IRS rules state that you can claim a loss for business expenses even if you’re unpublished as long as you can “prove you are actively pursuing a career in writing” and as long as the expenses are considered “necessary business expenses.” (IRS pub. 535)
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. Postage and/or shipping fees for books sent to wholesalers, retailers, readers, reviewers, etc. are necessary business expenses.
3). Membership dues, conference fees, hotel expenses, gas mileage and meals are all deductible expenses even for unpublished writers. Mileage (round trip) to meetings, speaking engagements, book signings, conferences, etc. *for 2016 57.5 cents per mile - changes annually. Map quest the directions and mileage to business activities (meetings, speaking engagements, etc.) for records. Keeping a calendar also helps to provide proof of your activities should you be audited. (IRS Publication 463)
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:
COGS: What does your book cost you including shipping – figure on a per book basis and deduct from your gross receipts to figure gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense. Be careful with inventory because in some cases you’ll actually pay inventory tax. This is something you want to research or consult a tax professional about.
Set up costs: cover art, and the charge for producing (or buying) your self/ E-published books. Occupational or Resale License fees are also deductible.
Self Employed Health Insurance
Charitable Donations to NP – Do you tithe off of your income separately? (IRS Publication 526)
Education Expenses – are you working toward a degree to benefit your writing? (IRS Publication 970)
Other miscellaneous expenses (IRS Publication 529)
Trademark/Copyright fees (copyright your book or trademark your tagline?)
Subscriptions to professional, technical and trade journals (Writers Magazines, Magazines you want to write for)
Books, professional equipment, etc. (Writers Market Guide or books bought for research; Computer, printer, etc – this can be done on a one-time basis (full expense) or depreciation *see a tax professional*)
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 at http://www.irs.gov/, or call them toll free at: 800-829-3676 and request IRS 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 firstname.lastname@example.org or telephone (914) 834-3227. His address is 3 Washington Square, #1-G, Larchmont, NY 10538-2032. Website: http://www.julianblocktaxexpert.com/
Award-winning author, Pamela S. Thibodeaux is the Co-Founder and a lifetime member of Bayou Writers Group in Lake Charles, Louisiana. She has over twenty years experience in bookkeeping, insurance and tax preparation. Multi-published in romantic fiction as well as creative non-fiction, her writing has been tagged as, “Inspirational with an Edge!” ™ and reviewed as “steamier and grittier than the typical Christian novel without decreasing the message.”
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