Writer's Guide to Taxes
You've made your first writing sale. Now what? Part of the job of being
a writer is reporting that income to the IRS. What do you need to know?
Do I need a minimum income before filing?
There is no minimum. Report everything of a dollar or more. But there
are easier ways to report small amounts of writing income.
- Income less than $400 per year can be reported on the front page of
IRS Form 1040 as Miscellaneous Income without the details.
- For income above $400, use IRS Forms Schedule C and Schedule SE with
Form 1040. You can use Schedule C for less than $400 to deduct expenses
to reduce your income tax. $400 in gross receipts can be reduced to zero
net income for tax purposes.
What is deductible?
Schedule C is required to deduct writing expenses from writing income.
The payment you received for writing is called Gross Income. Subtract your
costs from the Gross Income to get the Net Income. Some of those costs may
- Paper and note pads
- Computer supplies
- Pens and pencils
Use a blank Schedule C to research the standard categories.
Specifically identify in the lines for such miscellaneous items as:
- Professional publications (i.e., subscriptions to The Writer's
- Professional associations (i.e., Mystery Writers of America)
- Professional functions (i.e., writers conferences)
Keep all of your receipts. Don't just dump them in a box and forget
about them. Take the time to organize them. Otherwise you and your
accountant will be scrambling when it's tax time.
Can I deduct my home office?
Yes! The percentage of floor space used exclusively for business is
applied against the total habitable floor space. The resulting percentage
is applied to the costs for rent or mortgage, insurance, and utilities
(power, gas, electric, water, sewer, but not the first telephone line, nor
cable TV, nor the Internet). Set aside a whole room only for writing.
What if you live in a small apartment? Set aside a corner of a room
exclusively dedicated to your writing.
Can I deduct too much?
Err on the safe side and don't deduct more than your gross receipts
from writing. The IRS believes any business that loses money over many
years is a "hobby," and hobby losses are not deductible. Hobby income can
be offset with hobby costs, but no further.
Where can I get help?
The best source for help is the IRS' written instructions that come
with the forms. The forms and publications are available at post offices,
libraries, on the IRS Web site at http://www.irs.gov, or call the IRS
Forms office at 1.800.829.3676. You'll need the Form 1040 package with
Schedules C, SE, and instructions.
How long must I keep records?
Three years from the date of filing, plus a few months for any IRS
notice to be lost in the mail. When disposing of financial records, keep a
copy of the return. Make sure you remember to shred anything you dispose
of so no one else can get your social security number.
Though everyone hates dealing with taxes every year, you will save
money by knowing the facts. Knowledge will help keep you focused on what
you really need to do--write.