It’s that time of year again. Writers everywhere are casting desperate glances around their workspace wondering where the money’s gone. Wishing they could rewind the last 11 months and keep better records (or any records!). Generally wondering how they’re going to make it through another tax season.
Some writers realize that writing is a business and come into tax time prepared … and then there are the rest of us, who wait to the last minute before hyperventilating in panic.
Writers can still save on taxes this year with some simple tips and tax deductions that most of us would never have thought of. Here’s how.
Profit and Loss
Even in our most panicked state, most of us will – with conviction – stand up for our pursuit of a writing career as being a business. It’s hard work. Our creativity alone doesn’t get us anywhere – it takes that and a ton of time promoting, advertising, and enhancing our career.
What it comes down to is this: Unless you’re a best-seller, nearly every penny you get out of your writing goes right back into it.
As taxes are concerned, this is something that becomes fully tax deductible. You’re receiving an income from your writing pursuits, but you’re not profiting. Even Advance Money (or PV Bonuses!) count as income, but when you’re using that income to enhance, advance, or promote your career you can usually write it off on your taxes.
What you’ll need is a Schedule C, or “Profit and Loss Statement”. You can download the form from the IRS website, or pull it out of your 1040 instructions book.
1. When filing a Schedule C, you’ll have to use a regular 1040 (not the EZ).
2. Decide whether you want to take standard deductions (this is in addition to your Schedule C), or itemize. To avoid an audit, most tax professionals recommend taking standard deductions.
3. Use your social security number and your real name unless you write under a pseudonym. If you do, then you’ll need to list your pseudonym as the DBA (Doing Business As).
4. When it’s time to list the code that applies to your career, you’ll need to look under the Performing Arts section and use “Principle Business or Professional Activity” (711510).
Before You Start
Now that we know what forms and process to use to make our deductions, it’s time to look at some things that writers can actually “write off” on their taxes. The key to what you can deduct is this: it has to be a “necessary business expense”.
Seriously, though, that has a lot of room for filling. As a writer, we have tons of expenses that we might overlook because so many of us work freelance from our own homes. That stash of pens you have to hide in a high cupboard under lock and key so the kids don’t make off with and mysteriously lose them are deductible. Sure, the package didn’t cost you a lot but they were a necessary expense that adds up.
A word of caution before I list examples of deductions which will apply to most writers: make sure you keep receipts and copies. If you haven’t prepared for this year’s tax season, take some time before you get going to round up every single scrap of anything that might prove the expense and its necessity. Place them all in a manila folder or a large envelope.
You’re looking for printed proof of two things:
1. That you’re actively pursuing a career in writing.
2. That your expenses were necessary for that pursuit.
Proof of pursuing your career in writing can include things like requesting submission guidelines from editors, taking writing courses or purchasing writing how-to books, and even a print-out of your published articles list on AC. Then, as long as your expenses are writing-related, you’re pretty much safe (the only way to be safer is – after this tax season – to be sure and purchase writing-related supplies and materials separate from personal ones, so that the only thing on a receipt is business related).
Writer’s Tax Deductions
Let me stress again the need to keep printed proof of your expenses and the fact that you’re writing as a career, not just an off-and-on hobby. Otherwise, you can land in a heap of trouble. Also, don’t take anything I say as gospel – I’m not a lawyer or an accountant. I’m just a fellow writer who has been doing this for many years, with too-much research during that time.
Here are the most common tax deductions writers can – but don’t – take:
1. Postage: If you’re sending out submissions that include a SASE, keep receipts of your stamps and envelope purchases. These can be deducted.
2. Education: Courses, college, and writing-related how to books are legitimate expenses. You’re furthering your career with them. Writer’s groups and conferences (including membership fees, gas mileage, hotel expenses, and meals) fall into this category – even for unpublished writers.
3. Office Supplies: The paper, ink, envelopes, business cards, pens, and even computer used for writing are valid expenses that can be deducted as long as you have receipts for them.
4. Home & Utilities: If you have an office set up in your home for writing (note that it must be an office, it can’t be a corner of your living room where the desk is set up), you can write off part of your rent or mortgage and utility bills for the use of that office.
5. Phone & Internet: When you make long-distance calls that are related to your writing (for an interview, to an editor or agent, etc.), you can write them off on your taxes. You can also deduct your Internet charges if you use the web to promote, learn, or publish your writing.
6. Website: If you have a website that is for your business (your writing), you can deduct everything from the creation and development to the maintenance and hosting fees for that website.
7. Promotion: The moment you pay for brochures, fliers, press kits, press releases, Internet advertising, radio spots, and anything else that you might purchase to promote yourself and your writing … it’s deductible. Just keep receipts and a copy of the advertising piece.
8. Donations: Have you donated some of your older writing books to a library? Maybe you gave away copies of your work for promotional purposes (swaps are fun and definitely count here), you can deduct the donations at retail value of whatever it was you gave away.
9. Fees and Commissions: Whether you pay an agent or are self-published and required to buy copies of your book to resale, you can deduct the expenses. For self-publishers, this means everything from set up fees to the cost of cover art and buying the necessary bulk books. If you have an agent, just check your royalty statement against your 1099 to make sure that agent fees and commissions weren’t deducted for you.
10. Business Attire & Upkeep: Have you had to purchase a nice suit for signings or other author appearances? You can write off the purchase and its upkeep (like drycleaning) as a business expense.
Avoiding an Audit
This is the scariest part for anyone filing their taxes – not just writers. If you’re worried, though, try not to be. The chances that you’ll be audited are extremely low, and as long as you’re being careful and honest you should have no problems.
Make sure that you review the changes to taxes by visiting the IRS website and take a look at Publication 535, which goes through every single kind of thing that you can and cannot deduct from your taxes.
Once your taxes are done for this year (with a copy or two of your return filed away for safe-keeping), take a look at the IRS Publication 552. This publication gives some really great advice on record keeping, which will help you through the coming year so that when the next tax season hits, you’ll laugh in the face of panic.
