2018-01-28

Tax time

As anticipated, I finished my first round of editing of Collision Course. The initial feedback from the those who have been allowed to read the novel so far have been positive. My content editor did a quick read-through and enjoyed the book. Now, he's going to take another pass through it to see it the plot holds water. My cover artist also enjoyed it and is now working on a cover. I will wait until I hear back from my content editor (Lee Dilkie) before starting on my second editing pass. After that, the book goes to my wife for proofing.

Tax Time
For those of you who are self-published, you should have received a notification that your 1099s are ready to be printed through Amazon's website. If you opted for paper copies, they're either in the mail or have already arrived. So now what? If this is the first time you've done taxes for your writing business you should do some reading up on the tax laws concerning what you can and cannot deduct. Hopefully, you've been maintaining a detailed set of records for your new business. If you've done this before, then it's just a re-hash of last year.

Writers should realize that the IRS does allow you to consider your writing as a business. But, you must treat it as such. If you don't, then it's considered a hobby and you don't get to deduct anything. You will, however, need to pay taxes on your writing income. So what's the difference? Mostly, it's how you maintain your records. Having a separate bank account, separate credit card, and an office dedicated to writing is pretty much proof that your writing business is a business. If you're ever audited and your writing income and expenses are mixed in with your personal accounts, you're going to have a harder time convincing the agent that your writing is a business.

One sure way to ensure your writing is considered a business is to register it with an EIN. Since most writers are a sole proprietor, this EIN will be linked to your social security number. If you've gone the route of incorporating (as some writers I know have done) then you're all set--you have a business. An EIN is not absolutely required though and you can still claim your writing as a business as long as you can prove it is a legitimate business entity. How? Documentation!

Having a separate bank account is an enormous help. It also helps tremendously when tax time comes as all of your writing finances are contained in a single source. If you use Quicken or other software to track your finances, then getting the data you need to file your taxes is even easier. So what are the advantages of claiming your writing as a business? Deductions for one.

You can deduct travel costs, meals eaten during travel, meals eaten where business is discussed, and mileage for all business-related trips. The cost of paper, computers, printers, and other office supplies and equipment are also deductible. A portion of the cost of the internet service, as well as the cost of maintaining an author website, is also a deduction. Magazine subscriptions, writing software, membership fees, and virtually any other cost associated with your writing are deductible. If you meet the strict requirements of a home office, you can deduct that as well.

If you write as a hobby, you get none of these deductions. The key to surviving an audit though is meticulous documentation. Detailed financial records specific to your writing activities, mileage logs, a business log, and other detailed documentation is proof that you treat your writing as a business.

Filling out the forms is not difficult. I used to use one of the online programs to do my taxes. The cost is minimal. Nowadays, I do my taxes by hand. I don't mind reading the IRS publications and I prefer to know exactly how my taxes are prepared. The publications produced by the IRS are actually quite clear. If you want to be assured that your taxes are done right, read the publications yourself and then do your taxes by hand. After finding a $650.00 mistake a few years ago by a tax professional, I have always done my taxes myself.