Deducting Writing Expenses
By Giovanni Andreazzi
Deducting writing expenses is allowed by the IRS. Believe me, that if a profit is made from the sale of an author’s books, the IRS will take their share. Therefore, continue to write off expenses against your royalties, even if you show a loss. A book may not become popular for many years making it difficult to go back and claim deductions after the original filing deadline.
The correct form for reporting income or loss as a writer is Schedule C (Profit or Loss from Business). Click here for a sample Schedule C for tax year 2008. Click here for the instructions. Note that the code for a writer in block B is 711510 which can be found in the instructions.
Publishers should issue a 1099-MISC (Miscellaneous Income) for royalties earned during a tax year from their sales records. The 1099 is sent to the IRS, so make sure your reporting is accurate. Sales from book signings or other means that have been done independent of the publisher are the author’s responsibility. I might mention that sales within Ohio are subject to sales tax which the author is responsible for paying, but that is another All About article. This article is all about income taxes.
Those royalties reported on a 1099 along with any gross income collected from other sales, go on Part I, line 1 of the Schedule C. Part I is where income from book sales along with deductions from income are listed.
Part II is where expenses are listed. Line 13 of Part II requires a Form 4562, (Depreciation and Amortization). Click here to see a sample of Form 4562. Line 30 of Part II is for home expenses. A portion of a home or office can be deducted as an expense, but again, keep very good records as this used to be a red flag for the IRS auditors. A Form 8829 (Expense for Business Use of Your Home) is required to deduct home expenses. I tend to stay away from deducting a portion of my home since the effort is not worth the reward. Click here for a sample Form 8829.
If you used your car legitimately to sell or promote your books and have kept the required records, enter this data in Part IV (also see the above Form 8829). Personally, I don’t deduct my car as the record keeping is too time consuming, and again, for me, not worth the effort; however, if you drive across the country for book signings, you may want to deduct the vehicle expenses and mileage.
Part V is for other expenses and I have listed a few as examples.
A profit or loss is reported on line 12 of Form 1040 and on line 2 of Form 1040 SE. Click here for a copy of 1040 SE (note that any income below $400, tax year 2008, do not file 1040 SE).
Always keep good records and backup documentation. If you are completely income tax challenged, hire a CPA to do your taxes, but they will require all the records from you and may miss some legitimate deductions.
As a caveat, the information provided herein, is from my personal experience. It may not be accurate for all situations. It is intended only as a guideline.