Saturday, November 24, 2012

Small Business Saturday (& Taxes)

by Kaye George

I like the concept that’s being promoted this year. Friday is the day to camp out and burst through the doors of major merchandisers. The people who wrote the SBS ad campaign realize this, they’re not fighting that tradition, but they want you to consider patronizing small businesses the next day. (I didn't realize this concept started in 2010 by American Express. I would have thought some small business organization would have started it.)

Small businesses are good, right? Buy local!

If you’re a writer, you’re a small business, too. If you’re self-published or traditionally, you’re still a small business (unless you’re a big one and everybody in the world knows your name). Next month will be the end of your business year if you run on a calendar year. Some time between January and April, you’ll have to start getting your expenses ready for filing taxes.

There are, surprisingly, a few writers who don’t know the special rules that apply to them. Even seasoned tax consultants sometimes don’t know! So I’m here to tell you! (I recently posted a similar article in the Guppy newsletter, but feel it deserves all the audience it can get among writers.)

There is a well-known Hobby Rule that says you can't take deductions if you don't make a profit in 3 out of the past 5 years. This does NOT apply to writers. I've collected a few articles that shed light on this and I'd like to share them here.

The bottom line is that writers can take deductions for an indeterminate number of years, since even the IRS knows how hard it is to make money as an author. There ARE certain things you should do to prevent coming up short in case of an audit, however.

I'll mention that I'm not an authority. My tax experience is limited--I prepared taxes for H&R Block for a few years and don't have any degrees in accounting--but I do keep alert for parts of the tax code that affect me.

The source files I've collected are too long to include here. One file is 4 pages long, the other is 18 pages long. I'll give you the locations where I got them, though, in case you want to collect them together for yourself.

Here are the highlights.
You can help your case by being professional about your writing: joining writers' organizations, spending time networking, keeping good records of how you spend your time, showing that you're attempting to get into publication by submitting and keeping records of that, taking classes to improve as a writer to demonstrate effort toward publication. You can even make money some years and not other years if you can show the above things to an auditor.

This article (, called Authors and the Internal Revenue Code by Linda Lewis, goes into great detail and cites lots of IRS Section codes. It also enumerates the classifications for deductions. It's helpful to me to put these on a spreadsheet and keep track of them throughout the year so I can slap them onto my Schedule C when the time comes. OK, I won't tell you how many months I'm behind in this task, but I do have the spreadsheet and a folder full of receipts. There are cases in this article to illustrate right and wrong ways to go about being a writer.

One last link ( to an article by CPA Peter Jason Riley, goes over expenses in detail a little differently and has some PDF and Excel worksheets you might find useful.

Please look at the original articles I've given links to before you do your taxes next year if you've been unaware of these details. The life of a writer is hard enough--no need to make it harder by not taking your deductions.

And happy shopping at your local stores!


Earl Staggs said...

Great information, Kaye. Thanks.

Kaye George said...

You're welcome, Earl. I cringe when I hear that accountants tell writers they're subject to limited years of the Hobby Rule! Trying to shed a little light. :)

Edith Maxwell said...

Thanks, Kaye. I think I'll send a link to this post to mynew tax person (who told me her sister is a writer, but she might still want the info).

Carla King said...

Hi Kaye!

We know each other from the Guppies group. I'm working on my first mystery novel, and although it's not complete, I've accrued some expenses. My understanding is that I can still expense certain things as long as I'm treating my writing endeavors as an intended income earner. Thanks for these links. I'll have to review them in depth to learn more.


June Shaw said...

Thanks for the info, Kaye. I've printed it and will place it in my tax file.

Kaye George said...

I'm so glad this is helpful!

Jacqueline Seewald said...

Lots of good ideas and information here that's helpful to us writers!

marja said...

Thank you so much, Kaye! I knew some of what you talked about and learned a few new things. Great post!
Marja McGraw

Kaye George said...

I'm so glad this is useful!