Each week, for the next month, the SFWA Blog will feature FAQ’s related to taxes and writing. Our own “Tax Czarina” will answer some.
The Tax Czarina is a licensed CPA with more than 25 years of experience preparing US Federal and state tax returns. After earning a Masters of Accountancy degree, her resume includes working for the now-defunct largest accounting firm in the world, for the world’s largest cement and construction material firm, and for her own one-woman company, which specializes in individual and small business income tax. She is currently the preparer for SFWA’s tax filings. She is not looking to add new clients.
Q: What is the deadline for Federal individual income taxes for 2015?
A: The deadline for filing your individual income taxes depends on where you live. If you live in most states or the District of Columbia, your individual return is due on April 18, 2016 instead of April 15th this year. The IRS is headquartered in the District of Columbia where Friday April 15 is a legal holiday, Emancipation Day, in 2016. If you live in Maine or Massachusetts, your return is due on April 19, 2016 due to Patriots’ Day being celebrated on the 18th.
Q: What are the state deadlines for 2015?
A: You mean, if your state has an income tax, of course. States vary and you should double-check each state and the District of Columbia separately. Almost all are due the same date as your Federal return. In Delaware, Iowa and Virginia, you have to the end of the month to file your state return. And in Louisiana, the return is due a month later than the Federal return.
Q: What if I am out of the United States on April 15?
A: You only get the automatic extension if you’re living abroad or in the military assigned overseas. The automatic extension is two months, to June 15, but all tax is due by April 15, the same as it is for residents. There’s no need to go on a trip just to get an extension. Extensions are easy these days. And if you are going on a trip for other reasons, make sure you file or get an extension before you go.
Q: I can’t deal with taxes now, I have a deadline with my editor. How do I extend my return?
A: You file a Form 4868 if you’re an individual or LLC using Schedule C to report your business results. Other types of entities file Form 7004. Most tax software has Form 4868 available and it’s easy to file it electronically, if you’re e-filing your return anyway. Many states accept the Federal extension, but have a separate form for any payment that might be due.
A word of warning: you must still pay all your tax liability by April 15 for Federal and by the state’s due date (see above) to avoid penalties, so you have to do a good estimate of your business results. If you file a joint return and the other filer has a regular W-2 with withholding, that may be enough to cover any tax liability for both of you. The trick I learned to use back when I was at a big accounting firm is to estimate the tax due to include an amount for the first quarter estimated tax payment for the next year (which is due on the same date). Then, when you prepare the return, you apply what’s left to the net tax year or you refund it if you don’t need it for the first quarter estimated tax payment. If your tax applied to the first quarter estimated payment ends up too small, you make up the difference as soon as you can. At the current interest rates, underpayment of estimated tax is far less expensive than the penalties for failure to pay tax due by April 15.
If you’re sure you’re aleady overpaid and owed a refund, it’s easy. Just check the boxes and show a refund and send in the form. In fact, if you’re overpaid for a year, there’s no penalty for not filing on time, not even if you don’t have an extension. But you must be sure or you’ll be subject to some very severe penalties.
Q: Do I have to report income if I didn’t receive a 1099-MISC?
A: US citizens are required to report ALL their income, wherever earned, on their individual income tax return. So if your agent doesn’t put all of your foreign income on the 1099-MISC sent to you, you must still include that income from other information sent to you. And if your non-employee earnings are less than $600, you still include it. Because a 1099-MISC is required for royalties over $10, it’s likely you’ll receive a 1099-MISC for all of your royalties from writing. But even if you don’t, include it.
So where do you report these other earnings when you’re using a software package to prepare your taxes? The electronic preparation packages will have you input each 1099-MISC and link it to a business or to the other income line of the tax return. In most cases, a writer’s royalties will be on Schedule C as income from a trade or business. If you have questions about where your writing income should be reported, consult a tax advisor. In addition, your software should also have a place to input “other revenue not on a 1099-MISC” for your trade or business. That’s where you input the total of all your income not reported on From 1099-MISC. And if you’re typing directly onto the forms, everything is reported on the same line. The final printed Schedule C shows only the total.
More FAQ’s and answers next week!