I digitally met Chris Morris, a CPA for writers, a few years ago through a mutual friend. In that time, I’ve gone freelance and he launched his own accounting company to help writers, freelancers, and small business owners.
Chris related that he specializes in helping the creative entrepreneurs, regardless of whether the business started yesterday or two decades ago. Over 75% of his clients are entrepreneurs. He helps painters, graphic designers, wedding photographers, editors, authors, and even the neighborhood swimming pool guy. He knows your business is too complex to trust it to a tax preparation service that you might find in the grocery store, especially when you need a lot more than just tax work. And one day soon, he will publish both of his manuscripts and start fleshing out the crazy fiction idea he cannot shake from his memory.
If I wasn’t married to a CPA (who fortunately offers me no-fee advice), I’d certainly be going to Chris for all of my tax and accounting needs. He was very gracious with his advice in this interview, which speaks to the facts that he knows what he’s talking about and that he’s generous with his expertise.
The timing of my interview could have been better considering April 15th just passed, but Chris offered this perfect reminder:
“Now that tax season is over, it’s time to think about taxes again. WHAT!?! I know this sounds unconventional, but bear with me for a moment. It is not until taxes are filed that most people start thinking about their current financial situation. So, now is the perfect time to take a few minutes to think about it.”
So, take a moment and think about your financial situation right now, then dig into Chris’s excellent advice. (All bold text is my emphasis.)
1. You’re a CPA who helps small business owners make sure they get their taxes in order. Why would a writer or freelancer need a CPA for writers? Can’t they just do their own taxes and hope for the best?
I think there are two basic reasons that a person would be interested in hiring me to provide support in the tax and accounting piece of their small business.
The first reason is simply a matter of time or stress management.
The average small business owner is very busy doing what they do best — running their business. They might not or probably don’t have the time to focus on pulling together all the details for expenses and revenues to prepare taxes without sacrificing something else, so the small business owner lets something else drop in order to put taxes together. Or maybe they don’t drop anything else, but neither is ideal. Both lead to stress. This is where a CPA can come in. By managing one of the stressors of your business, you are freed up to be excellent at your business.
The second basic is information.
You mentioned “hope for the best” in your question, and many small business owners reach the point where this is exactly what they are doing. The complexity of their business or the tax code eventually becomes too much for someone to figure out in their spare time. By hiring a CPA for writers, you are able to entrust all the details of the ever-changing IRS regulations to an expert.
While I obviously cannot promise this type of return for all my clients (promising a refund is actually illegal, FYI), here is one example of how using a CPA might work for you. I had a new client this year who was concerned about the increase in price from TurboTax to me. In our initial consultation, I asked him a few questions that he had not considered, and in a matter of those 25 minutes we uncovered a way to reduce his taxable income by $5,000.
2. Why do you prefer to work with creative types like writers?
I am building the business of my dreams right now. It is still in process, which means that I do have a “day job.” I don’t mind this day job. Actually, I am pretty good at it, and I like most of my coworkers. I even like some of my clients. But I don’t love any of it. Never once have I woken up excited to start my job. I want my CPA firm to be different.
One way I am making it different is by picking my clients carefully. If I don’t 100% believe in what somebody is building — whether that is a fantasy world for his books to take place in or a family-oriented painting company — I just won’t say yes to the client. I have turned down a number of clients because I did not trust or believe in their product.
I am a writer myself, though I am still working on getting my first book published. I know and appreciate the joy, pain, exhaustion, and self-loathing that is part of the creative process. I also know what it feels like when somebody GETS what I am creating. There is nothing more wonderful than discovering a fan of my own work.
I want to be a part of helping people deal with the back-end stuff in order to find those fans. I love celebrating with my clients when they are recognized, when they get that first book deal, or when they win an award. Because I know their business and I know the ways they struggle to get something out to public consumption, I am more able to appreciate the journey. This makes me a great CPA for writers and creative entrepreneurs.
3. What’s the one thing you wish more writers would understand about taxes and their writing work?
I have already alluded to this several times, but I wish more writers would view their writing work as a small business. The most basic definition of a business that I can give someone is this: You have a business if you have a product or service, and if you are actively trying to sell this product or service.
Folks get tripped up on this far too easily. They think their book doesn’t count as a product because it’s not a New York Times bestseller. Or they assume the $500 they paid to commission an artist to create an original piece of artwork for their book cover is just money gone from the family budget. Or even, they believe that they have to make a certain about of money before they can really think about their writing thing as a business.
These ideas make sense on some level, but not in light of the IRS definition of a business. If you have a product or service, and if you are actively trying to sell this product or service, then you have a business. This means you can and really should report the results of your business to the IRS. Yes, even if you are reporting a loss. Companies lose business all the time, and this does not make them something other than a business. It means there was a bad year. The same is true of your writing.
Keep in mind please that definition though. There needs to be a product, and that product needs to be offered for sale. Specifically, this means not all bloggers technically have a business, unless this blog is tied to a product or service.
4. Can someone hire you who doesn’t live in your state? How would that work?
Yes, an out-of-state person can hire me as their tax accountant or bookkeeper.
The beauty of the technology age is that there is little lost in the business relationship when states separate clients from their CPA. Indeed, most of my clients are not local to me. This is easier than it used to be, since most states have aligned with a single definition of what it means to be a CPA.
I also use a series of tools that make it very easy for me to receive any information I need from a client. Documentation can be sent to me through a secure online portal, via secure email, or even by snapping photos on a smartphone and uploading. This data is at least as secure as it would be sitting in a local CPA’s office. Beyond that, I also use a series of other communication tools that make it seem like we are on opposite sides of a desk.
In short, mobility is key to success for today’s businesses, and it’s no different for me as a CPA for writers.
5. When should a writer or freelancer consider getting a business bank account?
I actually wrote about this recently on another site, so feel free to check out an extended answer at “Hobbies, Bank Accounts, and a CPA Trying Not to Bore You.”
The short answer though is that you should consider getting a business bank account as soon as you have an actual business.
Beyond the various tax and legal benefits of this choice, opening a business account is full of emotional value as well. Taking this step is a choice to up your game, so to speak. You are communicating first to yourself, but also to the rest of the world, that you are serious about treating your writing as a business.
6. What’s better for a full-time, income-generating writer: to form an LLC, S-Corp, C-Corp, or to remain as a Sole Proprietorship?
There is no one-size-fits-all solution for this question.
That being said, I am a huge fan of keeping things as simple as possible, while also maximizing potential tax benefits. To consider the simplicity and tax benefits, I typically guide clients toward a four-step analysis. The answers to these questions will help guide a person toward the right business structure:
- Do you now or will you in the near future offer employment to other individuals?
This does NOT include anyone you contract with and pay cash to on an irregular basis, or anyone for whom you are not responsible for taxes.
- Are the activities you engage in opening you up to a great deal of risk for litigation?
In the context of writing, the most common ways you open yourself up to litigation is by discussing controversial topics or by “naming names” in a confessional of some type.
- Do you have assets you want to keep separate from your business?
For example, you might have a large trust account or real estate holdings you want to keep safe.
- Does your revenue in a given year exceed $100,000?
If one of more of these questions is a “yes,” then it would be wise to consider a business structure other than sole proprietorship. The different scenarios beyond that are too complex to answer in a cogent way, without providing a series of (boring) scenarios or sharing the specific details of certain clients.
Suffice it to say there are circumstances in which an LLC or an S-Corp are more tax-friendly to a writer.
7. Lastly, a non-tax-related question: what three books have impacted you in the last few years?
One of the books that has impacted me the most overall in my entire life is Failing Forward by John Maxwell. In this book, Maxwell speak about the healthiest ways to approach failure, and how we can use failure in our lives to catapult us toward success. Due to my perfectionistic tendencies, this was a powerful message for me, one that I revisit regularly.
More recently, I have been deeply moved by Francis Chan’s book Crazy Love. Chan was able to put into perspective the depth and strength of God’s love in a way I hadn’t considered in the past. He gave me fresh eyes to understand the goodness and powerful hand of God in my life.
The third book is really three separate books, but I have been impacted by each of them for the same reason. My good friends Jim Woods, Tim Gallen, and Blake Atwood – yes, THAT Blake [Ed. note: Ha!] – each published books in the last few years. This showed me that it is possible to self-publish a book, and to experience success along the way. While I am not a published author yet, I do have 2 manuscripts that are nearly ready for print and many more ideas rattling around in my head. These three gentlemen paved the way for me to take that step, and I borrow courage from them each time I consider taking the plunge.
If you’re ready to finally take your writing, freelancing, or small business seriously, you need serious tax help. As this lengthy and utterly helpful interview attests, Chris Morris is the CPA for writers you need.
P.S. Chris will be presenting on “Navigating Taxes and Accounting in a Freelance World” at PENCON May 16–21, 2016 in Colorado Springs, CO on behalf of The Christian PEN (Proofreaders and Editors network).