Official Transcript of the Episode
Here are three dangerous thoughts every writer has around tax time.
1] What can you count off? I can count off my bed. I write on my bed, so it’s a
business expense—especially that expensive pillow I just bought.
2] For taxes, I can count all my paper and pens as business expenses,
right? My fancy note cards and journals, the posters to decorate my room,
padded bulletin boards and stencils. Oh, and photo apps. And an app to organize
my daily schedule.
3] And my phone! I contact my designer and editors and schedule
for conferences on my phone. Gee, I can buy one of those really fancy ones that takes good photos. I’ll get a lot of tax dollars back, won’t I?
Well, no and yes.
What truly are the kinds of things counted as writing
expenses that can provide deductions on your taxes? Maybe this episode has a few answers.
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Books - YouTube or go directly to the episode here.Welcome to The Write Focus, a podcast for writers at all
levels. Headed by M.A. Lee with the assistance of Remi Black and Edie Roones,
all from Writers Ink Books. Our focus is productivity, process, craft, and
tools.
Show notes for this and other episodes can be found on thewritefocus.blogspot.com.
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the link and the free novella and then the current newsletter.
As for today, we’re bookcasting with Think like a Pro
by M.A. Lee, copyright 2017, revised 2018.
Today’s episode is an amalgamation of three different places
in the guidebook along with information I’ve learned since revising Think
like a Pro in 2018. Like the plot methods chapter that included “Kishotenketsu”,
I’m adding in. Therefore, the transcript for this episode in its entirety will
be on our website thewritefocus.blogspot.com.
Also, celebrate with us!
We’ve reached our 25th
episode. After a celebratory email from my podcast host for passing the 15th
episode, I have a feeling many podcasts start up, but few persist. So I’m
rolling my eyes. Joanna Penn, the Creative Penn, has hit her 500th
episode, so my 25th episode seems like a small ladder rung. However,
we have to start climbing somewhere! So, yey for The Write Focus and our 25th
episode.
It seems strange to celebrate as we hit the episode on Tax
Tips for Writers—yet we have to do Tax Tips now, and it is #25.
So, on with
this episode, a few tax tips for writers: business expenses and the like.
For official tax help, see an accountant who can help you
the first year that you make money. And consult a financial advisor who
understands intellectual property. If you haven’t considered your writing as
intellectual property, you have a huge mental viewpoint to change.
Becoming a professional writer is becoming a small business
owner. Your product that you sell is your writing—fiction or nonfiction, prose
or poetry. No matter which genre. No matter the length. No matter
self-controlled or work for hire, traditional or self- published, you are
creating product with every word. Some products will be MacMansions. Some will
be rustic cabins in the forest. Some are a shed in the backyard. No matter
where, every finished product is property, generated by your brain—that makes
it Intellectual Property. You'll see IP everywhere. You own it.
When you sell it, you actually sell a license to others to
use and retain the property—unless you sign away the copyright in a contract.
Always read contracts or pay an IP adviser to read it for you. That’s just good
business sense, and that’s not what this episode is about.
Let me head off on another tangent. When you first make
money as a writer—or even when you launch the process to do so, you’ll
need a tax identification number from the IRS or the appropriate revenue institution
for your government. A financial advisor can help you decide whether to have an
S-Corp or another tax designation and whether to have an LLC. These are early
decisions to make when you start up your intellectual property business before
you deliver your first product to the marketplace, to consumers, to readers!
Tax numbers and designators are also not the focus of this
episode. We’re concerned with the expenses that you will gather up as you
prepare to file taxes.
To set up your small business properly, when you are close—so
close to sending content to the marketplace readers—don’t think about promotions
first, think about being a business owner and set up an appointment with a
money professional, a CPA or a financial advisor.
Do this long before tax time. Do this early in your writing
career, and you will be setting up your IP business with the best practices for
a start-up.
Don’t wait until January to April, the busiest times for a
CPA and a financial advisor. Schedule for summer or fall then follow the advice
you receive.
Now--Now that I have these two important professional life
concepts out of the way—intellectual property and small business start-up—I’ll
start with the tax tips.
Remember those 3 foolish questions that opened this episode?
1] Counting your bed because you sometimes prop up with your
laptop to do late-night writing.
2] Counting all your purchases of papers and pens and apps
and more.
3] Counting off your phone so you can buy the newest gadget every year, especially one with great cameras or allows you to stream or game.
Let’s take your writing space first.
The space you count on your taxes for writing has to be solely
for writing, not sleeping also. Not your dining room table since you can clear it
off 4 or 5 times for family gatherings or projects. You can’t count the craft
table in the corner. Yes, you may write there—but on 1 or 2 days each month,
you also pay bills there. To count your writing space, you have to devote a
space for writing only. This is one reason that pro writers may have an office
they go to or a room solely for writing or a backyard shed. You may have a desk
in an unused walk-in closet space or a corner with a window—as long as its sole
purpose (not primary, but only purpose) is for your small business.
Measure it out. That devoted space can be used on your taxes
to offset your mortgage or your rent.
This is also the reason you should track your writing
sessions, especially in the early years when you don’t turn a profit. (Yes, most writers--99.9%--are not successful with their first publications.) A zealous
tax auditor might need to reference the sessions you spent in your writing
space to count it as an official deduction.
Set up your writing space not just for writing but for
tracking the business of writing.
When you need to take a writing break, you can work with numbers in your writing space. Turn to something totally analytical when your creativity is zapped. Take an hour or two to set up a business ledger. Track the month-by-month
income/outgo as a report. You can call it credits/debits or earnings/expenses if
you wish. Project expenditure into the future. What earnings are need to fund
those projected expenses? After totting up columns of numbers, the brain will
beg to return to creative writing.
Create a running tally, month to month. Running all those
numbers will make the creative side of your brain wish it were working with
words. And when tax time rolls around, you will pat yourself on the back.
Think like a Pro, p. 144 to 147
Be Business Savvy.
Track the money. Do a cost analysis Think like a Pro,
p. 134
Anything related to the creation of intellectual property is
an expense.
When you go on a trip that’s not specifically related to
writing, journal everyday about impressions of the place, descriptions, experiences, and
your writing itself. A portion of that trip now becomes inspiration for your
writing. It’s research for your writing, and it’s deductible. That’s straight
from my CPA.
Count your devoted research trips as well as books and webinars
that your purchased to improve your craft and professionalism about writing.
Definitely count the cost of a writing conference, the hotel
room and its fees and taxes, the cost of food—not in this past Corona-coaster
year when conferences canceled right and left and sideways, but definitely in
the future.
Account for all your sales in the year it comes in.
Deferring only works when your 6 figures or more with a foreseen financial
hardship in an approaching year. Otherwise, when you get it, pay
taxes on it. Ask a CPA if you disagree with this advice. (Some people want to
put off paying taxes. I personally don’t think it’s wise.)
Other writing expenses may not be immediately
writing-related. For example, for last year’s taxes, since I started this
podcast in August, I will count microphone, headphones, fixing/editing costs,
music license, and mixing software. All of those are expenses for this podcast
which is directly intended to support one small portion of my writing. If you’re
interviewed for a podcast and you supply your own microphone and headphones or
you create audio files to support your books or you create a streaming video
which you narrate, guess what? It’s writing-related.
In addition, I’ll have the cost of the subscription to the podcast host. If you access through Apple Podcast or Spotify or YouTube, that’s
from the RSS feed off my host Podbean.
And start now buying your own ISBNs so you can put your books
in wide distribution. Don’t wait like I did. I had lots of expense in one year
that I could have spread over 5 years.
Also pay the fee to register your copyright. Don’t use Poor
Man’s Copyright. What is Poor Man’s Copyright? It's mailing the manuscript to yourself,
using the date stamp of the Postal Service as the copyright date, and never opening
the package. The major problem is that Poor Man’s Copyright won’t hold up in a
court of law. The whole purpose for registering copyright is to ensure that you can take someone to court (even small claims court, now that that's entered the law) if they take intellectual property that you have officially copyrighted.
One area that I’ve fallen down on as a writer is promotions.
I’m trying to change that this year.
I have started a
newsletter, prompted by my first subscriber. I hope to have more subscribers
soon. A newsletter requires an email aggregator, and I’m still figuring out the
one to which I subscribed. I set up three emails—with myself as a subscriber—and
didn’t receive the first one. When it’s working, when I finally figure it out, I’ll tell you the service.
I’ve also joined Book Funnel. My free novella comes through
Book Funnel.
As you go year to year with subscription to services and to
professional organizations, you need to consider if your goals are being met.
Divorce your emotions and go with logic. You can have emotions with your
personal money, but we’re in a small business now. Logic wins the day.
I’m certain I’ve missed some expenses. Hopefully, these
lists and my rattling over them will have dinged off expenses you should count
at tax time. Remember, first, protect your intellectual property and 2nd,
run your writing like a professional small business. Writing is not a hobby. We’re going
Pro.
Next week, we finish the guidebook with chapter 7, “One Resolution”. After Think like a Pro, we’ll be bookcasting Write a Book in a Month¸
published under my Remi Black moniker. Yes, if you hadn’t figured it out, M.A.
Lee and Remi Black and Edie Roones are all one person. I talked about pseudonyms in
the 7th episode, part 2 of “What’s in a Name?” way back last fall.
I still haven’t decided if Write a Book in a Month
will be one Wednesday as always, only Wednesday and a weekend episode, or daily, which is
how the original blogs occurred, back in April of 2019.
Until next Wednesday, Write On.
Resources (links are to Amazon because I’m lazy)
The Copyright Handbook by Stephen Fishman
https://www.amazon.com/Copyright-Handbook-Every-Writer-Needs/dp/1413320481/
Dean Wesley Smith
The
Magic Bakery
https://www.amazon.com/Magic-Bakery-Copyright-Fiction-Publishing/dp/1561468258/
The
Magic Bakery is also a course from his WMG Publishing workshops and classes
on Teachable.
Think
like a Publisher
https://www.amazon.com/Think-Like-Publisher-Step-Publishing/dp/1463698224/
Kristine Kathryn Rusch’s Discoverability
https://www.amazon.com/Discoverability-Writers-Kristine-Kathryn-Rusch-ebook/dp/B00NCJL9AG/
Six Figure Authors podcast, episode 074 “Tax Savings,
Business Structure, Retirement, and Cumulative Advantage for Authors”
Joanna Penn’s The Creative Penn podcast, episode 522 “Tips
for your Author Business Plan”
M.A. Lee’s Think like a Pro
https://www.amazon.com/Think-like-Pro-Advent-Writers-ebook/dp/B07DYJDY5S/
Think / Pro: A Planner for Writers
https://www.amazon.com/Think-Pro-Planner-M-Lee/dp/1983248673/
