Taxes

[Pete]

Having just finally finished preparing my taxes to send to my accountant, I thought I'd impart a bit of advice to those of you who are serious about trying to make money from their webcomic.

The first and most important is too KEEP GOOD RECORDS.  I did okay with this my first year of going legit business-like, but this past year... well, let's just say that itemizing was a nightmare.  Make sure you keep all of your receipts and invoices in one spot, and keep them organized.  Every month or so you should go through the receipts and invoices up until that point and enter them into a spreadsheet (break them down into categories such as "Travel", "Supplies", "Business Dining", etc.).  Do the same with the income you've earned up until that point.  Then, by the time tax time comes around, you're good to go and won't do what I did, which is rummaging through a pile of receipts, scratching my head at the ones that had faded and I had forgotten to label, and wishing I was dead.

The second bit of advice is to get yourself a good accountant.  I'm lucky enough to have an entertainment accountant that I met out in LA who is willing to our stuff.  This is important because he understands what artists can and can't write-off on their taxes.  Sure, you could probably do your own taxes and not have to pay a hefty accountant's fee, but... I've seen those forms and I think the fee is well worth it.  Just my opinion.

Also, on that subject, be aware of what you can write off on your taxes.  You'd be surprised at the receipts you've just tossed away without thinking about it.  You probably realize that when you buy art supplies you can write those off; that's a given.  But did you realize that if you go to convention and buy books or comics from another artist that you can write that off as research?  Or if you go out for drinks with other artists that you can write that off as networking?  If you are paying for something that is connected to your profession as a webcomic writer/artist, chances are it can be written off.  But again, it's best to have a knowledgeable accountant who can confirm that for you.

The last bit of advice is make sure you know about the tax laws of your state and any states that you attend conventions in.  California is great because you can get yourself a temporary seller's permit for conventions, and you're only obligated to declare your income in that instance.  But I know in order to attend ConnectiCon in Connecticut, I had to purchase a full-on permit (good for 5 years), and I'm obligated to declare income quarterly.  So make sure you know what's what wherever you plan on peddling your wares.

I'm sure others can chime in with their advice, but this is the stuff comes immediately to my mind.

[raerae]

This is a subject matter not often talked about that interests me greatly. ^^; I'm nowhere near having my art as a business, but am interested in doing so.

[Gibson]

Actually, whether you consider your art as a business or whether you make a significant amount of money at it, if you make any money at all, you are legally bound to claim it. In the U.S. and Canada for certain, though not limited to those I'm sure, if you make $.01 you are expected to claim it. The up side is that you're also allowed to claim every penny you spent to make that money as a business expense...paper, pens, a new tablet, a chair to sit in while you draw, software, a whole range of things. If there's a room in your house that is your workshop for drawing, you can write off that percentage of your rent or mortgage, and your utilities, along with light bulbs for that room. Hell, if you drink coffee while you work, you can write off sugar and cream. I've toyed with the idea of writing off cigarettes, and I HAVE written off alcohol. It's not just important to keep good records when you're making a lot of money, you can make the expenses you have now work for you.

[Gar]

So you're saying if you're making any money at all off your comic, you can use that to write off any costs associated with your comic as business expenses, and use that as a deductible against your main salary income?

I think Ron and a couple of others were talking about wanting Cintiqs but being put off by the cost, so if I'm understanding you correctly that's Veeeeery Interesting.

[wendyw]

In relation to what Gibson was saying, my aunt and uncle used to run a small book shop that only opened a couple of days a week as it relied on coach visits from tourists, but they had the cost of their van, the only transport they own, and any costs of running it written off as a works vehicle.

[Gibson]

So you're saying if you're making any money at all off your comic, you can use that to write off any costs associated with your comic as business expenses, and use that as a deductible against your main salary income?

Actually, you don't even have to be making money at it, you just have to be trying to make money at it. Think of a store that is losing money, taking in less money than it's putting out...that store is still writing off all of its expenses. As long as you can argue, reasonably, that the aim of your webcomic is to make money, be it with PW ads or shirts for sale or anything that's designed to bring in funds, you can write off the expenses associated with that.

[Cary]

So you're saying if you're making any money at all off your comic, you can use that to write off any costs associated with your comic as business expenses, and use that as a deductible against your main salary income?

I think Ron and a couple of others were talking about wanting Cintiqs but being put off by the cost, so if I'm understanding you correctly that's Veeeeery Interesting.

You can get downright silly with write offs trust me. I recently wrote off two laptops, a full set of Abobe CS3, Microsoft Office 2007, Three convention trips including tables, hotels, food, and BEER for the weekends in question AND got paid 57 cents a mile both ways to drive there and back. I also got all my office supplies including mailers for books tax free because that's the beauty of having a tax ID number, and I then turned around and wrote off the untaxed office supplies as a business expense. Hell, I even wrote off the $80 I spent getting the business license to begin with!

But having said all that, you gotta be realistic and you have to have paperwork to back it up. I didn't write off a single thing I didn't have a receipt for, and I won't ever first because I like freedom and hate jail, and second because my step mom is my accountant and I don't want to even come close to getting "the look". So yeah if you spend money and you can even REMOTELY link it back to your business, then DO that! We just bought a new iMac for the house and the first thing I did was prep my new month's worth of buffer on it. Write off city baby! woo!

[mcfadyn]

So as far as working on this webcomic thing, is it possible to start writing off stuff even if I haven't made a dime?  Cause ink and stuff is pretty expensive.

[Gibson]

As long as you can say reasonably that your expense is made with the intent of making money, then yes, you can start writing it off before you make a dime. You might want to back yourself up by showing that you've taken steps to make money, be it through a PW or actual merch or submissions to publishers or what have you, but you can certainly write off not only ink and art supplies, but light bulbs for your lamp and, since you do WEBcomics, at least a portion of your IP expenses.

If you have a separate room where your studio is set up, you can write off a percentage of your rent/mortgage the same as the percentage of the floorspace it takes up in your home, as well as that percentage of the bills. If the two of you meet for coffee or food and you talk about the comic, you can write I believe 50% of that off. If you drink a lot of coffee when you draw, you can write that off, as well as sugar and cream, as long as you have specific coffee that you drink while you work (or are willing to attest that you do.) The list goes on. Use your imagination, you'll be surprised with what you can think of that is a business-related expense. It might seem like cheating, and it might be, but it's legal.

[Cary]

So as far as working on this webcomic thing, is it possible to start writing off stuff even if I haven't made a dime?  Cause ink and stuff is pretty expensive.

As Gibson says, absolutely. My tax dragon ( I say that as affectionately as possible) informed me point blank that I'd need to keep receipts, which is a pain at first, but you get used to it. Just get a box or a folder and make it a habit. You aren't required to turn a profit for the first 3 YEARS you're in business, so that's just write off gold. My first year I made a conscious effort NOT to make a profit because I needed the write offs to balance some ridiculous money I made at my day job. LAst year I kinda had to show at least some profit, so I kept it to a minimum and got much love. I like this legal business stuff! :)

[Rob]

I leave this stuff to the accountants. And if anyone has a good one that understands this business it might not hurt to ask them if they want some more business and pass their card around because in less than a year I'll be looking.

That said, and I'm not positive about this, but that said I believe you have to have a significant amount of deductions and write offs to overcome the standard deduction on your taxes. Like thousands of dollars. Otherwise, it simply isn't worth the money to hire an accountant and itemize. I remember once I thought I had enough deductions to itemize but it turned out I was about a thousand dollars short of the standard deduction. If I had itemized I would have literally over payed my taxes for no good reason.

So there's that to consider. Maybe somebody else knows what the hell I'm talking about and can expand on it.  :P

[Cary]

I leave this stuff to the accountants. And if anyone has a good one that understands this business it might not hurt to ask them if they want some more business and pass their card around because in less than a year I'll be looking.

That said, and I'm not positive about this, but that said I believe you have to have a significant amount of deductions and write offs to overcome the standard deduction on your taxes. Like thousands of dollars. Otherwise, it simply isn't worth the money to hire an accountant and itemize. I remember once I thought I had enough deductions to itemize but it turned out I was about a thousand dollars short of the standard deduction. If I had itemized I would have literally over payed my taxes for no good reason.

So there's that to consider. Maybe somebody else knows what the hell I'm talking about and can expand on it.  :P

Well there's two schools of thought on that and I've been to both. Now when dealing with personal taxes unless you have a house and or make a ton of money then usually you're fine not itemizing. With a business I've been told it's always better to itemize, and my business isn't that big or complicated. I have a pretty straightforward inventory versus sales and some convention expenses and that about does it. With mine, because I have a sole proprietorship it all works into one big ass tax return. The results, at least in my case, are spectacular. If you have an LLC...man you're on your own because I have no clue.

As to hiring an accountant...I have one, but she's related to me and she only does my taxes she doesn't mess with anything the rest of the year. She set me up with the whole "put your receipts in a folder" thing and turned me loose. If i needed her to do more I could prolly talk her into it cause she kinda loves me and all, but I don't generally mess with anything more than a general inventory so there's no need.

To give you a quick idea of the difference between something along the lines of Jackson Hewitt or Turbo Tax services versus my CPA...If I had gone the Turbo Tax route this year I'd have pulled back about $3000 or so, give or take, in a refund. Enough to enjoy myself with certainly, but nothing Earth shattering. Going with my CPA I got back...6 times that. And I don't cheat my taxes. My CPA has had a client audited ONE TIME in 25 years of doing business. That'll tell you right there she's either really good at hiding things, or she doesn't cheat. I'd say she's smart enough to cheat if she really wanted to, but it's not worth the hassle for her. She's straight up on the tax stuff. So, had I cheated...there's really no telling how much I might have gotten back. I shudder to think. Full disclosure here a lot of what I got back this year was due to some weird changes in education tax credits because I'm a full time student. In years past my refunds normally run around the $9000 mark depending on how much I earned in a given year and what I spent on business stuff. The next two years I'm gonna clean up on the education thing tho. :)

So yeah, knowing what I know now, I'd use a CPA for your taxes. Does it cost a little more? Sure. If I were paying for her time it'd end up in the $300 range. But put that against my return...well worth it. Since she's also my step mom she lets me off with cooking dinner for her. I do toss a mean stir fry!

[Gibson]

Not all of us can afford an accountant and fewer of us can afford a good one. I've been lucky enough to have known some personally plus doing a certain amount of homework with the taxman. For the Bombs Boys (and others,) remember, they're in Canada and not all of the same regulations apply. One thing to know about the CRA is you can defer expenses from one year to the next, so even if you don't have enough deductions to make a difference you can hold those expenses over to the next year.

Honestly, I would suggest you guys head downtown (the tax offices are downtown in Deadmonton, right?) some afternoon and talk to someone there. Hell, it might even be worth your while to take a drive to Red Deer and talk to someone in the tax offices there, since it'd probably be slower and in less of a hurry. Almost everyone I've ever spoken with at the CRA has been very nice and very helpful as long as you're respectful toward them. If you can make them laugh, you're home. They can answer all your questions or pass you along to someone who can or give you literature that'll explain the rest. Hell, I've even heard of one rep who even helped someone fill out the tax forms.

Yeh, sometimes the stereotypes about us really are true.

[mcfadyn]

Yeah Gibson, we're Edmonton boys.  I may just have to look into it for next year, actually.  I'am kind of excited to know about what I could possibly get away with when it comes to taxes and art supplies.  We'll see with next years! :P

[Overlord_Thundersnow]

6 years in, I'm dying to hear if anyone's viewpoint has changed on their original comments!

Are you still writing everything off?  Did anything backfire?  Are you re-investing the profits into your company?  Are you swimming on a beach?  Are you sitting in a Federal Supermax using the Prison Library computer?

I sent a pvt message to each significant poster here and see if we can get some more great feedback on this.