Is there anything less conducive to creativity than income tax preparation? My imagination flees. My desire to write takes a vacation. My incentive dries up. My brain freezes. My heart sinks out of sight. I dread walking into my home office and looking at the ledger lying on my desk, warning me that the sharp talons of misery are waiting to grip me.
In short, I hate it.
Cue up the violins playing in the background because who doesn’t detest this annual task? I am hardly alone. I try not to be such a baby about it. I crack the whips of fear and self-discipline to make myself start. Procrastination is only going to make it worse, right?
My annual New Year’s resolution is always to break this behavior and start keeping up with my accounts on a weekly or monthly basis so that the actual prep is a quick snap to do. But I never keep the resolution. Never. Occasionally I try, and my resolve will hold on somewhere between February and April. After that, I’m gone.
In other words, I do my accounts once a year, which makes the whole job much much much worse than it need be.
Still, it gets done somehow. And then I shove things out of sight–files and ledgers and calculators and scraps of papers–until next time.
So, if you sell your book–woo-hoo!–or a short story or a novella or a magazine article, (and whether you go through a traditional publisher or self-publish electronically)–if you sell your written materials, you will have to file a Schedule C form on your tax return and report the income. Along with that, you’re entitled to take deductions. Although they continue to dwindle, you should know about the ones that are not yet extinct. Given that not all accountants and tax preparers are conversant with writer deductions, here are a few things you should know so you can consult successfully with your professional tax adviser or CPA. (The following does not constitute official tax advice. Always consult with a professional.)
The home office deduction. In the past, this was a dicey, muy dangerous deduction to take. You had to have an actual room dedicated to writing. (You still do.) None of that corner of the kitchen table business. Then you had to really tiptoe through the landmines of what was allowed and what would get you audited. However, IRS rules have changed somewhat on this one. So many people now work from home that the Feds have created a standard deduction that you can take. It’s much easier usually to take the standard deduction instead of trying to calculate the square footage of your house versus the square footage of your office to determine the percentage of your utilities you can deduct. I think this one is still being tweaked, however, so be sure you find out exactly what you can and cannot deduct here. But if you qualify, O ye hardworking writer, take it!
Equipment. Do you need bookcases? A new printer/copier/fax machine? A new computer? A lamp to see by? A fabulous ergonomic chair that will help you write comfortably for long hours? A great camera for your blog? Sometimes you have to depreciate expensive items, which means spreading out the deduction over multiple years, but your accountant can advise you on the best approach.
Car mileage. This one requires keeping a–sigh–mileage log. You can purchase little books at the office supply store that have entries for the day’s beginning and ending mileage, what the trip was for, etc. (And make sure you deduct the cost of the log.) For many writers, the mileage log may not add up to a lot of miles. See, we’re sitting in our computer chair, writing, instead of going places. Used to, jaunts to the post office to mail manuscripts, to deposit royalty checks, to go to the library, to shop at the office supply store, to browse at the local bookstore, etc. were all legitimate errands for a writer’s business. Now, we email our manuscripts, we may deposit checks via our smartphones, use the Internet instead of the public library, and browse on Amazon.com. All those conveniences erase our deductions, alas. However, if you conduct in-person interviews, or travel for research, or don’t care to deposit your checks via your phone, then you should keep the mileage log. At over fifty cents per mile, those little trips across town and back can add up quickly.
Office supplies. After shopping in a bookstore, the office supply store is one of my favorite places to visit. You may do everything via your computer. I combine low and high tech, so for example I stick Post-Its to my AirBook lest I forget something. That’s because I’m a visual person. I need the note where I’ll see it, not have it buried in some computer file or reminder app on my phone. So I need Post-Its, envelopes, pens, file folders, tape, thumb drives, paperclips, and printer paper. All the wonderful paper-oriented products that the modern world is trying to dispense with. Computer software programs and anti-virus software fall into this camp as well. (As long as you’re not buying games for your five-year-old.)
Internet service. The IRS expects writers to keep a log of how many hours they clock on computer usage, especially if the computer is shared among members of a family. My computer is shared with no one. My Internet access is for my business use, so I deduct the cost of it. Your CPA may suggest that you deduct a portion of your communications costs. However, your business phone line, your Internet access, the costs of your Wi-Fi router, etc. are potentially all deductible.
Meals and travel expenses. If you travel to interview someone or you travel to writers conferences, you can deduct your transportation and hotel costs, your conference registration fees, and a percentage of your meals.
Books, magazines, and movies. If you write novels, part of your job entails knowing your genre and the market, which means you’re reading novels constantly. Those are deductible materials for a professional writer. If you write magazine articles and/or you are perusing journals for research, you can deduct the magazines you read. If you rent or purchase movies in order to do research, you’re writing a filmscript or teleplay, or you need to input the plot to feed your imagination, you can deduct those costs. Going to a first-run movie in a theater, however, is a gray area that might get you audited. See what your CPA thinks. Mine gives me a thumbs down on that one.
Professional services. This covers such expenses as paying your CPA to do your taxes, or hiring a cover artist to design your next e-book cover. And although there are DIY options, you may prefer to spend your brainpower on your plotting instead of design. You may want to hire a company to make a video book trailer that you can put up on YouTube or your Web site. You may need professional assistance in designing your Web site or putting up Podcasts. If you’re selling very well, you may need to hire an assistant to handle your emails, PR promotion, and/or research. If you have a literary agent representing you, then the agent’s commission is deductible.
Donations. Find a few charities you like and give to them. You may want to donate to your place of worship, or to organizations like First Book that support literacy, or to some other cause near and dear to you. Besides monetary contributions, if you decide to clean out your garage and donate a pile of stuff like old sporting equipment, toys, and that bike you can’t use since your knees went bad, then you should itemize everything, assign each item a garage-sale value, drop them off at a donation center or arrange for an organization to come to your house and pick them up, and deduct the value. Make sure you obtain a dated receipt from the organization and attach your itemized list to it for your records. Such clean-out donations are easier to cope with than holding a garage sale, and sometimes the deduction from your taxes will profit you more than whatever cash you might earn from a sale. However, be sure your records have the name of the organization and its address because that information must be provided to the IRS.
While there are a few more deductions that you can dig up to ease your tax burden, these are some of the major areas available to writers. Good luck and may the task of doing your accounts prove less onerous to you than it is to me.