This week I decided to get down and dirty and and practical and send up a few warning flags BEFORE tax season approaches.
We're writers, we love to play with words - numbers, not so much.
But writing is a business and if we want to be in the game and take full advantage of tax deductions in light of what writing costs US, then we better be on our toes and pay attention.
Ahead of when the tax man commeth.
So here are a few tips that you should be following all year long, not just as (horrors!) income tax deadline swings around.
The biggest thing you need to do is maintain good documentation of all your expenses. Keep those receipts. List them clearly in a notebook or if you're up for it, use an spreadsheet, learn just a little about basic bookkeeping and spread out your income and expenses in a professional way. Simple double entry bookkeeping is a snap and it's a great way for your to keep an eye on what's going on financially.
As a writer your expenses include things like postage, office supplies, reference books, computer hardware and software, possible conference travel expenses, dues for membership in writing organizations, possible contest entry fees and possible web access fees (at least half can be attributed to your business if you're using it to send queries and proposals, do research and the like.) Your expenses might also include mileage if you travel for your writing (keep a detailed mileage log if that is the case). You might be able to claim a home office which would include a portion of utility bills, home maintenance and repair bills, etc. (I, personally don't do the home office despite the fact I have one, for a lot of complicated personal financial reasons). You might want to do some detailed research to be sure what you think is deductible really is. A consulting visit with a bookkeeper or accountant to get you started would be a good idea.
Once you have a good grasp of what expenses are supported by your writing, keep good, clear records, save those receipts, and don't toss it all in a shoebox and expect someone else to figure it out. What might take you just a few minutes a week to keep up with would take someone (or you!) hours at the end of the year to sort out. Don't let yourself get caught in that trap.
Track your income as well, and don't try to hide it!
If you get called in for an audit (for some reason the IRS seems to love auditing artists and writers) you're going to need to be able to produce your records quickly (they also seem to have a habit of giving short notice). Be aware car expenses are one of the most common audit items so keeping that mileage log and keeping up with what the current per mile allowance is is critical if you spend much time in the car associated with your writing.
The IRS may also come back at you and claim you have no right to claim deductions related to your writing as those writing activities don't constitute a business.
Horse hockey. Keep very clear records of the writing you do, the proposals you send, the responses you get and emphasize that you run your writing 'business' in a professional manner and publication and income is your goal. Keep track of everything you do publish. Substantiate the time you invest in your writing business. If you go to the IRS website at http://www.IRS.gov and type in "business or hobby" in the site's search box you'll pull up helpful information on the distinction the IRS makes between business vs. hobby.
Be cool, be polite and be sure you've done your research ahead of time. Oh, and don't fall for that "you can just pay the proposed amount due to avoid any additional penalty and interest" line that comes with many an IRS audit letter. You can stand up for your rights and get matters straightened out in your favor. Don't forget, folks who are auditors are people to - they can make mistakes. Educate yourself. If you can possibly afford it, use the services of a great bookkeeper or accountant.
This doesn't take as much time as it seems at first glance and once you have tracking expenses as part of your routine believe me, your writing will flow with much more peace of mind.
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