Tax Tips for Writers / Think like a Pro / "6 B"

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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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. Write to us at winkbooks@aol.com.

Our podcast episodes last as long as it takes to fix a quick dinner, drive a short commute, or take a brisk wall.

M.A. Lee is currently offering her novella The Lion’s Den as a freebie when you sign-up for her newsletter. Write to winkbooks@aol.com and ask to join to get 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 25^th episode. After a celebratory email from my podcast host for passing the 15^th 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 500^th episode, so my 25^th episode seems like a small ladder rung. However, we have to start climbing somewhere! So, yey for The Write Focus and our 25^th 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 2^nd, 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 7^th 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/