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?
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?