Before I begin, I’m not a tax expert, but I’ve been a writer for a long while, a writer who has to keep receipts and records in order to do the best I can when it comes to filing a tax return. I don’t do my own, and haven’t since I got into this business. Be smart and find a CPA who can do your returns, unless you’re a tax expert. In that case, you probably can stop reading right here. I know what my CPA has me do.
If you are actively writing and submitting materials, whether they be articles, stories, novels or books, you need to keep records of your expenses. The first thing my preparer told me was that the IRS does not decide your business is a hobby. Be active, keep everything and as long as you have an income, you can deduct the items.
The most important deduction you will have is your mileage. Carry a book in the car and keep good records of date, mileage and odometer reading every time you do anything connected to your writing. That’s meetings, conferences, research, travel to interviews, anything. You’ll get a bigger deduction there than anywhere else.
Internet costs when used for your business. Your domain name and upkeep, webinars online, the cost of your DSL or whatever gets you online. My cell phone is used for business only. I do not give out my number to anyone but my daughter for emergencies, and use it strictly for travel and business contacts when traveling, so I deduct the entire cost. I have a phone with no contract, so this isn’t a lot.
Postage expenses if you still mail manuscripts or do any other business through snail mail. Costs of belonging to writer’s organizations. Cost of conferences, motels, meals, and of course mileage. Keep track of everything. If you don’t keep receipts, there is a maximum allowed for meals each day during conferences and travel to and from, and I usually take that because we don’t eat out high on the hog. If you do, keep the receipts.
My preparer cautioned against deducting for a home office. That usually sends up a red flag and you’ll probably be audited. There are so many rules about that office, like it can’t have anything that isn’t used in your business in the room, like a sewing machine, a hobby table, etc. I’ve never claimed my home office, but you can if you like. It’s difficult to figure electricity, heat, etc., but it can be done by an expert.
Cost of all supplies for your business from paper clips to reams of paper, as well as equipment like printer, scanner, computer, anything else big. My preparer takes big expenses off over a period of time, rather than all at once, like if I replace my entire computer system at one time, or buy all new furniture for the office.
Books, magazines, online subscriptions are all deductible. If you have books out there already and you buy them from your publisher, that cost is deductible, but must be kept separate from the cost of books and magazines you use for research, not resale.
If you receive a large advance, you’d be wise to file quarterly. Consult a CPA for his take on this.
If you like, set up a spread sheet on your computer and keep records that way. It’s not necessary. All your preparer will want is the total of each deduction you’re claiming. He doesn’t need to see your receipts, but if you’re ever audited the IRS will, so keep each years’ in a labeled envelope. I like to staple them together by category so they’re easier to check if it ever becomes necessary. Don’t throw everything into a shoe box or an envelope without some type of organization, and keep them for 5-7 years. Depends on who you listen to on that requirement.
As you might guess, I’m going through my receipts and organizing, totaling, etc. at present. I don’t make loads of money as a writer, but I’ve been filing as a writer since about five years before my first book was published. I was doing some writing and making a bit of money prior to that sale, but I actually filed prior to earning any money as a writer, since I file jointly and we did have an income. I painted and consigned to a local craft shop and taught piano, so I had a small income besides my husband’s.
Another hint. If you do a lot of research for a book, wait until you sell it to deduct the costs of that research. For instance, in 2009 when my husband and I took off and drove all over four counties of Arkansas for an entire summer doing research, finding places to write about and interviewing people, I kept a record of mileage and any other costs in my notebook of scheduled trips. The book was not due out until the next year. When the book came out in 2010 and began to sell, then I dug out that notebook and those expenses will be deducted from sales of the book when I file this year for 2010.
It’s wise to keep all rejections handy, this shows you are actively pursuing your craft, rather than writing as a hobby. If you’re not submitting to publishers, or self publishing, then I wouldn’t file as a writer. That’s my suggestion and others may disagree.
I reiterate, I’m not an expert. So many writers I meet ask me questions about what records to keep and what they can deduct I decided to answer some of the questions I hear a lot. It’s best to consult a tax expert, preferably one who prepares returns for writers, before you make a final decision to file as a writer. He or she can advise you.
Velda Brotherton 