I am not an accountant, and I'm just barely a writer, but I’ve attended informative presentations
on this topic, I just met with my accountant, and I'm plagiarizing freely from the very good article called Writers and Taxes from the most recent A View from the Loft. Take my suggestions as just that. Pre-published Writers
The best tax advice I ever got was to keep track of every penny I spent establishing my writing career, from paper I printed rough drafts on to postage on query letters to receipts for the Nut Goodies I sent with them. Because of my detailed record-keeping, I was able to write all this off at the end of the year, which I did for the three years it took me to get published. I encourage you to make a "receipts and notes" folder in a drawer or filing cabinet, or stuff them in a dedicated manila envelope that you will not lose.
I also devoted a portion of my house (a whole room, actually) to writing. In this room is my computer, a bazillion ripped pieces of paper with story ideas scribbled on them (Sandra Cisneros calls these "buttons," and you sew a story around them), pens, darts to chew on (I'm orally fixated and quit smoking a decade ago), and books I use for research. Because this is a space devoted to my business of writing, I get to write off a portion of all my utilities. Other points a writer (prepublished or published) should consider:
- Your writing must be a business (you intend to make money off of it) and not a hobby (you do it for personal fulfillment and make occasional money off of it) for losses to be deductible. If your writing is a business, keep detailed records and have a clear and honest plan for turning a profit.
- Mileage. The standard mileage rate for 2009 is 55 cents per mile. Keep track of all the miles you travel to signings, conferences, and anywhere else related to the business of your writing.
- IRA. For 2009, you could contribute up to $5000 to an IRA if you’re under the age of 50, $6000 if you’re over the age of 50. If you’re exactly 50, you can spank a cat and call it a day.
- Withholding. If it looks like you're going to have to pay big for 2010, now is the time to increase your withholding.
Published Writers
Once you have a published book, you’ll have a lot (okay, maybe not a lot) more money going in and out and so set aside a three-ring binder to record your expenses (review copies sent out, the postage paid to send them, promotional materials you bought, etc.) and income (royalties, books sold by you at signings and other events if you go that route, speaker’s fees). You also need to collect sales tax when you sell books yourself, so keep track of that and file a sales tax form for your state at the end of the year.
My accountant also recommended I look into filing to become an LLC, which stands for Limited Liability Company. Basically, I'd be a company of one, but having LLC status would protect me legally from debtors or people who would want to sue me on behalf of my writing. Sounds kind of paranoid--I write fictional mysteries, what's to sue about?--but it also sounds smart. The only cost is the filing fee in your state, and you do your taxes basically the same way, writing off expenses with a schedule C. If you have more questions about tax filing for writers, I encourage you to look for a CPA/attorney in your area who specializes in entertainment. Best of luck.
9 comments:
Great advice, Jess. As for declaring a loss, the single telling statement there is "writing with the intent to show a profit" (and being able to support the claim). Beyond that no one says we have to be "good" at making a profit.
Great tips, Jess -- thanks. Now I'm inspired to organize my shoebox of receipts.
Spank a cat? Kinda makes me look forward to turning 50.
That first tax filing where I finally had some fiction-writing income to declare against all the expenses that had been piling up - I should have framed that.
Thanks for a timely post!
IRS asked me this year to justify my writing expenses for 2007. 3 days work even though I kept records. Waiting to hear from them. What a pain!
I'm sorry to hear that, Keith. That's my nightmare, having to justify my expenses as a writer (makes me question whether I really am a writer since I have yet to turn a profit), but Darrell's words give me hope. I really do intend to show a profit. Just give me more time. :)
Cricket, I'll bring the cat. It'll be at least a dozen or so years 'til we have to worry, right?
Gin, I should dig that out and frame my first tax return with writing income, too! I'd have to use a highlighter do underscore that profit line as it is overshadowed by the expenses line. That was my first year as a published author, and I did the whole taco--bought t-shirts with the book cover to May Day on to give away at signings (not much good, it turns out, if only your mom shows up at your signings), bookmarks, postcards, book bags...the works! I don't do any of that now and sell far more books.
It's the clear and honest plan of turning a profit that gets me. I'd love to, but I doubt I ever will.
Good advice, Jess! I'll add a tip for the pre-published writer. Save all your rejection letters in a file. This shows that you are actively seeking publication and income from your writing.
As for expenses, some that people may not think of include:
- mileage to/from critique group meetings and writing events & parking fees
- printer ink, paper, mailing envelopes, stamps, and media mail postage fees
- any mystery fiction books you buy (you're researching the genre, right?)
A dozen or so years before you need to think about fifty, dear. Not nearly so many for me. :-p
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