I recently finished our taxes and mailed them off to the IRS. Yep, mailed them. Used the good old United Postal Service stamp and all. Much to my chagrin that was the easy part. The process has been more complicated since I started using income and expenses for my writing career, but with expenses outweighing income considerably, it has been well worth the effort.
My dream of becoming a full-time writer started in 2005. I was so far from any success, I did not file expenses. I continued writing, getting some stories published in magazines, an anthology in 2012, but I still did not file taxes as a writer. I do not know much about IRS rules on whether writing is a hobby or a business, but I’ve avoided all that because my whole purpose since 2005 has always been a writing business versus a hobby. I’m not giving tax advice as I’m certainly far from an expert, but I sure didn’t want to mess with the IRS by calling my writing a business in the early years when I hadn't made a penny. I knew someday I’d feel better with some oomph, like having a novel published.
And then it happened. In 2014, my novel, Just Another Termination, was accepted for publication by Black Opal Books for a 2015 publication date. I needed to work quickly to build some sort of platform and I needed a website. With that came all the trappings of a business from business cards to paid advertising. That was the first year I filed Schedule C and claimed expenses for the “start-up” of my writing business. I made some mistakes the first year. One of them was checking the bottom of the first page of Schedule C as “some investment is not at risk.” I didn't know exactly what that meant, but it wasn’t applicable to me as the IRS wanted me to send another form to show why some were not at risk. I changed my form that year to “all investment is at risk” and that’s how I’ve filed since.
Last year I made a mistake on Schedule C and included my royalties there and then again on form 1040 as “other income,” a slight loss to me since my royalties were not big numbers (far from it). The schedule C form, I believe, is for revenue you receive on selling the books you’ve bought against the cost you paid for them along with all the other expenses. It tracks your inventory at the start of the year and then what inventory you end up with. My husband tracks my expenses for promotion, office expenses, gas and driving, entertainment. We’ve learned that food and drink expenses (always at 50%), and gas and parking are not allowed unless you are away overnight. I got to include 50% of my food and drink expenses for a trip to Mobile, Alabama in February 2016 and to Bouchercon in New Orleans in October 2016.
Local mileage and parking and food and drink might be allowed as an expense if you use your home as your office. I tried that this year. The form for that was way too complicated to me and I didn’t bother, but ALAS, I saw there was a Simplified Method Worksheet to use instead. Not simple enough for me. I think, and I could be wrong, that unless you are making a profit, you cannot expense the cost of the office you use at home. There was a place on Schedule C to include the entire square footage of your home and that of your office, which I entered as zero expense since I lost money. If I’m wrong, at least it’s there for the possibility of the IRS catching and giving me a minimal benefit if there is such a thing. They’ve actually caught and changed a few errors in my favor over the past few years.
I have heard that the IRS is skeptical of authors with losses and not a single sale for too many years. My recommendation, and again I’m not the expert, is you don’t start claiming expenses for a writing career until you know you have a sellable publication coming up soon. I’ve offered a little information from my tax experiences as a writer. If any of you have some experiences or advice to share, please do.