Welcome to Curious Business
Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
Friday, May 26, 2017
Anne's lifetime of credentials and contacts landed another Blue Hills job in my lap: Editing a 60,000-word young-adult novel. The flat rate that we're charging is lower than I would have liked because Anne works a lot faster than I do. She figured it would have taken her 35 hours; it looks closer to 60 to me. But it will still work out to around $18/hour even at my pokey pace, and that's 10 times what I make working for Curio City. The client is a home-based publisher, so there could be more jobs ahead. Editing fiction is an interesting challenge. English clearly isn't the author's first language, so I'm struggling to correct her grammar without unduly Anglicizing and changing her voice, or introducing words too advanced for youngsters. I hope that she'll be satisfied with the result. She's going to get back a better book. Turning it into a good book would require at least twice as much of my time and the result would barely be recognizable...so she's not getting that.
Curio City is mostly a distraction nowadays. It won't even provide most of my income this year, and it's way too needy. I still need it, too, and thinking about the process of shutting down saddens me. But I begrudge it my time. I have even started thinking of orders as an imposition.
Without getting too specific, each new Blue Hills assignment has tax implications. You are required to issue a 1099 to any individual, partnership, or LLC to whom you pay $600 or more in a year; the internet tells me that payments to corporations don't carry this requirement (which might be a good argument for keeping Kraken around after Curio City closes). A check made out to Kraken Enterprises or Blue Hills Editorial goes through QuickBooks and my Blue Hills bank account and comes out as payroll, so the IRS gets its share. If that same client writes the check to me or to Anne personally, I could gamble that s/he will not ask for a W-9 or issue a 1099-MISC, making the unreported money unofficially tax-free. In that case it won't show up as Blue Hills income or contribute to my Blue Hills salary, and that offends my bookkeeping sensibilities. Worse: If the client realizes his/her accounting obligation and requests a W-9 at the end of the year, that income is suddenly official and taxable, and since I didn't withhold and submit the appropriate taxes in the quarter received I risk interest and penalties for late payment (assuming that I can even scrape together the amount due next April). Escrowing the tax portion off the books would cover that contingency, but that's both messy and shady.
Will an individual or corporation be paying me? Will they pay me more than $600 a year? Will they make a single payment, or several small ones? Will they ask for a W-9? Will they mail a check, use PayPal, or transfer bank-to-bank by ACH? Will they issue a 1099-MISC to Blue Hills (i.e., report it to the IRS), even though Kraken Enterprises is a corporation? Should I ask that their check be made to myself (or my wife), to Blue Hills, or to Kraken? And, finally, will they follow those instructions properly or not?
Untaxed income is, of course, worth 15 to 25 percent more than taxed income, and that could add up. The odds that little low-profile Kraken Enterprises will ever be audited by the overworked and underfunded IRS are comfortably close to zero, so the risks are low. But because I'm an honest and risk-averse person, I intend to stay clean unless I'm very confident that the client won't hit the $600 trigger and/or won't report the payment. I'm also more inclined to keep the income under the table if the client was undercharged.
Incidentally, I did NOT just admit to tax fraud. Philosophically, I believe that taxes are the price we pay for civilization, and (being fond of civilization) I always pay my fair share. Corporations and wealthy Americans are chronically undertaxed for the level of services we demand. So far all of my clients have been companies whose paperwork is in order. Sooner or later, though, a handwritten check with my name on it is going to be tempting.
Speaking of escrow: The bank problem that I wrote about in my last post week turned out to be more complicated than I had thought. I ended up having to phone CapitalOne after they sent an email to the wrong address. Long story short...they needed to officially locate Kraken Enterprises at my home address because the stupid PATRIOT Act won't allow a business to locate at a drop box. Apparently I could be laundering terrorist money, or something. It took me a couple of hours to figure out and supply exactly what they needed. Then it took another week for them to officially open the account, and another several days for me to link it to the proper checking account. But I think it's finally up and running, FWIW.