Filing taxes for freelancers can be a daunting proposition. However, for the most part it’s actually quite simple.

A hobby versus a business: If you made less than $1,000 in freelancing income, you don’t have to do anything special. You can even use the same 1040 form, reporting your freelancing income as “other income.” However, if you made more than $1,000 in freelancing income, if you want to claim your deductions, or if you are planning on pursuing writing as your career, you should file your taxes as if you are self-employed. If you take the latter route, there are two things to consider: your income, and your expenses.

Freelancing income: Your income should be pretty self-explanatory: all money you have made as a freelancer. Personally, I like to use an Excel spreadsheet to keep track of this information. Each time I get paid for something I’ve written, I enter it into the spreadsheet, which I have set up to calculate the totals automatically. That way, at the end of the ear there’s very little left for me to do.

Freelancing expenses: There are plenty of deductions you can claim as a freelancer. Basically, every expense you’ve had to pay to continue your business is an expense you can deduct against your income. This is not cheating the government out of taxes; it’s determining your real income. Think about it: if you are employed by a business, you receive a wage or a salary for the work you do, while the business pays all of the business expenses, such as marketing, buying supplies, furnishing you with the equipment you need to work, etc. As a freelancer, you have to pay these expenses yourself, with reduces your actual income. Therefore, making deductions is just figuring out what income you actually got to keep, by subtracting what was needed to run your business. You do this using the Schedule C form.

Deductions you can take: Again, pretty much any business expense is deductible – office supplies, envelopes and postage for mailing queries and submissions, internet connection expenses, phone calls – as long as it is clearly for business only. This means that you cannot deduct your entire phone bill (although you can deduct a separate line or a cell phone). You can also deduct a portion of your rent as office space, provided that area is used solely for business. (This is not advisable for homeowners, however, as they’ll hit you with additional taxes when you sell your home; to prevent this from happening, the experts recommend that you combine your office with personal space.)

Precautions: Of course, you should always be prepared for the possibility of an audit. To protect yourself, you should always keep detailed records and retain your receipts for every deduction you plan to take. Once again, I use an Excel spreadsheet to keep track of and calculate my expenses.

For more information: Moira Allen’s page “Handling Writing Income and Expenses” gives a thorough rundown of the basics. For more detailed help, The Writer’s Pocket Tax Guide is available as an e-book or in paperback form.

For more tips for writers, check out Swan’s blog.