Swapping hats again as tax season starts: tax tips for U.S. authors
As many of my friends and readers know, when January rolls around I work as a registered tax preparer, which supplements my freelance editing, financial writing and fiction writing.
I taught a few courses last year to help writers file their taxes—providing tax tips and advice specifically for the issues self-employed writers face. I usually shape the lectures based on questions I get from my tax clients, but this year I’m asking other U.S.-based writers in advance what tax questions you have. I’m also planning to compile all the information and lectures into a book as well, and the more questions I get, the better I can cover both the basics and the more advanced questions.
I’m giving away a free slot in my next course! To enter for a chance to win, just ask any writer-related tax question here.
What are your biggest concerns or problems when filing your taxes on your writing income? Even if you haven’t yet been published or earned anything from your writing, you can (and should) file a return to write off your legitimate expenses.
No question is too simple or too difficult, but please don’t include any personal financial information. I’ll randomly select one person to get free admission to my upcoming tax tips for authors course, starting February 1. Stay tuned for more information about the course in the next week.
8 Responses to “Swapping hats again as tax season starts: tax tips for U.S. authors”
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Oooh, this is great!
My question would be whether I can write off some expenses, even though writing is definitely not my main source of income. If so, what expenses qualify as legitimate? For example, if I bought a laptop mainly to write on while traveling, but also use it for “regular” computer stuff like Internet browsing, too, would that be legit?
Hope you have a great weekend!
I go into this issue in a lot of depth in the course, and with computers you need to handle the expense in a special way due to the fact that it’s a depreciable item (used for more than one year). But if you use something for at least 50% business, you can write off a proportional amount (75% work, then 75% of the cost can be reported against income). If the item is used less than 50% for business, it gets complicated again.
You can only write off such expenses on Schedule C, so you’ll have to file an additional form. Otherwise you can only write off the amount of expenses up to the amount of income and call it a hobby rather than a business. There are several key issues on that which I cover in the hobby vs business lecture.
Thanks for asking!
Reposting an earlier question from Cara Bristol
If you claim your home office as a tax expense, how does that affect the future sale of your house?
Cara, this is a great question and I’m sure many homeowners wonder. The good news is that if you only use a room in your home, business use does not affect your capital gains exclusion of a personal residence when you sell. And you don’t need to pay any business taxes on the sale. That’s because you aren’t putting your home down as a business asset. Even if you are eligible to deduct depreciation on your Form 4797 (Business use of home) the IRS does not require you to report that against the sale either on your personal or on your business return. If you use a separate building such as a guest hose exclusively for business the situation is different, but for use of a portion of your main home building, there is no effect. Hope that helps. If you want more information than that, refer to IRS Publication 587 Business Use of Your Home. Thanks for asking and you’re entered for a chance to win a spot in my class.
Reposting a question from Andrea (via Triberr)
Andrea S.
I had such an issue trying to find where on the tax form to report royalties. Using the same form in two different tax prep places, I had two different outcomes! I’d like to avoid that if at all possible this year. Any suggestions?
Writing income goes on Line 1 of Schedule C. Don’t use Schedule E even though it’s called Royalties, since it actually refers to something slightly different. Schedule E is for more passive royalty income where you might create something and sell it (like a song) and you don’t actively continue to market the item to buyers. If you are actively running your writing business, you want to use Schedule C and 1099 royalty income is called “gross receipts” which just means how much money you received from your writing.
You’re entered for the chance to win a spot in my class.
I checked into Schedule C (thanks for the tip!) and have a follow-up question. If I write under a pen name, would that be the business name?
Thanks!
Charley
Yes, unless you want to have an actual name for your company. It’s up to you. I use my pen name.
Thanks for stopping by and asking.