topic I wrote a book this year and spent personal money to get published. can I write any of that off? in Investors & landlords

I wrote a book this year and spent personal money to get published. can I write any of that off?

taraddpoor — Sat, 01 Jun 2019 04:55:54 GMT

It depends on whether or not you’re classified as a self-...

Patrice — Sat, 01 Jun 2019 04:55:56 GMT

It depends on whether or not you’re classified as a self-employed independent contractor or whether or not it's considered a hobby. If you are considered an independent contractor then, Yes, you can write off your expenses as it relates to writing the book and getting it published.

Hobby-Loss Rules (How to Tell if Your Writing is an Occupation or a Hobby)
First, let’s define your writing occupation. The IRS will apply “hobby-loss” rules according to how serious you are as a writer. If writing is merely a hobby or an occasional income-producing venture, then you can deduct your expenses only to the extent of your income. In other words, you can’t take any losses against other income. For example, if your hobby writing generates $1,500 for the year and your expenses amount to $1,900, you will not enjoy a $400 loss against other income. You may deduct only $1,500 in expenses, making your net taxable income zero from writing sources.

Intent becomes a key factor in determining your status. Are you a full-time writer, earning your entire income from this source? Or do you have a 9-to-5 job and write an article here and there for extra income? Perhaps you’re currently living on your savings while writing the Great American Novel. If you are working toward making a living from writing, even if you have another job on which you’re subsisting for the time being, then you can declare your writing an occupation by filing a Schedule C and take deductions, even if the result is a business loss. The loss applies to all other income you receive during the year, reducing your taxable income and therefore your tax liability.

The IRS leaves it up to each individual to make an honest determination of whether his writing activities are a hobby or a business. You make the decision as you file your tax return.

But the IRS gets a big scowl on its face when it sees five or more years of losses from a business activity. It’s inclined to audit and disallow the losses if it feels an individual is attempting to write off her hobby. That could be rather expensive, because the IRS will go back three years and recalculate your tax liability—including interest—without the losses. In some cases it may add penalties.

Here are some ways to prove business intent so you may enjoy losses against other income:

1.    Keep business records, either on an accounting software program or on spreadsheets.
2.    Maintain a separate checking account for transactions related to writing. (This not only proves business intent, but will make it easier to track income and expenses.)
3.    Attend classes and conferences to improve your skills.
4.    Advertise, network, seek new clients and keep a journal of
these activities.
5.    If you plan to deduct vehicle expenses, keep a mileage log.
6.    Keep a phone log of business-related calls.
7.    Obtain any required licenses and insurance.
8.    Give your business a name.
9.    Chart future projections and plans to turn the activity into a
profitable enterprise.

By following the above guidelines, you’ll demonstrate a profit motive and be more likely to convince an auditor you’re serious about the business of writing.

Business Organization (What you Need to Keep Track of, and How to Do It)
Being organized is one way to prove that your writing is something more than a hobby—and it makes filing easier, too. The best thing to do is track your income and expenses on a software program such as Quicken, QuickBooks or Excel. If you take the above suggestion to open a separate bank account, keep careful records of your statements, as well.

Make a set of business receipt files. Remember, in the event of an audit, the IRS may want to see more than cancelled checks. It’s best to have actual receipts to confirm the nature of your purchases.

For both the business and the personal side of your taxes, it’s good practice to create a tax file for each year. Then, as certain transactions occur, you can store the proper documentation in the file. For example, when you donate bags of clothing to a nonprofit, place the receipt immediately in the file. When you pay DMV fees and property taxes, put the receipts in the file. You get the idea.

And in January, when you receive all of those third-party reporting documents (W-2s, K-1s, 1099s, 1098 Mortgage Interest Statement, etc.), simply place them in the tax file, too. Then, when it comes time to prepare your tax return, everything is at your fingertips. What was once a dreaded occurrence will be relieved in part by your organizational skills.

Deductions (How to Determine What Qualifies)
When it comes to what qualifies as a deductible expense, the guideline is “ordinary and necessary” business expenses. This is verbiage directly from the Internal Revenue Code. Because of the subjective nature of classifying business expenses, questionable deductions are not automatically disallowed. The validity of deductions is up for debate.

The list of what can or cannot be deducted is short. One reason there is no definitive list is because of the variance of expense requirements from one industry to another. What is reasonably deductible for one may not fly for another. For example, the purchase of candies placed in a countertop bowl for patients at a chiropractor’s office would be considered an “ordinary and necessary” business expense. However, if you are a writer with a home office that has no traffic, you will raise an auditor’s eyebrows if you try to deduct a bag of Hershey’s Kisses.

I advise my clients to view a questionable expense in terms of, “Would I incur this expense if I didn’t need it for the business?” If the answer is no, then you likely have a valid business deduction.

When it comes to writing, you may encounter some or all of the following deductions: office supplies, computers, copiers, printers, telephones, travel, meals, entertainment, self-publishing and print-on-demand costs, trademarks and copyrights, domain name expenses, costs of book-launch or book-signing events, advertising, marketing and promotion, vehicle expenses, postage, bank charges and outside services—to name a few. If these expenses are related to the business of writing, they are deductible.

Let’s examine some areas of deductions that have specific IRS guidelines and can be tricky to defend.

HOME OFFICE: You can deduct a home office if you use the space exclusively and as your principal place of business.

Exclusive use: The area cannot be used for personal pursuits, only writing projects. That said, the space needn’t be a full room. If you have a desk and computer set up in your bedroom, you can deduct the area used as an office.

Principal place of business: You cannot have another space outside of your home (like a rented room) where you pursue your writing projects.

Many folks fear that the home office is a red flag. This was the case during the 1990s, when there was a big flap over home office use. There were severe restrictions in place stemming from a 1992 Supreme Court decision. But the IRS wised up and threw out those restrictions a decade ago. It understands that many self-employed individuals, even telecommuters, use qualified home offices. They’re not the red flags they used to be. As long as you follow the rules, you have nothing to worry about.

If you write one or two articles a year, you likely are not qualified to deduct a home office. The IRS would have a hard time believing you need an entire space of your home devoted to an activity that constitutes so little time. It also won’t believe the space is never used for personal purposes. You’ll throw up a red flag if you try to take the deduction.

However, if you spend a considerable amount of time in your home office on serious writing projects with a goal of reaping financial rewards, take the deduction.

First, calculate the square footage of your home office space, then divide that number by the total square footage of your home. This will give you a percentage to use against all your home expenses. For example, your home is 1,000 square feet and your home office measures 10 by 10 (100 square feet): 100/1000 = .10, or 10 percent.

Apply that percentage to the following expenses: rent or mortgage interest, property taxes, homeowner’s or renter’s insurance, utilities, housekeeper, repairs and maintenance. Don’t forget to write off the furniture and equipment used in the home office. (Yes, you can deduct that old desk you’ve had since college. Write off the lower of its cost or its fair market value.)

If you plan to do this, it’s a good idea to go to irs.gov and take a look at Form 8829 to see how the calculations are made. An even better idea is to consult with a tax pro to ensure that your office qualifies—and that you get every other deduction to which you are entitled.

TRAVEL, MEALS AND ENTERTAINMENT: If you travel quite a bit for your writing business, you should maintain a travel file of notes, correspondence and any other documentation that will demonstrate to an auditor that the trips were for business rather than personal pleasure. Let’s face it: The IRS always suspects that you’re cheating on your taxes. It pictures business owners merrily writing off personal expenses as deductions, illegitimately saving beaucoup bucks in taxes. Assume you’ll be presumed guilty until proven innocent. That’s why I can’t stress enough the importance of keeping proper documentation to support the deductions to which you are entitled—especially in the area of travel, meals and entertainment. The IRS has encountered a lot of abuse in this area, and is therefore very strict in its record-keeping requirements. It would behoove you not only to keep receipts, but to thoroughly document the nature of each activity. If you take your agent to lunch to discuss your book proposal, write that info on the receipt and keep it. If you go to the San Francisco Writers Conference, you’ll need more than a credit card statement showing room charges at the InterContinental Mark Hopkins Hotel. If this is all an auditor has to go by, he’ll likely assert you had a nice little vacation, not a valid business deduction. Attach to the credit card statement a copy of your registration form and a flyer advertising the event. The auditor will match the location and dates and honor the deduction without question.

In fact, think about this with every receipt you have. If you buy a new computer from a store such as Costco, the auditor will want to see the receipt. After all, you can buy groceries and all manner of personal items from this retailer. Therefore, the IRS will want proof that the purchase was in fact for a new laptop and not for a dozen cases
of vino.

There must be a clear business purpose to all travel, meals and entertainment deductions. A travel deduction for spending three months in Italy because the location “inspires” you to write will be met with a slamming gavel and the word “disallowed!” Yes, exclamation point included. But if the writing project you’re tackling is set in Italy and requires research of the culture, flora and fauna, architecture, etc., then hey, have at it.

Just be prepared to defend yourself. Keep all of your notes and your finished or unfinished project(s) in case you ever have to prove your point to an auditor.

LISTED PROPERTY: The term “listed property” refers to the acquisition of capital assets such as vehicles, computers and cell phones. Most self-employed people use these items on a personal level as well as for business, so you need to track the percent of business versus personal use. You then apply the percentage of business use to the cost and operating expenses, and use the result as a basis for your deduction. Of course, the IRS expects you to keep logs to verify those numbers.

Oh, great! A big homework assignment. It’s not as bad as you think. For instance, I have never been asked to produce a log for business versus personal use of a computer. The IRS has the right to ask for such a log and it technically can disallow the deduction for a computer if the taxpayer does not produce the log. Does that happen in real life? No—especially if you’re a writer. That’s the main tool of your trade. It would be like disallowing a ratchet set to an auto mechanic.

To properly document vehicle expense, write your beginning odometer reading under Jan. 1 in your appointment book. Flip to Dec. 31 and write the words “ending odometer.” That will jog you to record the ending mileage when the time comes. Throughout the year, write in various business destinations: office supply store, restaurant to meet a business contact, etc. At the end of the year, you’ll have your total mileage and a pretty good idea of what your business usage was. The IRS could technically demand a contemporaneous log, but I’ve never seen it happen.

This is, of course, an overview of a very complex subject. I would encourage you to meet with your tax pro to discuss your individual situation and how best to apply the laws to your advantage.

From more advice on how to save money on your taxes, consider:
Finances and Tax Issues for Writers

The IRS makes a critical distinction between authors and...

maglib — Sat, 01 Jun 2019 04:55:58 GMT

The IRS makes a critical distinction between authors and hobbyists. Authors are trying to make a living selling their writing. You are deemed to be a professional if you are trying to make a profit in the last 2 of 5 years. So the intent to make a profit is important.

If you are in the business of being an author:

Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income.

In most cases, you report royalties in Part I of Schedule E (Form 1040).

However , if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). This can be done using TT Self Employed.

If it is a hobby where you don't intend to make a living then you report the income as hobby income.

· Choose Wages and Income

· Scroll down to Less Common Income and click Start to to right of Miscellaneous Income, 1099-A, 1099-C

· Click Start to right of Hobby income and expenses

· The IRS doesn't allow you to deduct hobby expenses directly from hobby income. Instead, you can deduct expenses as an itemized deduction subject to 2% of your adjusted gross income. Also, the amount that you claim as an expense cannot be greater than your income from the hobby. In other words, your hobby cannot generate a loss.

· Taxpayers can choose to itemize expenses on their tax returns or take the standard allowable deduction. Hobby expenses can only be deducted if you itemize your deductions.

If you don't have any other itemized deductions, TurboTax will deduct the greater of the standard deduction or itemized deductions. TurboTax will choose the one that lowers your overall tax liability.

· If you are in the business, use TT Self Employed and enter as SE income on schedule C or C-EZ by following the interview and reporting as a business.

Re: I wrote a book this year and spent personal money to get published. can I write any of that off?

Tracycoles777 — Sat, 15 May 2021 13:31:02 GMT

I started my writing as a self employed classification, so what forms to use to file tax ?

Re: I wrote a book this year and spent personal money to get published. can I write any of that off?

AnnetteB6 — Sat, 15 May 2021 15:38:43 GMT

Self-employed writers would use Schedule C to report income and expenses.

Use the following steps to get started:

On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
This opens a box where you can type in “schedule c” and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
The search results will give you an option to “Jump to schedule c”
Click on the blue “Jump to schedule c” link

@Tracycoles777

Re: It depends on whether or not you’re classified as a self-...

DrakeHeyman — Wed, 06 Sep 2023 12:05:39 GMT

It's great that you've written and published a book this year. When it comes to taxes, you might be able to deduct expenses related to your book publishing venture. This could include costs like editing, cover design, printing, and marketing. However, tax rules can be complex, so it's advisable to consult a tax professional to ensure you're following the correct procedures and maximizing your deductions. If you're a book enthusiast or a writer looking for some literary fun, you should definitely check out the unscramble books tool. It's a cool way to engage with literature in a new and interactive way.

Re: It depends on whether or not you’re classified as a self-...

ashleyroth — Thu, 22 Aug 2024 07:53:18 GMT

Yes, you may be able to write off some of the expenses related to your book writing services and self-publishing. Costs such as editing, cover design, and other book writing services, along with publishing fees, can often be deducted as business expenses if you treat your book writing as a business. However, it’s essential to keep detailed records and consult with a tax professional to ensure you’re complying with all IRS guidelines and maximizing your deductions.

Re: It depends on whether or not you’re classified as a self-...

Mike9241 — Thu, 22 Aug 2024 08:11:23 GMT

@ashleyroth be wary of responding to old threads. the original was from 2019 with @Tracycoles777 being from 2021. {MODS] old thread.

Re: It depends on whether or not you’re classified as a self-...

ashleyroth — Thu, 22 Aug 2024 10:29:43 GMT

Yeas, Sure