Well, kids, it’s that time of year again. When we start thinking about getting our taxes together for THE MAN. Or WOMAN. Whichever IRS agent has a look at your stuff.
I know. Wow, what an exciting topic. Unfortunately, it’s a reality and it’s one that self-employed folks (and most writers are indeed self-employed) have to deal with all the time. And by now, you’ve probably noticed all the tax commercials showing up on your networks. You know the ones. TurboTax and H&R Block are already at it, as those icky reminders to get your tax on. Or off, which is what deductions are all about.
For those of you living overseas in countries whose governments take care of all of this for you (and they just send you a statement saying how much you paid in taxes), I can only dream of such ease. Here in the States, every citizen is required to put together his or her own tax/income portfolio between January 1 and April 15 of each year. That means you report your income and all kinds of other things to the federal government as well as to the state’s government where you live. Some states do not have what’s called a “state income tax” while others do.
Included in this process are things we here in the States “write off” each year. That is, expenses we incurred with regard to specific situations that relate to businesses or other things (like tax deductible donations, e.g.). In my case, I have to keep track of all my expenses as a writer, since that’s a “self-employed” position and my income is what I earn in royalties. So I keep files of receipts and royalty statements. Lots of receipts, since anything I buy and use in the furtherance/maintenance/development of my work as a writer is something I report to the IRS.
And yes, royalties are taxable. So if you write, you need to keep track of those. If you’re working with a traditional house, those houses will send you a form with your total earnings for the year so you can report that. If you’re self-published, you need to make sure you keep track of your earnings because that’s reportable and taxable.
Some of the things I report as deductions are:
- writing conferences (registration, travel to and from, hotels, meals if applicable)
- promotional materials/advertising for my books and blogs
- office supplies
- internet (because without that, I definitely would not be able to work as a writer in today’s world)
- mobile phone, which I use quite a bit for business
- office space (you may be able to deduct your home office)
- shipping costs for books and promotional materials
- website/domain fees
- writing association fees
- research materials
- computer equipment (last year I deducted my new printer)
- editing, typesetting, and covers for my books
- expenses I incur as an editor (yes, money I make from that is also taxable), like my subscription to Chicago Manual of Style
So I keep track of all of this during the year. Yes, it’s a pain in the ass. But if you keep things organized during the year, it’s not that big a deal to get it all put together to send off to either the IRS (with the proper forms) or your accountant. I have one of those, so I put my stuff together for the accountant which for me is a lot less stressful than having to do my taxes myself. Yes, it costs. But it’s worth it for my peace of mind.
So readers, in case you wondered, everything a writer makes in terms of sales is taxable, which means the government can take a chunk of it. So no, writing does not give anybody “free money.” It’s income. And therefore taxable. For writers who are just starting out, keep this in mind and start getting organized with regard to your expenses and earnings. Regardless of whether you’re publishing through a traditional house or doing it indie (or both), your royalties are taxable, depending on how much you make from them.
To help you get a handle on what you can deduct as a writer, try these links:
More writer-y
Writer’s Digest: “What Writing Expenses are Tax-Deductible?”
Savvy Book Writers
Jane Friedman’s blog: on self-employed writers and taxes (Friedman is super-knowledgeable about the biz)
More business-y
Internal Revenue Service deductions info
Riley & Associates (accountants) have some cool fill-out sheets and info
Freelancetaxation.com
Kiplinger.com on overlooked deductions (some of these may not be applicable to you and your writing career, but it’s good to know regardless)
I know. Doing your taxes is a level of suckitude with which we can all sympathize. But if you stay organized and get cracking early in the year, you’ll be done a lot quicker each year.
Happy Monday, happy tax season. Or something.
Andi Marquette 
Yea for this post!! Happy Tax Season!!
As a CPA I spend a lot of time educating self-employed people (in the US) on their potential deductions and on what “income” actually is. Three places people often get confused: 1) writing Royalties go on Schedule C as self-employed income, as you said above. There is a spot on the Schedule E which says “Royalties” so some people get confused and put them there. That spot is for gas and other investment royalties, so not for book royalties. 2) Sometimes mom or dad or uncle so-and-so will give you a little help for the business- say a $1000 check so you can go buy a better computer or what-not. Those “helping checks” are not income to you. They are a gift. Do not pay tax on them. 3) Your “home office” does not need to be a separate room. It does need to be a defined space that you can point out to an IRS agent should you ever need to. It does not need to have four walls and a door that separate it out, however. That space needs to be used 100% for business purposes (and I think reading writing blogs and groups is business if you are a writer).
If you are new to being self-employed, it is worth your time and money to at least consult with a CPA or other tax professional (e.g. Enrolled Agent) who has experience doing taxes for self-employed people. If they have experience with authors or other self-employed artists, even better. A good CPA will give you detailed information about the types of deductions you can take and will take the time to respond to all your questions. I usually recommend that you have the CPA do your tax return for a year or two and explain to you how it’s done. Then, if you like stuff like that, you can go back to doing it on your own. Another option is to prepare it yourself and pay a CPA to review the return for you.
THANKS so much for stopping by! AND THANKS for the clarification on the home office! People, this is awesome advice. Stay organized, stay on top of things, and if you prepare your returns yourself, at least get a CPA to review it for you. It’s worth the money.
One thing most folks might forget to deduct is the rental on a PO Box.
Thanks!