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maestrowork
01-27-2010, 09:22 PM
What can and cannot be deducted as expenses for writers?

willietheshakes
01-27-2010, 09:34 PM
(insert snarky comment about AW being an international board, and tax codes differing greatly in various parts of the world, here)

Christine N.
01-27-2010, 09:37 PM
What can:
*Books you buy that are in the same genre as you write (research)
*If you buy an electronic book reader and books for said reader the same type you write (also market research)
*A certain percentage of online access (like your DSL monthy charge)
*Paper, ink, pens, and office supplies
*Tolls and gas if you take a business trip to something like a con or writer's conference
*Part of the expense of a new laptop, if you use it for business (AW counts as networking). Not sure about if you use it for something else, like school, that counts, but I think you can deduct a percentage then. Turbo Tax tells me.
*Membership fees in professional organizations, like SCBWI or SFWA or Author's Guild
*Subscriptions to magazines that pertain to writing
*Any fees associated with your author's website, like annual hosting fees or domain name charges.

These are just off the top of my head and things some people forget. Of course since I've had declarable income the last couple of years, where I get forms and everything, I've had to itemize all this stuff.

I wouldn't deduct for home office space, because it gets tricky if you use it for more than writing, plus then it becomes a hassel when you sell your home.

*NO, you cannot deduct the lattes that you buy while writing in B&N. You CAN deduct a business lunch if you take your editor or agent out, but usually that's the other way around.

underthecity
01-27-2010, 09:58 PM
I WAS going to say "Home office," especially since I deduct that every year.

Office supplies. Computer (one time). Printer (one time). Although, these depreciate.

Chair. (Yes, I deducted my chair one year.)

Internet and phone.

Mileage on your car for driving to book signings or anywhere else book-related.

And, this may be stretching it, but say you're flying to some other city. While you're there, you stop in a bookstore to see if they carry your books. If they don't, you talk to the manager to see if they will. Business deduction on the plane ticket.

aadams73
01-27-2010, 10:09 PM
I don't like to get too greedy with this stuff, but I do or have deducted:

- my computer (although it's supposed to be used for writing exclusively iirc.)
- printer paper
- writing-related plane tickets (when I can prove it's business only.)
- writing-related postage
- printer ink
- writing-related books

I never bothered with the home office(too much of a PITA for me at the time,) or things like internet and phone.

Jamesaritchie
01-27-2010, 10:28 PM
You can deduct anything and everything, as long as you don't get audited.

underthecity
01-27-2010, 10:55 PM
^ And you shouldn't get audited, provided there aren't any major discripencies huge red flags.

maestrowork
01-28-2010, 06:01 AM
Yeah, but if you get audited... LOL A friend of mine did, and he had to show all his receipts, which he didn't keep, so he ended up owing IRS.

aadams73
01-28-2010, 06:51 AM
Yeah, but if you get audited... LOL A friend of mine did, and he had to show all his receipts, which he didn't keep, so he ended up owing IRS.

Oops! Always keep your receipts for 7 years.

(Unless you're me and you keep them for a whole lot longer than that.)

LuckyH
01-28-2010, 12:47 PM
An audit in the UK is called a tax inspection, and if you get one of those itís time to change your name and emigrate.

Jamesaritchie
01-28-2010, 07:35 PM
In fairness, you never know what can trigger an audit. I was once audited because I wrote some things for the Hearst Corporation, and some dummy there removed a digit from the middle three numbers of my phone number, and then used my phone number as my social security number when they paid their taxes.

This, of course, made the IRS think I was trying to pull a fast one, and a big, fat audit came my way.

I have no idea how anyone could possibly make such a stupid mistake, but it happened.

JanDarby
01-28-2010, 07:55 PM
Don't forget:

postage for submissions
conference registration fees
writers' group dues
mileage to/from writers' group meetings and classes, etc.
PR stuff (give-aways and press releases, etc.)

Be careful with the home office deduction unless you have a room that's dedicated to writing; also beware of the need to recapture that depreciation when you sell the house, so it may not be worth taking if you plan to sell it in the near future.

Be careful with deducting things that have a mixed use, like the computer. The IRS could ask for a log that shows the hours you spend on the computer for writing versus hours spent doing other stuff (to validate the percentage of business use).

Also be careful of taking travel expenses for a mixed-purpose trip. If you're going somewhere for a non-writing reason, and you stop off to do a writing-related thing, that does NOT make the entire trip deductible. It only makes the detour part (mileage, perhaps, not the plane tickets) deductible. Sort of like when you go somewhere for work, and the hotel charges the same, whether there's one person in the room or two, so you can deduct the entire hotel expense, even if you bring a spouse with you, but the spouse's plane ticket is NOT deductible.

Also, I believe some audits are purely random. You don't have to have done anything wrong. The IRS computer just spits out the occasional random return for review, and then the human being who looks at it will check it for red flags, including the home office deduction (maybe; it used to be a red flag, but they claim it's not now) and small businesses that have large losses year after year. Writers are perhaps fortunate in that, while it may take many years to show a profit, the start-up expenses in this career are relatively small, so the losses are relatively small.

JD, not giving individual legal advice, just general information

Jamesaritchie
01-28-2010, 08:09 PM
The IRS does do so many random audits each year, along with any red flag audits. They will tell you whether yours is a random or a red flag, which helps you get ready.

I think my favorite deductions are magazine subscriptions and books.

maestrowork
01-28-2010, 11:48 PM
In fairness, you never know what can trigger an audit.

One thing I learned was the claiming Home Office deductions is a red flag for the IRS, and thus it's better not to do that. And if you do, make sure you KEEP very, very DETAILED records.

Jamesaritchie
01-29-2010, 01:56 AM
One thing I learned was the claiming Home Office deductions is a red flag for the IRS, and thus it's better not to do that. And if you do, make sure you KEEP very, very DETAILED records.

They sure can, and if you get audited, and if you claimed your computer, they'll check it to see just how you used it.

And that home office deduction can come back and bite you, if you have to sell your house.

maestrowork
01-29-2010, 02:02 AM
And that home office deduction can come back and bite you, if you have to sell your house.

That's another reason why I NEVER claimed home office...

artemis31386
01-29-2010, 02:22 AM
If I were you, especially since allowable deductions change every year, I would talk to a tax guy. You don't necessarily have to have them prepare your taxes, but they would be able to tell you how to maximize your deductions and which things are allowable. I know that this helped me when I filed. My aunt is an accountant and I had all kinds of questions for her.

Jamesaritchie
01-29-2010, 05:22 PM
From my experience, the best tax consultant is the IRS. They're always up to date on their own rules and regulations, have always been more than willing to spend long periods of time on the phone with me, and answer every question I have.

If the IRS then questions anything, it's nice to be able to say, "Hey, you're the ones who told me to do this."

I also record all business calls.

CheshireCat
01-30-2010, 03:53 AM
I seem to say this every single year, but if you're a writer, and if that is your career, then take the home office deduction. You can, in fact, deduct anything one might find in an executive office if you take the home office deduction. I have a very large-screen TV and audio system in here, which I deducted. I have custom-built cabinetry and this desk, which I deducted (or depreciate, I can never get that straight and leave it to my accountant). My computer is here at my desk; I also have a laptop. Two very good printers, one of which is also my dedicated fax. Anybody walking into this house would believe I use this room for work, despite the comforts and conveniences I have here.

Now. I have made my living as a writer -- and only a writer -- for more than 25 years. I have never been audited. *knocks wood* I know a LOT of other writers, and few of them have been audited. For those who have, the home office deduction was never an issue.

Because, after all -- where else would a self-employed writer write except in his or her home (assuming you don't keep a separate office elsewhere)?

Sure, you have to follow certain rules if you later sell your house. But in taking the home office deduction, you can also take a percentage of your HVAC costs, based on square footage. And a percentage of various taxes. Possibly a percentage of your mortgage. And so on. A good accountant can advise you; an accountant who understands how writers work and get paid is a huge bonus.

The home office thing aside, as a writer you can also deduct all books you buy -- not just research books; reading widely helps in your career because it's market awareness. You can deduct DVDs and satellite costs, both for research and, again, market awareness. You can deduct all magazines and newspapers. I keep a separate office phone line, so that's fully deductible.

Hell, the lamps in here, replacement lightbulbs, a percentage of my cleaning (as in Merry Maids) costs, even artwork -- all are legitimate expenses to be deducted or depreciated. The window treatments in here. The rugs.

Here's the thing. We don't deal in a cash business. (At least not if we're published rather than printed, and not responsible for hand-selling our own books.) Every dime we earn gets reported. So as long as you keep receipts, and good records, you're really not all that likely to be audited unless it's one of the random ones.

I don't happen to believe I should avoid legitimate deductions out of the fear that I may one day have to argue this or that deduction with an IRS agent. Even my previous accountant, a very, very conservative man, encouraged me to deduct everything I could argue as being necessary for the advancement of my career.

We have "companies" that don't, generally, have a high overhead. We keep our desks and chairs for decades, most of us, because they're broken-in and comfortable. We change our computers when necessary, and for most of us that means wearing out the old one. (I'm missing so many letters on the keys of this computer's keyboard that anyone who didn't touch-type would be lost trying to use it.)

Our deductions tend to be small in the scheme of things. Again, that's assuming a successful career as a writer; writers not showing a profit to the IRS are a different matter entirely.

Anyway, my view has always been that you keep all your receipts and deduct everything you can. Which I do.

I am not an accountant and I've never played one on TV. I'd advise anybody to have a good accountant and to listen to him/her (after educating him/her on the publishing business).

If writing is a part-time gig, and you do indeed have an office (and job) elsewhere, then anything you deduct at home is far more likely to raise a red flag.

As with most things, seek the advice of a professional.

And now, I'm going to wander away after giving my yearly A Home Office Deduction is Not a Guaranteed Audit speech.

Jamesaritchie
01-30-2010, 08:18 PM
I seem to say this every single year, but if you're a writer, and if that is your career, then take the home office deduction. You can, in fact, deduct anything one might find in an executive office if you take the home office deduction. I have a very large-screen TV and audio system in here, which I deducted. I have custom-built cabinetry and this desk, which I deducted (or depreciate, I can never get that straight and leave it to my accountant). My computer is here at my desk; I also have a laptop. Two very good printers, one of which is also my dedicated fax. Anybody walking into this house would believe I use this room for work, despite the comforts and conveniences I have here.

Now. I have made my living as a writer -- and only a writer -- for more than 25 years. I have never been audited. *knocks wood* I know a LOT of other writers, and few of them have been audited. For those who have, the home office deduction was never an issue.

Because, after all -- where else would a self-employed writer write except in his or her home (assuming you don't keep a separate office elsewhere)?

Sure, you have to follow certain rules if you later sell your house. But in taking the home office deduction, you can also take a percentage of your HVAC costs, based on square footage. And a percentage of various taxes. Possibly a percentage of your mortgage. And so on. A good accountant can advise you; an accountant who understands how writers work and get paid is a huge bonus.

The home office thing aside, as a writer you can also deduct all books you buy -- not just research books; reading widely helps in your career because it's market awareness. You can deduct DVDs and satellite costs, both for research and, again, market awareness. You can deduct all magazines and newspapers. I keep a separate office phone line, so that's fully deductible.

Hell, the lamps in here, replacement lightbulbs, a percentage of my cleaning (as in Merry Maids) costs, even artwork -- all are legitimate expenses to be deducted or depreciated. The window treatments in here. The rugs.

Here's the thing. We don't deal in a cash business. (At least not if we're published rather than printed, and not responsible for hand-selling our own books.) Every dime we earn gets reported. So as long as you keep receipts, and good records, you're really not all that likely to be audited unless it's one of the random ones.

I don't happen to believe I should avoid legitimate deductions out of the fear that I may one day have to argue this or that deduction with an IRS agent. Even my previous accountant, a very, very conservative man, encouraged me to deduct everything I could argue as being necessary for the advancement of my career.

We have "companies" that don't, generally, have a high overhead. We keep our desks and chairs for decades, most of us, because they're broken-in and comfortable. We change our computers when necessary, and for most of us that means wearing out the old one. (I'm missing so many letters on the keys of this computer's keyboard that anyone who didn't touch-type would be lost trying to use it.)

Our deductions tend to be small in the scheme of things. Again, that's assuming a successful career as a writer; writers not showing a profit to the IRS are a different matter entirely.

Anyway, my view has always been that you keep all your receipts and deduct everything you can. Which I do.

I am not an accountant and I've never played one on TV. I'd advise anybody to have a good accountant and to listen to him/her (after educating him/her on the publishing business).

If writing is a part-time gig, and you do indeed have an office (and job) elsewhere, then anything you deduct at home is far more likely to raise a red flag.

As with most things, seek the advice of a professional.

And now, I'm going to wander away after giving my yearly A Home Office Deduction is Not a Guaranteed Audit speech.

If you do get audtited, and just because you haven't yet does not mean you won't, you'll regret some of those deductions.

Red flags aren't the only audits. Most audits are random, picked by the computer, and you're gambling your number won't come up. It probably won't, but if it does, you're going to be amazed at how thorough the IRS is, and how huge the fines can be.

CheshireCat
01-31-2010, 03:04 AM
Well, since I had two former IRS agents advise me on this stuff, I think I'll take my chances.

As always, YMMV.

ishtar'sgate
01-31-2010, 08:05 AM
One thing I learned was the claiming Home Office deductions is a red flag for the IRS, and thus it's better not to do that. And if you do, make sure you KEEP very, very DETAILED records.
That sounds really odd to me. In Canada it's pretty common to claim home office space. I do it for my husband's business and I do it for my writing space as well. I also claim a percentage of heat and light, interest on my mortgage and property taxes according to the square footage I use for business purposes.

willietheshakes
01-31-2010, 11:04 AM
That sounds really odd to me. In Canada it's pretty common to claim home office space. I do it for my husband's business and I do it for my writing space as well. I also claim a percentage of heat and light, interest on my mortgage and property taxes according to the square footage I use for business purposes.

See post #2.

And yeah, the home office expense is fine in Canada. AND we don't have to apply the benefit against our profits if/when we sell.

Jamesaritchie
01-31-2010, 07:30 PM
Well, since I had two former IRS agents advise me on this stuff, I think I'll take my chances.

As always, YMMV.



You go right ahead, but athe current IRS agent who helps me disallows several of the deductions you claim.

CheshireCat
02-01-2010, 05:38 AM
You go right ahead, but athe current IRS agent who helps me disallows several of the deductions you claim.


I'd be curious to know which ones, and what rationale he uses.

Not that I plan to change anything, mind you. :)

ishtar'sgate
02-01-2010, 06:05 AM
See post #2.

And yeah, the home office expense is fine in Canada. AND we don't have to apply the benefit against our profits if/when we sell.
Bummer for those who live in the US. Don't give Canada any ideas.

cwfgal
02-01-2010, 08:57 PM
I'd be curious to know which ones, and what rationale he uses.

Not that I plan to change anything, mind you. :)


Me, too. I've been taking pretty much the same deductions as Cheshire Cat for the past 14 years, including the home office space, though I haven't gotten down to cataloguing lightbulbs and I don't deduct all the books I buy even though I've been told I can. I've had two accountants in that time and they both advised me the same way with regard to what can and can't be deducted.

Haven't been audited yet but I keep very detailed records so I'm not too worried about it if it should happen. In fact, I suspect that if I ever am audited I'll get money back since I know there are deductions I could take that I haven't.

Beth

ETA: I don't have any sort of TV in my home office and my sound system is limited to an iPod and a set of headphones.

Bufty
02-01-2010, 09:04 PM
The governing rule for allowable expenses is usually (or at least it is here in the UK) 'wholly necessarily and exclusively incurred for the purpose....' and the purpose here is to enable one to write books for publication, and that definition seems wide enough to me to include virtually everything Cheshire mentioned.

maestrowork
02-01-2010, 09:07 PM
wholly necessarily and exclusively incurred for the purpose....[of writing]

I'm going to deduct all my Starbucks purchases...

Not to mention psychotherapy and weekly visit to the gentlemen's club.

cwfgal
02-01-2010, 09:08 PM
From my experience, the best tax consultant is the IRS. They're always up to date on their own rules and regulations, have always been more than willing to spend long periods of time on the phone with me, and answer every question I have.

If the IRS then questions anything, it's nice to be able to say, "Hey, you're the ones who told me to do this."

I also record all business calls.

Record away (and I hope you inform everyone you talk to that your are recording them.) It won't make a difference if the IRS finds an error, even if they are the ones who told you to do it that way. The IRS is pretty clear about the fact that it's all your responsibility in the end, no matter who gives you the incorrect info. A friend of mine in the construction biz was audited and the info he got from an IRS agent was incorrect. The IRS didn't deny it and didn't care. So while it may feel nice to be able to say, "You guys told me to do this," it won't help you come audit time.

Beth

Bufty
02-01-2010, 09:09 PM
Nice try, but I doubt that would get by unless it was entertaining a prospective publisher. Even then....cheapskate! :)


I'm going to deduct all my Starbucks purchases...

CheshireCat
02-02-2010, 01:10 AM
Well, you could always buy an expresso maker or something of the sort for your office and insist to the IRS that coffee is entirely necessary to your creative process.

Invite him/her to observe you for a day, wired and wild-eyed as you pound away at the keyboard -- and I doubt you'll get an argument. :D

Seriously, if I have a meeting at a coffee shop, I save the receipt. And I do have meetings in places like that. Can I deduct the full amount? No. But a percentage.

Oh -- and I wanted to add that I've had a relative who was audited get several deductions disallowed even though IRS agents had told him they were allowable. As Beth said, the auditor didn't care what he'd been told.

He was able, on the other hand, to argue convincingly for at least a couple of things those same agents had told him would be a problem.

So ... I say what I said. Keep good records and make sure you sincerely believe you can argue that the expense is necessary for your career advancement and/or your creativity.

maestrowork
02-02-2010, 01:16 AM
Basically, don't claim anything you have no good records for. If you claim home office, keep everything scrap of paper. If you want to deduct supplies, trips, etc. keep all the receipts, etc. Don't fudge a number and think the IRS won't audit you...

CheshireCat
02-02-2010, 01:47 AM
Basically, don't claim anything you have no good records for. If you claim home office, keep everything scrap of paper. If you want to deduct supplies, trips, etc. keep all the receipts, etc. Don't fudge a number and think the IRS won't audit you...

Yep. I never try to claim anything I don't have a receipt for.

And if the IRS wants files -- I've got 'em. Drawers of 'em. :D

And boxes in the basement. I don't trust the various recommendations for how long to keep files so ... I've got 'em going back to around 1985.

Saltier
02-02-2010, 01:57 AM
A friend of mine in the construction biz was audited and the info he got from an IRS agent was incorrect. The IRS didn't deny it and didn't care. So while it may feel nice to be able to say, "You guys told me to do this," it won't help you come audit time.

Beth

My state Revenue department is like that. They even have a pre-recorded disclaimer that they are not responsible for any misinformation that an employee may give.

Lauretta
02-02-2010, 02:23 AM
Move to Ireland and become an Irish citizen:


Exemption from income tax for artists (http://www.citizensinformation.ie/categories/money-and-tax/tax/income-tax/exemption_from_income_tax_for_artists)

CheshireCat
02-02-2010, 03:49 AM
Move to Ireland and become an Irish citizen:


Exemption from income tax for artists (http://www.citizensinformation.ie/categories/money-and-tax/tax/income-tax/exemption_from_income_tax_for_artists)


Believe me, the thought has occurred. Many times.

But I'd really rather not have that much ocean between myself and my family, to say nothing of friends.

But, man, it costs me.

April
02-06-2010, 03:14 AM
I think I'll throw my hat into the ring on this one. I'm in the US, by the way, and can only comment on US tax code. Back in December, I finished a twelve week class on income tax preparation at Liberty Tax. I highly recommend this class for everyone, not just people who are going into accounting. Every single person in this class said that they wished they had taken it years ago.

Anyway, we were taught that if you don't stretch the truth, you should take every single deduction for which you are eligible. In most cases, if the IRS doesn't agree with what you are doing, they will just disallow it. Right now, the IRS doesn't even have the man power to answer all their phone calls. They are not looking for ways to audit people. The audits that are happening most frequently are areas in which the most abuse occurs - tax credits: the first-time buyer credits, earned income credits, and the like, where the credits are refundable and the taxpayer is receiving huge refunds.

The home office is something that can be a flag. If you cheat somewhere else on your taxes, or stretch the truth (like not having a mileage log for the 15,000 miles you are claiming) then you are better off not taking that particular deduction. But, otherwise, it is a perfectly legitimate deduction. You do not have to have a seperate room. You can do it by square feet. I use to have a home office that was one half of my living room. My living room was say 100 square feet (I don't really remember). The total square footage of my apartment was 700. So I divide 50 by 700 to get the percentage of the space used by my home office - 7%. Now, I can deduct all my general household expenses at the rate of 7%. My rent was $900. Of that, I can deduct $63 x 12. The same formula applies to utilities, renters insurance, and pest control.

If you own your home, you can deduct the depreciation of the space as well. There are implication when you sell, as has been mentioned. But, they are really a matter of six on one hand, half a dozen on the other. You can't deduct the same thing twice, usually. When you sell your house, you deduct your cost basis from the selling amount to get your net profit. Now, you have already taken the benefit of the deduction, so you have to reduce your cost basis, meaning that your potential tax liability is higher. However, if you've lived in your house for more than two years, you don't have to pay any capital gains tax on the first....let me check the irs.gov...250,000 if you are single, 500,000 if you are married. Mind you there are some exceptions, but that is the broad stroke. So, unless you have a mortgage above those amounts, you are losing money by not taking the deduction.

I think I covered it all.