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Business of Writing, Publishing, The Writer's Life

Are You a Real Writer? The IRS Will Decide

How seriously do you take yourself as a writer? It’s not just me asking, it’s your government, specifically, the Internal Revenue Service.

I’ve always been pretty rigorous about keeping track of expenses related to writing, although since it’s tough to make much money at this profession I’ve always been cautious about declaring a loss. No more. An article in Poets & Writers March/April 2012 issue changed the way I will approach my taxes from now on.

The article, which unfortunately is not available online (print only), was written by writer Jennifer Wisner Kelly for The Literary Life section. It relates how her husband deducted her MFA tuition as a business expense. At the time Kelly was unpublished. As you might expect, the IRS audited the couple. The couple argued that although she was not making income from her writing, she treated the endeavor as a business, with the intention of making money.

Eventually the IRS agreed and allowed them to deduct the tuition expense.

What an eye opener. I began to look at my chosen profession in a new light. In my case I gave up a totally different life, and sold my business to begin writing with the intention of making this career my primary source of income, which is essentially the logic the IRS used in allowing Kelly’s deduction. Whether I have reached that goal or not doesn’t really matter, since the guiding principle appears to be intent.

From now on, every legitimate expense I make in the name of forwarding my career—books, subscriptions, convention fees and travel, etc.—will be duly recorded and deducted. Maybe I’ll even go get another MFA.

Of course it’s important to note a couple of things: First, I’m no tax expert[1], so don’t take any of this as advice.[2] Second, it’s important to remember that I really do spend a lot of time in writing related activities—probably four to eight hours a day. I would not recommend this strategy to someone who has a full time job and writes for an hour at night. The difference between the IRS determining whether your writing is a business or a hobby can cost you a lot.[3]

But if you do spend a lot of time and money trying to make it as a writer, there may be some tax relief to offset the strain on your budget (not to mention the strain of constant rejection).


[1] Little known factoid: I actually worked for the IRS for a season right out of high school as a tax examiner, one of the people responsible for checking returns against what the computers called out as mistakes. A few coworkers and I held a competition that awarded points for working on a famous person’s return. I got Geraldo Rivera and the owner (at the time) of the New York Mets. I tried to wheedle extra points for actress Zena Bethune, but my friends wouldn’t budge.

[2] I have to say that.

[3] There are many references to IRS rulings regarding writer activities. Here’s a couple I found: Authors and the Internal Revenue Code by Linda Lewis; Taxes for Writers by Cyn Mason. They’re a bit old and rather technical, but they help make clear the distinctions between writing as a business and as a hobby.

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About Joe Ponepinto

Co-publisher, with Kelly Davio, of Tahoma Literary Review. Author of "Curtain Calls," a featured Kirkus Review. Married to Dona. Dad to Henry, the coffee-drinkin' dog.

Discussion

26 thoughts on “Are You a Real Writer? The IRS Will Decide

  1. No points for Zena Bethune? That’s an outrage!

    Posted by Marc Schuster | January 26, 2013, 2:04 PM
  2. Well, I have an agent, so I guess that would help the cause? But, yes, I’m also anal about my work too, even log times on and off the computer for writing related efforts (oops, that reminds me…). I’m also a tech writer. Thing is, yes, they can audit you, but your better-the-sam-hill have all your ducks in a row. It might make all the difference.

    Posted by fpdorchak | January 26, 2013, 3:07 PM
    • When I owned a small business all that record keeping used to drive me batty. I couldn’t even get in the car without stopping to log mileage and destination. I don’t miss that at all. But at least I’ve retained some good practices regarding the rest of my writing business activities.

      Posted by jpon | January 26, 2013, 9:53 PM
  3. Seems fair that certain expenses should count. Any writer who makes money has to declare. Whether it’s $50,000 from royalties or $50 from a university lit mag for a story.

    Posted by Caleb Powell | January 26, 2013, 4:34 PM
    • I wish all those university lit mags paid–even $50. Being a writer can be costly, whether it’s paying for subscriptions to magazines and journals, or a new laptop, or your bar tab (oops). IRS rulings that I’ve read seem to indicate their focus is on the intent of your writing. They tend to disallow deductions for people who have full time employment and write to make an artistic statement, but allow deductions for those whose goal is to make writing their full time income generator, whether art is part of the equation or not.

      Posted by jpon | January 26, 2013, 10:01 PM
  4. My husband will aprreciate this one. Thanks, Joe.

    Posted by Darrelyn Saloom | January 26, 2013, 6:10 PM
  5. I’ve discovered that the professional expenses are only deductible once they reach a certain (large) percentage of total income. Since we file jointly, those expenses have never added up to the minimum number. Something to keep in mind.

    Posted by Kelly Davio | January 26, 2013, 7:20 PM
    • Sounds like you’re deducting on Schedule A (Itemized Deductions). If writing is a source of income, you should use Schedule C (Profit or Loss From Business), whether you file for a business name or not (self-employed people can use this form too). You can deduct all your expenses associated with the business against your business income, even if it calculates as a loss. That loss can be deducted from your gross joint income and decrease your tax liability significantly. You should definitely look at this, especially now that you are about to go on a book tour! A lot depends, however, on your job status. But if you spend as much time as a writer as you do working at your regular job, you should be able to file this way. I’d suggest asking a tax pro. Sounds like you’re missing out on some legitimate deductions.

      Posted by jpon | January 26, 2013, 9:50 PM
      • no, this was on a Schedule C. According to my tax guy, anyway. Maybe I need a new tax guy.

        Posted by Kelly Davio | January 27, 2013, 12:47 AM
      • Not to criticize your current tax guy, but please see my friend Dora’s response below. She’s been working as a comic and writer for years and she really knows her tax stuff.

        Posted by jpon | January 27, 2013, 12:08 PM
  6. Okay, you’ve fulfilled your obligation to this upcoming time of year, and written us a column on making the most of the friendly IRS (he!he!). Now, just for fun, how about a column in the next few weeks on Henry (your dog)? What does Henry have to say about all the time you spend writing instead of filling his bowl with chow and walking him?

    Posted by shadowoperator | January 26, 2013, 8:49 PM
  7. A lot of the same rules apply to most of the arts; for example, I have three outfits that I use almost exclusively for comedy. I deducted the cost of the outfits, mileage to and from clubs (even open mics), the cost of a trip out to Florida to film a sitcom webisode, and so on. I am also able to deduct the cost of travel to and from the writers’ group meetings that I attend, certain subscriptions to trade magazines and services (I’ll be deducting my Duotrope membership), the fees for my blog registration, flash drives — the list goes on. Every year, I get a letter or a phone call from the IRS asking me for clarification on this or that deduction, and every year it’s cleared up right away.

    Being able to show that you intend to make money from your efforts is the most important thing. “Hours worked” is not always the most important criterion. When I first began taking the deductions for my writing, I registered on Elance and Textbroker. I applied for editing and ghostwriting slots on Elance (and was hired for several) and I still write a couple of articles a week on Textbroker. It’s free to register for these services (there are minor transaction fees through Elance; in Textbroker, the client pays the fees) and they don’t take too much time away from the writing I want to do; I also make some decent money from these services, which is handy. Best of all, I’ve established that I am a working writer. I’m sure the fact that my deductions are often more than two or three times my income from these endeavors is a red flag, but I’m meticulous in providing back-up documentation.

    The documentation is critical. Keep accurate records of *any* funds coming in or going out, update your mileage diary religiously (my 2012 diary for travel to comedy clubs, writers’ group meetings, and client meetings for my web design company nearly fills a comp book), and provide a detailed written record of any expense or income that doesn’t come with a receipt produced by a machine, a printed check, or some sort of digital backup (having too many handwritten receipts or checks raises eyebrows). Cover letters for every category of receipts you’re sending are also helpful.

    Ledgers are great; write ’em in ink and remember to date *everything*. Sign and date any corrections. Spreadsheets are handy for filing purposes, but if there are ever any questions (and there will be) having a handwritten ledger to back you up can save your ass — especially if you offer to bring it in to the local IRS office the same day you get that phone call or letter.

    The tax codes for the arts undergo changes every couple of years and sometimes they’re pretty massive. If you don’t want to slog through all of the different forms yourself then an accountant who specializes in doing taxes for entertainment or arts professionals is your best bet. Standard tax accountants don’t always keep up on the specialized rules for the arts. If you do go the accountant route, ask a lot of questions; you’ll soon find that you’re confident enough to pull the paperwork yourself.

    -d

    Posted by badger1 | January 27, 2013, 11:56 AM
    • Wow. It’s great to have someone with personal experience in the area relate her experiences. This helps a lot, and those freelancer services sound good too. Thanks, Dora.

      Posted by jpon | January 27, 2013, 12:06 PM
  8. Happy to help :)

    I forgot to mention, you may also be able to file an amended return if your deductions in a prior tax year would have been large enough to justify how irritated the IRS agent who opens your letter is going to be.

    I forget how far back you can go, but when I first started filing my arts deductions I was successful in filing a corrected return for the previous year which (after fees) completely wiped out that year’s tax bill. That was the only time the IRS asked me to sit down with them (not the other way around); it wasn’t a full audit, but they wanted one of their agents to verify the original receipts. It was nerve-wracking at first but well worth it!

    -d

    Posted by badger1 | January 27, 2013, 12:14 PM
    • Definitely worth considering if some legitimate deductions were overlooked in prior years. I wish I had the guts to try to deduct my MFA retroactively, but four years past might be pushing it.

      Posted by jpon | January 27, 2013, 12:22 PM
  9. lol, I think four years *would* be pushing it, but any trip you took in the last couple of years to your alma mater might qualify. Since you have an established track record as a writer (paid or not) going back several years, sitting down with a tax specialist is a very good idea. S/he’ll also be able to tell you the best way to move forward for 2013.

    -d

    Posted by badger1 | January 27, 2013, 12:29 PM
  10. Oh god. Is it tax season again? Already? I’ve barely recovered from Christmas!

    Posted by Averil Dean | January 28, 2013, 1:39 PM
    • The IRS does not recognize traditional holidays or seasons. In their world it is simply tax season, tax extension season and recovery time.

      Posted by jpon | January 28, 2013, 1:46 PM
  11. interesting! I’ll have to talk to my tax consultant, aka my spouse, about this.

    Posted by Stephanie Barbé Hammer | January 28, 2013, 5:25 PM
  12. I’m forwarding your post to my man. He’ll be thrilled. Not that I spend much on writing, but every penny counts. (Are you doing AWP this year, Joe?)

    Posted by girl in the hat | January 29, 2013, 12:51 AM
    • I’m finding a lot of writers aren’t aware of what they can legally deduct. The IRS isn’t all bad … oh, wait, yes they are.

      And yes, I’ll be at AWP, sitting in on sessions, touring the bookfair, generally annoying independent publisher types, and deducting the whole enchilada. I’ll also be pulling some shifts at the LA Review table, so if you’re attending please stop on by and say hello. It would be great to put a face to a name. I will post my table schedule when I know it.

      Posted by jpon | January 29, 2013, 3:30 AM

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