As we scratch our heads to recall the difference between a 1098 and a 1099, the writing life adds a whole other layer of complexity to filing our taxes. We’ve slaved away, dreaming of the day we’d see our darling stories in print. And then the day comes. And with it, comes the taxes.
As a disclaimer, I’m a writer by trade—whether writing feature articles or romance novels. This article is intended to be food for thought. Definitely, definitely consult a tax professional before you take any steps tax-wise. I spoke with my tax-preparer about preparing for the days when I’m actually earning an income as a writer, and I thought I’d share some of what I learned with my fellow writers.
A few tax caveats for writers:
1.) Quarterly taxes. In the eyes of the Internal Revenue Service, most writers are self-employed. And as if filing annually wasn’t stressful enough, you may be required to file quarterly. If you don’t, you could be stuck with penalties when you finally do file. According to the IRS, “As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly.” Visit the IRS’s website for the self-employed to see where you fall and read the guidelines.
2.) Hobby vs. business. The IRS is skeptical about people trying to pass off a hobby as a business. One of the criteria is that you must earn a profit three out of five years. So if you write off expenses for your writing career before you actually have an income stream, in a few years, your writing career could be relegated to the hobby category—at least, for tax purposes. To determine if your writing career currently qualifies as a business, click here.
3.) Business expenses. Being a writer is an expensive business. Paying for trade publications, professional membership dues, conference registration and travel expenses, advertising expenses, or website design and maintenance could all legitimately be written off as business expenses, but in the event of an audit, be prepared to prove how it benefited your business. Keep careful track of your expenses in case you’re audited, and make sure to note how a given expense directly benefited your career. It’s a really complex process, so consulting a tax professional could definitely be to your advantage.
4.) The home office pitfall. Most writers work from home, so it’s tempting to write off the expenses associated with a home office. But if your office isn’t used exclusively as an office for your writing, you might want to steer clear. Rooms that double as a guest room, living room, or dining space don’t count, in the eyes of the IRS.
I’m not yet ready to declare my writing a business for tax purposes, but I’d like to be prepared when I get there. For those of you who are published, what tips do you have for managing your taxes as a writer?