Over the last couple of weeks the topic of the business of
writing has come up on various chat lists. Since I have been operating my
free-lance writing and editing business as a professional since the 1980s, with
a bow to the IRS every year, I thought this might be the time to start talking
about how I do it.
Even though the end of the year is four months away, and the
filing date for tax returns is a full three and a half months after that, the
best time to get organized is now. If any writer is going to file taxes as a
professional, you have to be organized and ready before the deadline.
There are several programs that will allow you to keep your
information on the computer, and from there you can easily load it into Turbo Tax.
You can also keep it in a simple ledger or account book. At my day job, our
accountant/auditor uses the computer, of course, but their records include a
huge ledger into which they glue (yes, glue) copies of the important statements
and documents. As a great fan of Charles Dickens, I find this charming and
oddly comforting.
My files record everything related to my business of
writing and editing each year--all income (publishing, teaching, talks,
consulting, editing) and expenses (and this is where you have to be careful, to
satisfy the IRS).
I record my income and expenses by month. I categorize almost everything under one of
the following headings: Income, Office Expenses, Dues and Publications, Telephone,
Travel and Entertainment, and Books. These headings should make clear what the
basic deductible items are--any money received as a writer/editor/teacher
(except salaries), any shipping of books, postage, gas and tolls while
traveling to give a talk or serve on a panel, dues in MWA or Sisters in Crime,
or any of the other writers' organizations. I record conference fees separately, since I don't attend conferences every month. You can record under these categories things like printer toner, paper,
envelopes, food at conferences, and mailing samples of your work or stories to
magazines. The library you build as a reference resource is also deductible, though the IRS has special guidelines for books. Even Turbo Tax is tax-deductible.
Don't overlook where you do all your writing and editing
work. If you work at home as a writer, you can deduct a portion of your house
or apartment that is dedicated to your work. If you have a dedicated space where you work as a writer and do
nothing else in that space, either a room or a portion of a room, that space is deductible. If you have a home with five rooms and
one is your office, then one-fifth of your mortgage or rent is deductible (but
you can't use this space also as a guest room or sewing room, for example; it must be dedicated to writing). If you live in
three rooms and use half of the dining room as an office, you can deduct
one-sixth of your rent or mortgage if the space is dedicated to your work. The same percentage can be
deducted for utilities, home owner's or renter's insurance, water, and real estate taxes
(though you can sometimes take those off entirely in other ways).
The key to making all this work is receipts. You have to
keep track of everything you earn and everything you spend. I have a ledger and
a file box for each calendar year. I save and file all receipts, if they have anything to do
with my business. At the end of the year, I fill out the ledger. When it comes time to do the taxes, I have
totals for the year and just plug them into Turbo Tax.
I think it is important for anyone who is serious about
writing to keep track of income and expenses, to track their work as a business
and not a hobby. The IRS will consider your writing a hobby if you are not
conscientious about this aspect of your life. You don't have to make a lot of
money, but you do have to be professional in how you manage your financial
affairs.
Tags: writing, editing, IRS, business of writing
Tags: writing, editing, IRS, business of writing


