Not published yet? I 've got some tips for you as well, so keep reading!
Is your writing a hobby or a business? You don't have to make a profit to call writing a business, if you show that you are attempting to earn money at it. Even if you haven't earned a single penny, you may be able to claim writing as a business, and take deductions for all your expenses.
Most of you know me as an author of gay erotic romance. By day, however, I'm a tax preparer. It does seem like two ends of the spectrum, but I've always been a numbers person, studying engineering and financial economics at university and graduate school. I've discovered a way to combine my two interests, and I've come up with a set of tax tips for writers, based on my tax experience, my writing experience and necessity.
Here are a few tips to get you thinking about ways to handle your own tax situation. It may only be February, and for US-based writers, taxes aren't due until April 17 this year, but it never hurts to get an early start, especially if you're filing Schedule C (Profit or Loss from Business) which I recommend nearly all writers file.
This is where even unpublished writers can benefit.
Did you take a writing class which you paid for? Did you travel to RWA meetings? You can write off the mileage. Write off your RWA membership fees. The key to taking deductions is to document everything. Yes, everything. Overdue library fines on a book for research. Keep the receipt.
If you're still getting rejection letters from publishers, don't worry (at least as far as your taxes go). Print out a copy of the email and put it in your records folder. It shows you tried to sell your work. The IRS requires a consistent attempt to make a profit, even if you don't. Most businesses don't show a profit for a couple of years. So, while you're honing your skills, you can be writing off expenses against earnings from your day job.
How to Tackle the Schedule C
If you've taken your first look at the Schedule C, used to report profit or loss from a business, you may find it a bit daunting. It's not as bad as it looks, and it has plenty of useful places to take deductions. I'll go over the key areas which apply to writers, and how to get all the deductions you deserve, while warning you away from the areas that could cause problems.
Let's take a look at the Schedule C, I'll show a few items, line by line for you to get some ideas for the sort of expenses you can deduct.
I'm a huge fan of Line 8 Advertising. I call my website, domain name, swag pens and business cards, online ads, Facebook ads, LiveJournal account cost, etc., as “advertising.” Did you do a giveaway? Put down the cost of prizes here. What I don't put here is the cost of having my website professionally designed or maintained. Use Line 17 Legal and Professional Services for anything you paid anyone else to do for you. Line 8 is for items or services you purchased.
Line 17 Legal and Professional Services. Do you have a promotional company working for you? This is the place to deduct those expenses. How much did it cost to have your taxes done? Put it down. If your Schedule C caused you to need the services of an accountant, rather than doing it yourself, take it as a business expense, even if your other income from a regular job is on the return.
Want more tax tips for writers? I'm running a one-week online class full of even more information and tips. The cost is only $15. There will be daily lectures and plenty of Q&A so you get a good grasp of even complicated tax issues. I'll be covering these topics and more:
- Hobby vs. Business
- What's Deductible? (including recordkeeping)
- How to Tackle the Schedule C (detailed information about the sections most relevant for writers)
- Home Office Deduction
- Self-Employment Tax
- Quarterly Estimated Payments
EM Lynley writes gay erotic romance. Her latest release was A CHRISTMAS BONUS, and RARER THAN RUBIES is forthcoming from Dreamspinner Press. Stay tuned for ITALIAN ICE, sequel to RUBIES, due out in April 2012. She has CFA Level III and a Masters from the London School of Economics, and she writes killer sex scenes. Find her online at her website, Facebook and twitter.You can buy all her titles at Amazon.com and All Romance eBooks.