What I learned doing my freelance tax return

Happy tax day! It’s April 15, the deadline for filing your 2012 income tax return.

This year, after I pulled together 1099s and plowed through expense receipts to get a return ready for my accountant, I took another look at everything to see what it could tell me about my freelance writing business.

Here’s what I learned doing my freelance tax return:

1. Freelancing is a low overhead business.

Unlike some other undertakings, freelancing can be an inexpensive business to run. That might not be the case if you travel all the time for interviews or story research. But if you don’t, or if you travel only sporadically, overhead can be nominal. This year, my expenses were roughly 8 percent of my gross income, not including taxes and health insurance. Even with those expenses factored in, it’s still a high-margin business.

2. It pays to be nice to editors.

While I was in tax mode, I created an Excel spreadsheet to see where my freelance income had come from, not just in 2012 but for the past five years. I discovered that the bulk of my earnings have come from a half dozen or so publications or clients. Some years some of those publications pay more, and some years less,  depending on their budgets. The other “aha” moment looking at five years’ worth of work — that I’ve worked with some of my favorite editors multiple times over the years. Let that be a lesson to you to play nice with your editors, and to keep in touch if they leave for a different job, you never know when your paths might cross again.

3. Expenses change.

It’s interesting tp note how expenses change over time. When I freelanced in the 1990s, telephone and postage costs accounted for a substantially larger portion of my expenses than they do now. In fact, telephone costs were so expensive, publishers reimbursed for them. Originally I kept track of calls I made for different publications manually, which was an enormous pain. Then I switched to a long-distance service where I could punch in an extra 2 digits to itemize calls by publisher, and see a read out of my itemized calls on my monthly bill. Today the cost of my local and long distance service is so nominal I don’t even expense it, though I do expense my cell phone, which I use for business.

4. The Internet can be expensive.

My biggest expenses last year related to Internet related services and fees. In addition to paying Comcast for access, I paid for a data plan for my cell phone (see above),  plus hosting, domain name services and connectivity for my blog. In 2012, I paid a website designer to redesign the blog and for work related to the blogathon. All told, these Internet-related charges accounted for a whopping 30% of everything I spent on my business last year. That’s a substantial expense for an undertaking that I use as indirect marketing for my business.

5. Travel expenses can quickly add up.

In 2012, I took exactly one business trip, so my travel costs were minimum compared with 2011, when I took four trips for stories, writing conferences or to see editors.

6. I don’t do lunch.

In 2012, I spent the grand total of $20 on business lunches in town. I’m not a fan of business lunches. As a working mom, I do the bulk of my business during school hours. Taking a break to meet someone for lunch takes too big a chunk out of the work day. I much prefer a morning coffee meeting, or getting together after working hours if possible.

What did you learn working on your taxes this year?