Write Off That Income
By C. Hope Clark
The average writer gives too much money to Uncle Sam at tax time. So do most self-employed people. We get so caught up in the doing that we forget about the
accounting due by April 15 each year. Make sure you keep every penny you are entitled before signing that tax return or writing that check to the Internal Revenue
Service.
Hopefully, you are claiming "writer" as an occupation on your tax return. If you wish to remain in the hobby status of writing, that is fine, but all those expenses stay expenses and
come out of your pocket. You actually pay taxes on those expenses because you did not write them off. But the IRS expects you to make a profit every three or so years to justify your hobby as a career. You can't always claim a loss. But any amount is a profit. One year I claimed $17 in the black side of the ledger, and I proudly showed it on my 1040 form.
Before we get too far, here goes the disclaimer. I am not a legal authority. I just like keeping my own money. Spawned from a family of tax planners and retired from a career in financial management, I thought I'd give some personal insight into what you need to claim on your return to keep those dollars at home. But always talk to your own tax preparer.
The Workplace
You work at home. You have the option of claiming your workspace as an annual expense whether you rent or own. Just make sure that space is purely for work and easily defined. Say your spare bedroom is your office and it measures 10 X 10 or 100 square feet. Your house is 2000 square feet total. Five percent of your
mortgage interest, insurance, utilities, property taxes, and homeowners association dues are writing expenses. Same holds true if you are renting.
Mileage
You drive to the office supply for paper and toner after going to the grocery store. Claim the mileage. Going to the grocery store doesn't negate the expense. Going to the bank for both the writer account and your personal account? Claim all the mileage. Even if you mailed your nephew's wedding present while dropping off a manuscript at the post office, count all the mileage. The six miles to the writing club meeting, the ten miles to Barnes and Noble, the twenty miles to the state park for quiet time to write all qualify. If you sent your teenager to pick up your copies at the printer, count it. Keep a log in each car and get used to noting the odometer before you start the car and before you get out of the car. It becomes a habit, I assure you. This year you are authorized 37 cents a mile for those expenses. That adds up considerably.
Communications
The ability to write off expenses often opens doors to efficiency. Get that second phone line, connect to high-speed online service, and obtain a better cell phone. And don't forget the cost of website hosting, e-commerce fees, and domain name costs.
Office Supplies
You remember to save the tickets when you buy a box of paper or $50 ink, but what about pens, paperclips, envelopes and labels? Don't let the dollar value determine your record keeping habits. Even if you do not log each expense in a ledger, at least have a file folder to drop those sales tickets. If you picked up pens at the grocery store, circle the expense. If you picked up postage while mailing a birthday present, ask for a receipt and circle the business expenses. The pennies add up.
Subscriptions, Memberships
What writer doesn't belong to at least one organization? The fees are tax deductible. So are your magazine subscriptions to Writers Digest, Poets & Writers, ByLine Magazine, and The Writer.
Education and Professional Development
I attended a conference by the Arizona Arts Commission to learn about their policies and guidelines. While there, I passed out my business cards. The mileage and parking came off my taxes. I attended a community arts festival to see the romance authors' booth and see how they promoted their work. Another expense. Online classes, community college classes, even private classes or meetings with other authors all can count as professional development. Claim the mileage and any other expenses. I met with an author at her request last year to advise her about a grant. I claimed half the meal and all the mileage as allowed by law. And don't forget those ebooks you download periodically when temptation gets the best of you.
Promotion
Advertising, printing flyers, and business cards fall under legitimate expenses. Even the trips to three different printers to compare costs count. Bookmarks, posters, banners, tablecloths for the book signing table, and the wheeled tote that carries that tremendous weight of books you lug to shows are real and authorized expenses.
Depreciation
It is so easy to forget some of these items. And once you place them under depreciable assets, make sure you maintain that list from year to year. Such items can consist of your desk, chair, fax, computer, laptop, printer, bookcase, lamp, phone, whatever you use in your work that is not a one-year claim item. Furniture and computer are easily identified but list everything in your office then check the IRS code or talk to an expert. No one wants to claim something they should not, but chances are you omit things you
can claim. Do not short change yourself.
Software and Electronics
Website software, Windows, that screenwriting software, the query organizational software, that Office upgrade, your tax preparation software, and the virus protector help minus out your income as well. The calculator, palm device, ebook reader, cordless mouse, or any other electronic device that makes your writing life more productive also help keep more of that writing income in your pocket. Make sure, however,
to find out whether they fall under "supplies" or "inventory." Sometimes your computer related inventory can be claimed in one year. Read your IRS code, study your tax software, or discuss this with your tax
preparer.
Medical Insurance
As a sole proprietor entrepreneur, you can write off 100 percent of the cost of health insurance. That is a biggie! However, that does not mean you can claim 100 percent of your premiums because you are claimed on your spouse's insurance at work. Two totally different categories.
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Your taxes deserve some attention, and while we usually start considering taxes after we throw away Christmas wrappings, maybe you should place a higher priority on the task. Start thinking about 2004's taxes in January 2004 instead of January 2005 while you dig for receipts and try to remember what you accomplished, bought and sold. A Quicken program or financial spreadsheet that is managed as you go is optimum. At least have designated files for expenses, receipts and capital purchases, and if you do not have a car logbook for mileage, note mileage on your calendar. You enjoy earning those writing dollars, and when the checks are not regular, they become precious. Why risk losing them to the government when they can remain in your pocket where they belong?
C. Hope Clark is founder of FundsforWriters at www.fundsforwriters.com,
where she provides insight and information on funds, grants, contests, markets and general writing employment. She resides in Phoenix, Arizona with her secret agent husband, and infuses writing into her newly acquired time as an empty nester.
