Practical aspects of professional writing. TAXES

[gravesbane]

How do you write off expenses in year one of writing when you won't see any income till years two? What if you can't get the thing published at all? Any comments from you all will be greatly appreciated. Thank you.

[AverageGuy]

What if you can't get the thing published at all?

Not an issue in that case.

[Yeratel]

You can only deduct writing expenses to offset income from writing. If you don't sell anything for money, you've just got a hobby. If you keep really good records, though, and manage to sell something for a hefty payday a few years down the road, you can go back several years (5, I think) and deduct expenses leading up to the sale.

[gravesbane]

Thanks! that's the kind of response I wanted. OK here goes. Let's see I need a new computer, notebooks, pens, general supplies. Oh, I need to add a new room to the house (my private office). Hire JB as an consultant. I'll need to attend every Con from San Diego to New York. Happy deductions everyone.

[meg_evonne]

Thanks! that's the kind of response I wanted. OK here goes. Let's see I need a new computer, notebooks, pens, general supplies. Oh, I need to add a new room to the house (my private office). Hire JB as an consultant. I'll need to attend every Con from San Diego to New York. Happy deductions everyone.

From a practical stand point...  You left out some writers conference that is a WHOLE BLASTED 6 weeks called Clarion or something similar. Mickey mentioned it about a year ago and I've since had someone else mention it. Yeah, my staff have patience but I run a democracy here and they would be justified in lynching me if i even brought it up.... 

Seriously, spend a little bit of time with the trade magazines for whatever you do for a 'normal' job and crank out a couple interesting articles.  Adds to your resume and you can at least deduct anything up to that amount.   If you hit the big time, that self-employment tax is a killer.  (Hint Incorporate!)

Reading agent websites has become a hobby.  I feel like a lurker...  One suggested authors shoot for one fiction and one non-fiction.  Don't laugh.  The online classes I took all said that getting a non-fiction book published was a breeze compared to fiction.  Also beefs up a resume.  My trouble?  Why do I want to take my writing time to write something i do all day at work?  Still--it's another avenue.

[gravesbane]

I know what you mean about the self-employment tax. I've been self-employed for almost 14 years.

I hadn't thought about writing articles for the trades, but that is a good idea.

[KevinEvans]

We lump in our writing in with our other incomes.

Any income from a publisher over a set amount ($600.00 I think) demands a 1099 from the publisher be sent to you. We added the received moneys in and then took the deductions for our writing expenses for the year.

Allowable deductions include convention expenses (travel, lodging, convention fees, etc.) also business expenses such as writing tools, (laptops) and communication costs (phone calls and net fees) even depreciation on a vehicle that 60% or more the mileage is used for supporting the writing.

The most important thing is to keep very good records, and make them organized. The more you claim the more likely an audit by the IRS is.
Hope that helps,
Kevin

How do you write off expenses in year one of writing when you won't see any income till years two? What if you can't get the thing published at all? Any comments from you all will be greatly appreciated. Thank you.

[Cathy Clamp]

Since I just got done sending in my taxes for this year, here are the categories of deductions my (very conservative) CPA is happy to include on my Schedule C:

Postage/FedEx/UPS
Printing Expenses (for pre-ARC manuscripts to reviewers)
Book copies (that I have to buy myself when the free books from the publisher are gone)
Misc./Gifts (for agent/editor holiday tokens, gift baskets, donations to causes)
Website maintenance/design
Print ads
Promo goodies
Office supplies/software/equipment
Dues & Subscriptions (trade magazines, organization memberships)
Professional Fees (Agent, entertainment attorney, accountant)
Meals & Entertainment (conference dinners, lunch meetings with other writers, etc.)
Book Conference Fees (just the dues. Other stuff goes other places)
Hotel/Valet (for conferences or book signing tours)
Travel (for . . . well everything. I think it's up to 42 cents a mile for car travel.)

Hope that helps organize your thoughts on what sort of receipts to keep track of.

[gravesbane]

Yes it does thanks.

[Richelle Mead]

I was able to deduct stuff before I was published.  Conferences in particular qualify as you educating yourself for a potential career, and the travel expenses go along with those.  I think there were some other things...seriously talk to a tax professional.  I think you'll be surprised at what you can do, even not published.  And once you are published, yeah...the deductions are crazy.  I was astonished at how much I was able to write off this last year.  The downside, sadly, is that being self-employed means having to pay Social Security twice as part of the self-employment tax.   Being published will also mean paying quarterly taxes on your own since the publisher doesn't deduct them.  Seriously...talking to a tax person.  Good luck!

[meg_evonne]

Richelle, ask your CPA about incorporating.  You pay yourself a smaller salary (make the FICA even lower by dumping as much as you can into a SIMPLE IRA), then pay yourself dividends which bypass FICA completely and are (or will be) lower than your tax rate.  I think you get to deduct your health insurance premiums as well that way as a direct expense.  Just put away for retirement as your Social Security draw will be very low. 

Incorporating is a simple matter of filling out a form and having an annual meeting, (anywhere you'd like to have it on the globe).

[gravesbane]

Kool thanks for that tid bit.

[Yeratel]

Incorporating is a simple matter of filling out a form and having an annual meeting, (anywhere you'd like to have it on the globe).

Just as a subnote, writing off travel expenses for your annual S-corporation meeting in Hawaii is a good way to attract the attention of the I.R.S. auditors.

[meg_evonne]

Really?  Well-we usually just drive to Chicago and see the cubbies!  I have used two overseas trips and luckily nothing triggered.  You only get to write off one day plus travel, (which is the most expensive day your are there of course) but if one were a writer there surely would be the excuse of research? :-)

I will also contact and visit a State Farm office. We share ideas (such as tax tips), management ideas, office building etc...so I write off that day as well. 

[Richelle Mead]

I believe my CPA did mention incorporating at one time, but for whatever reason, it didn't seem like the best choice.  Things keep changing with my career each year, though, so who knows what'll happen in the future?  I do have a SEP IRA right now that I really should be putting money into vs. my savings account.  The nice thing is that when you do taxes and decide you'd benefit from putting some of the money away, you can then put something in the IRA for the previous year, so long as it's done before April 15.  If that makes any sense.