Tax Tips for Authors.

Romance Lives
Forever welcomes author EM Lynley back to the blog. As a tax preparer, she has
a good insight into what authors need this time of year. Here are her top five
tips to us.

As both a
romance writer, and a tax preparer, I know exactly the worries and frustrations
my fellow authors go through every year. If 
you use tax prep software, you’re never sure what’s allowed or where on
Schedule C to put the cost of your website and cover art–or you pay through
the nose for an accountant to do your return. Kayelle asked me to offer a few
tips to help you feel a little more confident about your taxes, whether this
year as you rush to finish by April 15, or pick up some advice to help you out
when you file next year.

1. You can
write off that whip you bought while researching your BDSM story! There’s quite
a bit of latitude for authors to deduct research expenses. Just ask yourself:
“Would I buy this if I weren’t writing a story about X?” If not, then it’s a
legit research expense. I write off reference books, library fines on research
books, and trips to visit a location. I even wrote off some wine I bought while
writing a novel about a winemaker. You can also deduct some of the fiction you
buy, if you call it market research. Just don’t abuse that one. If you make
$500 on writing and spend $1000 on books for “research” you’ll find it
difficult to defend if the IRS asks any questions.

2. Document,
document, document. This is the magic word for the IRS. Keep records of
everything you buy or spend related to your writing business. You can do a
spreadsheet or write notes in a desk calendar. If the IRS happens to audit your
return, they’ll require this level of documentation, even if you don’t have
original receipts. You can even show them the scribbles in your calendar.

3. Other
deductions you might have missed: swag for conventions, fees for online
classes, contest entry fees, airfare and hotel for conventions, mileage for
trips to the library, bookstore, stock photos for cover art, your domain name,
RWA meetings (and the fees!), membership fees for any and all author
organizations. If you bought it for promotion, report it as
“advertising” expense. Anything that doesn’t fit into a standard category
on Schedule C goes as “Other.” Just document how the item was used
for business purposes: “RWA dues and meeting expenses” or “Books for research.”

4. Even
unpublished authors can take these deductions. If you had expenses in 2012, but
your book won’t be released until 2013, you can and should file Schedule C to
get the deductions for 2012. Don’t worry about a loss on your business return,
as long as 3 out of 5 years show a profit, the IRS won’t question the
occasional loss. And you can’t take the deductions in a later year, only the
year you actually spent the money.

5. Missed some
of these deductions? If you’ve already filed, but didn’t take as many
deductions as you’re legitimately entitled to, it’s not too late. You can file
an amended return. It’s  a correction to
the original, and if you are owed an additional refund, or have a smaller
balance due than on your original return, the IRS will send you the difference.

6. Bonus tip:
Like most of you, I get paid from many publishers through PayPal. I signed up
for a PayPal debit card, which I use for as many of my expenses as possible, so
I can keep personal and business expenses separate. Only use this card for
business expenses, and pay for personal items only from your personal bank
account or credit card. This will help with recordkeeping. Then, at the end of
the year, print out the statement and make a note what each item was for. Save
that with your return in case two years from now the IRS asks you to
substantiate a particular item. You won’t necessarily remember later on.

I teach an
online course each spring, covering these topics and a lot more. I do a
line-by-line Schedule C walkthrough and home office deductions, and explain
self-employment taxes as well as the dreaded estimated quarterly tax payments. The
course content is also available in a book, Tax Tips for Authors,
from Amazon
and Smashwords.
(Use coupon code DU56V to save $1.00 at Smashwords).

By night EM
Lynley writes gay erotic romance, but by day she’s a financial writer, editor,
and tax professional. She holds an MS degree in Financial Economics from the
London School of Economics and is a former staff economist at the White House
Council of Economic Advisers. 

Tax tips can also be found here: taxtipsforauthors.wordpress.com

QUESTIONS?

Have a question? Ask it here and leave your email. EM will answer your questions (if time allows).

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