Writing as a business

If you're a writer and you plan on making money from it you should treat your writing as a business. Even if you are just starting or have made very little so far, you still need to seriously consider your writing as a business--here's why.

  • If you travel to do research, the mileage is deductible (only applies if you have a home office).
  • If you can establish a home office, you can deduct the portion of your utilities, home insurance, rent, home loan interest, and several other items off your business income.
  • Meals, trips to to conventions (i.e. DragonCon), and purchases of educational and writing-related publications are deductible.
The only downside to forming a business is the extra taxes you must pay on your earnings. If you're receiving good royalty payments and you have very little deductible expenses then perhaps just claiming the extra income is your best option. The only way to know for sure is to run the numbers. In my situation, having a business is the way to go.

So now that you've decided to form a business, now what? First, go get yourself a copy of Home Business Tax Deductions then study it. Don't just read it, study it. Tax law is a complex subject and it's easy to miss an important detail. Next, take the following steps:

  • Establish a LEGAL home office. Record the dimensions of this office area and take a picture of it.
  • Start a business journal. State the date the business was started and then continue with entries documenting important business activities. It's sort of like a diary for your business. You can use anything from a paper notebook to a cross-platform, cloud-based solution. I use EverNote because I can make an entry from any device.
  • Open up a separate checking account for the business. This is not required but is highly recommended.
  • Get or designate an existing credit card for business use only.
  • Get into the habit of documenting everything you do that is business related. Record the reason for and the mileage of every trip. Record when, where, and who you had business meals with. Record the time you spend in your office and the time spent using shared resources (like a computer that is used for business and pleasure). The IRS loves to see documentation--meticulous documentation. I like to use Google calendar so I can record every business activity in half-hour increments and I can access it from any device I own.
  • Get yourself some business cards.
  • Set up a website.
  • Create an e-mail for business use only.
Above all else, document your business activities and become familiar with how to treat your writing activities as a business. I would also recommend doing business as if you expect to be audited. Home businesses are audited more often than normal tax payers. If you keep your deductions legal and maintain accurate and timely documentation you will sail through any audit. The IRS realizes that many people try to claim more than they are allowed. Don't do this! Honesty and faithful adherence to the law will keep you out of trouble.

I am not a tax expert but if you have any questions as to how I do things myself, please feel free to drop me an e-mail. I can be reached at: author@dougfarren.com