First, the usual disclaimer: I’m not a tax professional. The following is my opinion only and should not be taken as professional advice. Please consult someone with an actual degree and certification to get the final word.
So, it’s tax season. I’m particularly sensitive to this time of year because my mother was a CPA for 25 years. (And she still is, though she’s retiring this summer — this will be her last tax season and she’s positively giddy about it.) Growing up, tax season meant Mom didn’t come home until 8 pm, and we had to learn to make hamburgers and burrito filling ourselves.
Now days, tax season means finding out how good my recordkeeping was last year. Answer — I can always do better. I have two different accounting files — one for business, one for personal. As long as I make sure to enter everything and keep up with it, recordkeeping can be pretty easy. The software shows me exactly how much money I made and how much I spent at the touch of a button. Awesome. Basically, it doesn’t matter what kind of system you have — stuffing receipts in an envelope, a complex computerized spreadsheet, a spiral notebook — just as long as have a system that lets you get to the information easily.
Another issue is deductions. As a writer, what can you deduct as legitimate business expenses? Quite a lot, as it turns out. Never assume that something you paid for in pursuit of your writing career isn’t deductible — and this is where asking a real tax professional comes into play. Some of the obvious deductions are postage, computer, paper, and so on. But there’s more.
Most writers work at home — there are formulae for determining how much your home office is worth, and you can deduct that as an expense. Also pay attention to how much of your internet time is spent on writing-related activities (research, promotion, etc.), because a percentage of your internet fees may be deductible.
Mileage: the driving you do on business — driving to a signing or writers conference, driving to your critique group meeting — is deductible. The IRS has a standard mileage rate that changes from year to year.
Meals: Does your critique group meet at a restaurant? Save those receipts! The drinks you had at the bar at a convention, with three other writers and an editor, where you talked about who’s buying what? Ditto.
Research: A couple years ago I took a tour of the Pepsi Center in Denver because a scene I was writing was set there. I ended up setting a short story there as well, because the information I got was so good. The tour ticket was only $5, but I saved it and deducted it. That’s the kind of thing you need to pay attention to. Did you take a class on something related to a book you’re writing? Did you travel for research? It may be deductible. Now, this can get tricky. Deducting your trip to Hawaii because you might write a story there probably won’t fly. But if you can show you had a concrete purpose for going, and show concrete results in your work, it might be a deduction.
Hobby rules: So, you’re spending quite a bit of money trying to get published — workshop fees, how to books, paper, postage — but you haven’t made any money at it yet. That’s okay. It’s never too early to start good record keeping habits — saving receipts, recording expenses. Look into reporting expenses on a Schedule C, the form used by the self-employed to report profit and loss. There are rules about how long you can show a loss at the business before the IRS considers it a hobby, but I think the habits are worth forming early. Talk to a professional about it.
And good luck! Get it done early, and April 15 will be just another day.
