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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 include:

  • 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:

  • Postage
  • Professional publications (i.e., subscriptions to The Writer's Digest)
  • 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.

Summary

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.

 

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Emory Hackman

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