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 (http://www.eclectics.com/articles/taxes.html),
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 (http://www.artstaxinfo.com/writers.shtml)
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!
