Introduction: this piece was written by author/editor Mary Anne Mohanraj and is noded with her permission. Of this article, she writes: "I am not a tax accountant. This is just what a moderately bright writer could figure out from the IRS forms and booklets."
I'm just finishing my taxes -- this information might be helpful to you,
especially if you're in graduate school for writing. You can call
yourself a writer even if you made no sales last year.
This year, I got a $1100 refund. This is why:
- I'm filing as a self-employed writer
- I worked half the year and had pay deducted for taxes, then went to
graduate school to get an MFA -- all of that pay is coming back to me.
What I deducted:
- General supplies (paper, pens, stamps, envelopes, etc.)
- Books (All the books I bought. Yes, all of them.)
- Computer (I bought a computer in the fall -- keep in mind that
computers depreciate over time, so if you've had yours a while, that gets
complicated.) (Noder's note: the depreciation form is hairy as all get-out and is written for accountants rather than regular folk; I found this the most time-consuming step in the whole process. You may need help with this bit).
- Travel expenses to conventions (I write SF/F and go to SF conventions. My registration fees are deductible, as are my hotel bill and airfare to get there.)
- Meals at cons (I didn't bother, but you can deduct 1/2.)
- Tuition -- this is the big one. The key requirement of getting to
use this is that it can't be tuition needed to maintain your current job --
it must advance you. And it can't be for a change in jobs. So if you're a
writer already, and think you can make more money by getting an MFA,
then it counts as professional development and you can deduct it.
- Textbooks, if you didn't already deduct them under #2
- Moving expenses -- I moved from Philly to CA to attend grad school. A
move that is at least 50 miles more than the distance you already travel
to get to work is deductible if you moved for work-related reasons, as
above. I haven't filled out this form yet (doing it today), so I'm not
sure how much of the move is deductible. I'm assuming the airfare and
shipping expenses.
You can also deduct:
- Your relevant on-line expenses such as internet access fees
- Magazine subscriptions
- Phone calls to editors or fellow writers on business
To do all this, I filled out a Form 1040 (not A or B, since I took the $4000 standard deduction rather than itemizing separate non-writing deductions),
and a Schedule C (Profit or Loss from Business). If you had a profit, you
might be able to fill out a C-EZ instead -- very quick, but keep in mind
that you have a profit of more than $400, must also fill out a SE - self-employment tax form. Also fairly simple, and remember if you do, that 1/2 of your self-employment tax is deductible (line 25 on the 1040). Doing my taxes took about 40 minutes, including 15 minutes on the phone listening to their recorded messages on educational expenses and moving expenses.
I hope all of that was clear. I'm not a tax whiz, but I've been filing as a writer for a couple of years now. Also keep in mind the following:
You must show a profit in 3 out of 5 years, or the PRESUMPTION changes
from business to hobby. Your job, should you wish to accept it, is to
overcome that presumption. The best way, of course is to show a
profit. But there are other ways. Send out materials regularly, keep
time logs showing frequent effort, do all the things someone really
intent on making a living at that kind of work would do (whatever those
things are). Also, to prove your efforts are taking a reasonable
amount of time to show a profit, make a file of descriptions you run
across of how long it took various authors to finish and find
publishers for their books.
Your hopes of profit must be reasonable. Poets don't live off their
poems, so your claim that you intend to is suspect. But novelists
often take 4 or 5 years to finish a book, researched non-fiction can
take even longer and still be a reasonable investment of time and money
when compared with reasonably expected financial results.
The IRS publication on small business should have the current
business/hobby rules spelled out.
Someone not yet commercially published might prefer to take no
deductions until the day s/he finds a publisher for the first book, and
then go back and do amended returns for the three prior years. The
choice would be to give up possible deductions for the years in excess
of three instead of taking the time to convince an auditor that those
deductions are valid; but I have read that some authors have taken
deductions for a dozen years and survived resulting audits.