The biggest problem is the pesky hobby rule, often misunderstood by writers and CPAs alike. Some writers, even a lot of tax accountants, think the IRS hobby rule applies to writers. It doesn’t have to, if you’re serious about your writing.
To begin with, take a look at this IRS publication: http://www.irs.gov/irs/article/0,,id=186056,00.html
If you’re starting out as a full-time writer, you don’t have to declare income 3 of the last 5 years if you satisfy some requirements.
The important points for you, as a beginning writer (not making any money), from this article are:
- Does the time and effort put into the activity indicate an intention to make a profit?
- If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
- Do you have the knowledge needed to carry on the activity as a successful business?
- Do you expect to make a profit in the future from the appreciation of assets used in the activity?
You can report losses on a Schedule C for quite a few years before the IRS will take a look at you. See this article, which elaborates on the above:
This link gives some checkpoints to make sure you’re fulfilling the requirements:
You can see that it’s important to be keeping records of submissions, classes, time spent, and to conduct writing as a business in every way you can. Also, of course, keep track of what you can deduct.
This article goes into exquisite detail: http://www.eclectics.com/articles/taxes.html
This one includes some forms to help you keep track if you don’t already have some that you like: http://www.artstaxinfo.com/writers.shtml
I hope this helps. Don’t lose out on loss deductions that you’re entitled to. And may you someday be declaring a profit! I did last year for the first time in 12 years. It was a small 3-figure profit, but maybe someday it’ll be more.