This would include any advance on a story or article you sell, or royalties that continue long after the story or book has actually been published. Additionally, fees paid for readings or giving talks or lectures also need to be reported as income. Now, it can get a little tricky here because per diems and expenses that are paid by others for a writer to do a reading or lecture are not normally counted as income. This means if someone pays your traveling expenses and lodging, as well as a meal per diem for you to come and present or teach at a conference—if you can prove that you spent every bit of your per diem on daily expenses (save those receipts), it will not be counted as income.
Another confusing thing to watch for in your reporting is any money received for prizes and grants. Sometimes these will need to be reported as taxable income, and other times they will not. Make sure that if you receive any prize money or grants for your writing work that you find out if it will be reported as income. When in doubt, it is a good idea to see your accountant or tax professional to clarify what is and isn’t reported. Rules and laws change as well, so periodically consulting a professional will help you keep current.
When in doubt, include any revenue in your records with detailed information, this will help in evaluating whether or not it is taxable income when tax time rolls around.
See Also: Freelance Writers Need Contracts and Planning for NEXT YEAR’S Taxes