Variations of this article have appeared in print and e-publications including but not limited to SpiritLed Writer Ezine, Longridge Writers Group Website, and Romancing the Skyz print magazine.
Writing is more than creating the ‘great American novel’; writing is a Business and a business requires record keeping and tax preparation. Many have already begun gathering information and getting things in order. Most will wait until the last minute then be in a panic. Don’t be one of them, be PREPARED!
IRS rules state that you can claim a loss for business expenses even if you’re unpublished as long as you can “prove you are actively pursuing a career in writing” and as long as the expenses are considered “necessary business expenses.”
Most writers will use a Schedule C or Profit and Loss statement to file their business tax. This form is found in your 1040 forms and instructions book or from your local IRS office. You can file a 1040 form with a Schedule C and still take standard deductions in lieu of itemizing. Use your social security number and your name unless writing under a pseudonym then it’s your name DBA (your pseudonym). The “Principal Business or Professional Activity Code” (711510) is listed in your 1040 book under the Performing Arts section.
How do you prove you’re “actively pursuing a career in writing” and what are “necessary business expenses”? Here are a few examples:
1). Send letters to agents, editors, publishers. Postage is deductible as well as return postage on your SASE. Do this via email? Print out a copy of your email query and their response.
2). Office supplies (paper, ink, envelopes, business cards, etc.) are valid expenditures. If you have an office set up in your home you may be able to claim a portion of your rent or house note and utility bills for the use of this room. Also, long distance phone calls that are writing related are deductible as well as Internet service fees if you’re using the Internet to develop your craft and/or promote yourself and your work.
3). Membership dues, conference fees, hotel expenses, gas mileage and meals are all deductible expenses even for unpublished writers.
5). Fees related to the creation, development and maintenance of your website are tax deductible.
6). Professional fees and services (CPA, Tax Consultant, professional evaluation or critique, attorney fees, etc)
How do you keep track of all those expenses?
Spreadsheets and receipts. Keep receipts in a standard manila envelope or organized by category in a pocket sized file folder. Spreadsheets are easy to set up and easy to maintain. Most programs like Windows come with a standard spreadsheet application. One column (or page) for Income and one for Expenses. What about all those formulas? Simple. Most spreadsheets have an Auto Sum ( feature for the addition of a column or you can manually do this by using the formula =sum(cell+cell) or =sum(cell:cell) for a range of cells. Need to subtract, divide or multiply? Formula would be: =Sum(cell*cell) to multiply; =sum(cell/cell) to divide; and =sum(cell-cell) to subtract.
Additional items that can be written off as expenses for published writers.
1). Promotional expenses (brochures, flyers, press kits, press releases, etc.)
2). Books donated to libraries or given away for promotional purposes may be deducted at retail value.
3). Books bought for research.
4). Dry-cleaning those nice clothes you wear for speaking engagements, book signings or other author appearances.
5). Postage and/or shipping fees for books sent to wholesalers, retailers, readers, reviewers, etc.
6). Agent fees and commissions.
7). Set up costs, cover art, and the charge for producing (or buying) your self or E-published books. Occupational or Resale License fees are also deductible.
Remember, if it falls under “Necessary Business Expense” it is deductible!
Worried about being audited? Don’t. Be careful and be honest.
One more note; IRS suggests that you keep all tax records for a minimum of seven but up to ten years. Remember, tax laws change yearly. For more information visit the IRS website @ www.irs.gov or call them toll free at: 800-829-3676 and request publications such as # 334 (Tax Guide for Small Businesses and Individuals who use Schedule C or C-EZ), #535 (Business Expense –this guide tells you what you can and CANNOT deduct), and #552 (Record keeping for Individuals).
For more information on deductions available to you, check out: Tax Tips for Freelance Writers, Photographers and Artists by Julian Block. Julian Block is a nationally recognized attorney who has been singled out by the New York Times as a "leading tax professional" and by the Wall Street Journal as "an accomplished writer on taxes." E-mail him at email@example.com or telephone (914) 834 3227. His address is 3 Washington Square, #1-G, Larchmont, NY 10538 2032.
Pamela S. Thibodeaux has been a bookkeeper for over twenty years. She is the co-founder and a member of Bayou Writers Group in Lake Charles, Louisiana. She is the author of the 4-part ‘Tempered’ series from ComStar Media. In addition to the series, her single title novel, The Inheritance and 4 short stories are available from White Rose Publishing. Pam’s writing has been tagged as “Inspirational with an Edge!” and reviewed as “steamier and grittier than the typical Christian novel without decreasing the message.” All full-length novels are available in print from Amazon.com or through Pam’s website. All titles available in Ebook also from All Romance Ebooks.