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.
7 comments:
I'm still working on my taxes, but generally I don't deduct more than I make. Some years are sad but others are encouraging. Filing taxes as a writer is a learning process, and I'm still learning though I've been doing it for years.
Funny I should read this post today, since I spent the better part of the morning gathering files, papers, receipts, etc. that I need to file my taxes. Here's hoping that our incomes outpace our expenses from now on!
I thought this might be a timely subject. It would be nice to make a profit. Right now, I'd just feel good to be able to write again. Crazy times at my job that's taken over my writing life. There might be an end to it, but not sure.
I always deduct what I can legally deduct and i never make a profit--though I do make money, but I spend far more in this wonderful writing business. But it is great. Back when I first started, I used to write notes to the IRS telling them that I did write at least 4 hours a day 5 days a week.
Most of my author friends don't make money. Or do, but put it right back into the business like you do. It is nice though to get the Schedule C deduction and pay less taxes.
I too file a Schedule C. For the first couple of years I did declare a loss, but I was very careful on what I claimed for expenses so that the loss wasn't too large. However, being the paranoid person that I when it comes to taxes and having already been spanked once by our local Revenue Service for selling books w/o a tax permit (and successfully appealed the penalty), I now only declare a profit when I actually sell books. I no longer claim any expenses on my taxes.
Interesting post. I'm outside the US and I'm hoping that if/when I do have to file tax returns for writing income it's not quite as complicated as this.
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