2020 royalties and 2020 expenses in 2021?

[jdhlnh2018]

A publisher wasn't able to provide me with a 1099-NEC for 2020 book royalties, (the publisher failed to meet the filing date) so the publisher combined 2020 and 2021 royalties in a 2021 1099-NEC. My question: Am I permitted to deduct expenses in 2021 for expenses incurred in 2020 related to the 2020 book royalties (now that the 2020 royalties are being filed in 2021)?

[DianeW777 · Accepted solution]

No. The expenses you paid in 2020 must be deducted in 2020, with or without the royalty income. 

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 every 3 of 5 year periods. So the intent to make a profit and earn a living is important. 

• This makes the difference whether the income is reported on Schedule C as a business activity or Schedule E as royalties.
  • Click here for a detailed discussion about this topic provided by our awesome Tax Champ @maglib.

If you do need to amend your 2020 tax return to include your expenses paid in that tax year you can use the link below.  Carefully read all the instructions before you begin so that TurboTax knows all the numbers and changes.

• How to amend (change) a return you already filed