Tuesday, March 15, 2011

Posted by Laurel Garver on Tuesday, March 15, 2011 19 comments
It's tax season and this year I had the distinctly frightening experience of doing a Schedule C for my husband. See, he got paid for writing a chapter in a book published in 2010 by Wiley, The Ultimate Harry Potter and Philosophy: Hogwarts for Muggles. Along with the check came a 1099-MISC and a lot of complication, because book royalties are considered self-employment income. If I manage to sell some of my poetry or short stories this year, I'll be in the same boat next tax season.

So here's my question: Are you taking steps to treat your writing like a business?

If you hope to make a little money from your writing this year--whether from magazines or anthology publishers, or better yet, a book deal, you need to begin keeping good financial records NOW. I'd argue that if you are pouring resources into writing, you SHOULD try to make at least a little income from it. Why? As far as I can tell, the IRS requires that you have some income in order to deduct expenses.** Chances are, you are racking up quite a few. What kind of expenses should you track? Here's a starter list:

Advertising expenses
Business cards, stationery, bookmarks and other items to used promote your writing are deductible--keep receipts! Costs associated with maintaining a website and blog, such as paying for server space and a domain name would fall under this category (design is a "professional service," see below).

Legal and professional services
Keep track of what you pay others to help you improve your writing or run your "writing business"--a professional editor, a proofreader, a web designer, an accountant, etc.

Equipment costs
Big ticket equipment purchases like your computer and printer can be deducted over a period of time using a method the IRS calls "depreciation."

Office expenses
The usual materials writers run through--paper, ink, pens, staples, whiteboards, sticky notes, postage--are deductible business expenses. Keep receipts!

Utilities
If you work from home, a portion of your home utility costs can be deducted; you may need an accountant to calculate this correctly, so keep copies of all utility bills.

Travel
Attending conferences to network and skill-build would be considered business expenses. Travel costs associated with book signings and school visits most definitely are. A portion of your expenses including mileage, tolls, parking, hotel costs, meals can be deducted. Be sure you're keeping good records and documentation of what you spend.

I believe that conference fees can also be deducted, but I haven't found definitive advice on where you report this particular "professional development" expense. An accountant could tell you. Just hang on to your receipt.

Other expenses
Reference and craft books to build your skills are likewise deductible, so keep receipts!

Child care
If you put your kids or a disabled dependent in daycare, after school care or elder care so that you can write, you might be able to take the child and dependent care credit on your 1040. Again, you need to have some income from your writing, or the daycare is really just a convenience to you as far as the IRS is concerned, rather than an expense so that you can work.

A caveat
Remember that you won't get in trouble for not deducting expenses, only for not reporting income. But if you spend more than you make, your tax documentation should reflect that, right? Keeping good records may involve some work, but it can save you big money come tax time.

**BIG disclaimer: I am not a tax professional. The above post contains general pointers on record keeping and should not be construed as professional tax advice. Seek help from a tax professional to determine which expenses are legally deductible.

Are you tracking your writing expenses? Will you consider doing so now?

19 comments:

  1. Great post for writers just getting an agent, or about to self publish or sell short stories. Always better to keep track.

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  2. Laura: thanks so much for the retweet! I hope others can benefit from what I've learned. Had we kept more records, we could have deducted even more from my hubby's writing income than we did. I suspect a lot of struggling writers are not getting any tax advantages from all they spend trying to get published. All it takes is selling one piece to begin taking deductions.

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  3. This is a really great roundup of tax info, Laurel. It's also a bit of a reality check. I think a lot of people go into writing as a hobby or a fluke, not realizing that if you intend to make money, it's not like getting paid for babysitting--you will need to pay taxes and fill out tax forms. But the good news is that you can also claim some deductions from your expenses. Yay!

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  4. I am--and thanks for the reminder about advertising expenses... I will confide. I've been a freelance writer for many years and finally broke down and started using a CPA for our taxes. Totally worth it~ :o) <3

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  5. Thanks for the reminder! I think I may have to get a tax professional for the first time in a long time - and I've probably already waited until too late. Ugh!

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  6. Great post! And congrats to your husband. I don't do my taxes but they sound like a big headache.

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  7. Thank you, Laurel! I'll keep this in mind for the future. Good to know...:)

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  8. Thank you for this very helpful & informative post! I've bookmarked this page for the future.
    :)

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  9. We're planning a trip to Turkey this summer and it's honestly just to research my current WIP. I told my husband we might be able to write it off, but I'm not 100% sure since my occupation is a teacher, not a writer.

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  10. Carol: Indeed, getting published means becoming self-employed in the most grown up sense of the term. Many writers have the idea that an agent will somehow do this all detailed record keeping for them. As far as I know, what they handle is some of the income side of things--you have to monitor most of your own expenses.

    Leigh: If I hadn't worked in my mom's tax business all through high school and an additional 7 years on a CPA magazine, I think I would have hired someone this year. TurboTax made the process pretty do-able with my level of understanding of tax code. I suspect that if I were to get a book deal, however, I'd soon be out of my depth.

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  11. Susan: It is getting a bit down to the wire. You might have to settle for one of the tax prep chains. Good luck!

    Saumya: If it weren't for TurboTax, I don't know that I'd still be doing taxes myself. But honestly, it's the paper gathering and organizing that's the biggest pain, and no accountant will do that for you.

    Jamie: Glad it was helpful.

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  12. Jade: if you think there's any chance at all you'll submit any short pieces to paying markets, be sure to track your expenses all year.

    Stephanie: Hmm...that's a tough question. I'd ask a tax professional. It's possible you can write of a portion of the travel. You must, however, have some writing income in the same tax year. Have you considered querying some kids' magazines (like Faces, Calliope, Dig) or a travel magazine with story ideas about Turkey? I bet you could line up a paying assignment, in which case some expenses would definitely be deductible.

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  13. I'm nowhere close to that stage - and I have to admit it terrifies me more than a little! Our tax laws are likely different in Canada, but I'll have to look into it someday ... at least I hope I'll have to look into it!

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  14. haha; my one and only publication for the year at http://www.bewilderingstories.com/ is in a free e-zine and didn't even charge me a reading fee. (The story debuts on 3/28)

    I did buy a new printer though :) But I think my writing expenses are small enough the schedule C would acutally laugh at me.

    Some day maybe I'll have to keep track, and when I do, I'll refer back to this post.

    ......dhole

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  15. Jemi: Sorry I have no clue whatsoever what your taxation laws are like. I hope they are less complicated than ours!

    Donna: I STRONGLY recommend that you tuck away all writing-related receipts in one spot just in case you do sell a story sometime this year. You will seriously thank me for it if you do have to deal with 1099-MISC income when you file 2011 taxes. Those few dollars of expenses can reduce the "income" to the point that it is a "loss" and make your overall tax bill lower! A little preparation saves a lot of headache.

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  16. What a fantastic post, Laurel. You have taken away a multitude of worries. You ROCK!

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  17. Great advise Laurel. I've had a Writing Expense file in my tax box for awhile and hope to one day be able to claim the receipts I've piled into that folder! Even if not published, writers can act like they are to be ready for all that occurs when they are.

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  18. Laurel,
    This is great advice that each and every author should read and take advantage of. Too frequently tax and financial items are not through of in advance and then when tax time comes they rise up and surprise unsuspecting authors.
    Sincerely,
    E. Hoffmeister, Rhemalda Publishing

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  19. Thanks for posting this, great advice. I'm guilty of not keeping good track of receipts and stuff but that has to change as my book might get published this year...I've read about this before but thanks for the reminder!

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