Forum Transcripts

Keeping Records for the Tax Man 2/15/05

Event start time: Tue Feb 15 12:04:46 2005
Event end time: Tue Feb 15 13:31:29 2005


Legend:
Questions from the Audience are presented in red.
Answers by the Speaker are in black.
The Moderator's comments are in blue.

mary rosenblum Good morning, all!
mary rosenblum I hope you all had a good weekend, and welcome to our Tuesday Forum.
mary rosenblum I'm assuaging my guilt at not having yet gotten all my numbers to my long suffering accountant, John, by doing this Forum topic today!
mary rosenblum You and the IRS....or the Canadian equivalent!
mary rosenblum If you're seriously working on becoming a career writer, you really can begin to claim expenses that you incur as you work.
mary rosenblum And while I am NOT an accountant, and can't give you specifics on what is or is not deductable...
mary rosenblum an accountant familiar with court decisions affecting writers and artists will have to answer those questions...
mary rosenblum I can tell you how to present yourself as a professional writer to the IRS. And this is critically important.
mary rosenblum Unless the IRS considers you a professional writer, you cannot deduct ANY expense related to writing.
mary rosenblum AND...you do not have to sell anything to be a professional in the IRS's eyes.
mary rosenblum You simply have to conduct yourself in a professional manner and clearly demonstrate that you are TRYING to be a pro.
mbvoelker I have good news to share with my writing friends. I've just discovered I'm expecting my 4th child. So I forsee some personal essays in my futurel.
mary rosenblum Oh, good for you, MB!
mary rosenblum Do them quick, while you still have time to write! :-)
mary rosenblum This is the Tuesday Forum with me, Mary Rosenblum, LR Web Editor, fiction and nonfiction writer. Today we're talking about being a writer by the IRS's definition! If you're new here, remember that you need to click on the 'Ask a Question' button or the 'word bubble' next to the red question mark at the top of the screen, or use the ask a question icon in order to ask a question. Your regular 'send' bar won't reach me! You can also type /ask in front of your question to reach me.
barbg Mary, can we deduct the LR fees if we're not published?
mary rosenblum Barb, I"m not sure what kind of deduction you can use for courses and the like....haven't had anything like that to deal with on my taxes. You'll have to ask your accountant.
gskearney If you host a website dedicated to your writing, is it deductible? --gk
mary rosenblum I sure plan to, gary! It should be deductable...it's advertising after all.
mary rosenblum I'll let you know after I get my return back from my accountant!
bravo6 can you give examples of deductibles? I know mag subscriptions and paper and even a printer, if you use it mainly for writing. But what else???
mary rosenblum Well, let's see. Travel to conferences, expenses at conferences, research materials, trips devoted to researching a particular book...
speckledorf Morning! There is a place on the forms for continuing education expenses. Part of it is deductable.
mary rosenblum Thought so. Thanks speck.
mary rosenblum I'm very reluctant to say 'yes' or 'no' to any specific deduction..I'm not an accountant and I don't want to get someone else in trouble.
mary rosenblum Is it necessary to send letters requesting guidelines and magazine sample
legitimate expense? Will regular sales receipt listing


mary rosenblum This is a question I received in advance.
mary rosenblum Your cancelled check should be enough evidence that you purchased that sample copy.
mary rosenblum I also keep a 'mileage bible' where I list the miles I drive in writing related business.
mary rosenblum And the IRS hates these, so you need to keep it religiously, not write it all up at the end of the year from memory!
susannah Is a book purchased for research deductible?
mary rosenblum Yes, it is, susannah. But...you'll have to check with your accountant, because you may not be able to claim that deduction until you sell the work.
mary rosenblum Tax law changes all the time, so do find out.
tory Mary I think Tanya might have meant buying mags at a local store? I plan to count mine--as long as they are in the same genre that I write. For example, at this point I don't do any car or mechanical writing!
mary rosenblum Same difference...if you buy through the mail, use your check, if you buy locally keep your receipt.
mary rosenblum Get in the habit of doing that, especially for travel...
mary rosenblum Keep an envelope in your car or with you when you're at a conference and put all receipts into it...
mary rosenblum with a clear note so that you will know, months later when you do your taxes, what it was for.
mary rosenblum I buy a lot of research books, and I also deduct my subscriptions to 'trade magazines' for writers....such as 'Locus' the SF trade mag.
mary rosenblum Of course your office supplies and the like are expenses, as are long distance phone calls to editors and publishers...
mary rosenblum But you need proof of all this should you get audited, so make sure you keep those receipts and copies of the appropriate bills.
mary rosenblum Membership in writers organizations is an expense.
mary rosenblum So are copies and postage for ms...and that can be considerable if you're sending ms around, especially overseas.
susannah then Internet access should be partially deductible
mary rosenblum Depends on how much of it is writing related, susannah.
mary rosenblum My internet access is more than 80% used for business...I just don't use my computer/access for anything much other than writing.
mary rosenblum BUT...if it's your family computer, that's a different story.
mary rosenblum Discuss it with an accountant. The IRS is sticky about
mary rosenblum business use issues.
mary rosenblum Same for home office.
mary rosenblum If you have one, you CAN deduct that percentage of your utilities, property tax, and the like...
mary rosenblum but ONLY if the room cannot be used for any other purpose.
mary rosenblum If you have a sofa bed in there and a TV and you could concevably use it as a family room...forget it.
mary rosenblum Same thing if you could put a guest in there overnight.
mary rosenblum That's another sticky point with the IRS.
mary rosenblum If you want to sleep in MY office, it will be on the floor or on the file cabinets! LOL
mary rosenblum This is the Tuesday Forum with me, Mary Rosenblum, LR Web Editor, fiction and nonfiction writer. Today we're talking about being a writer by the IRS's definition! If you're new here, remember that you need to click on the 'Ask a Question' button or the 'word bubble' next to the red question mark at the top of the screen, or use the ask a question icon in order to ask a question. Your regular 'send' bar won't reach me! You can also type /ask in front of your question to reach me.
bravo6 and remember, if you drive, KKEP TRAKC OF THAT MILEAGE! They pay like - a mile. And that can add up after 3000 miles of travel! :-) But again, as mary's discalimer is staiting - Check with an accountant!
mary rosenblum Yes, but if you caught my earlier refernce to this, bravo...
mary rosenblum the IRS hates this, so you MUST keep a regular 'mileage bible' and record your mileage with every writing-related trip.
mary rosenblum Guessing at it at the end of the year, without those stained and rumpled pages, will probably be disallowed.
bravo6 As someone who ran a computer business out of my home for 10+ years i can says some of my experiences., My opffice space i was allowed to deduct (a % of my utilites and taxes), al subscriptions pertaining to my job, Milage back and forth to clients,
mary rosenblum That's pretty standard, BUT the more you deduct the more likely you are to be audited, so be honest. If you are deducting your kids' magazines...good luck convincing the IRS that you NEED...
mary rosenblum Rolling Stone unless you are writing for them or writing like articles!
bravo6 office supplies, software i purchased for my job - development languages, word procvessors - nothing like Uncle Sam helping me pay for M Office ;-P), hardware I used, conventions/conferences I went to. Ink for my printers, etx
mary rosenblum Yes, business software, computer, printer...all these are deductable...and probably will be depreciated...
mary rosenblum at least the hardware will.
mary rosenblum Again...
mary rosenblum two caveats here.
mary rosenblum It has to be mostly for business use...NOT the family computer....
mary rosenblum and you need those receipts.
bravo6 there were several items i could NOt get - clothes - I wasn;'t a rock star - yes, this IS what my acct told me! ;-P) a new car, because I would not be using it for 80 - 90% of my business but other stuff, Anythign that was family related...
bravo6 as far as audits go, I have 2 freinds who are, in Tx, Tax Attorneys. They told me taht onfce, very blue moon, the IRS would audit a small business, just to say they Do it. But if you are not making 100,000s of , the likely hood goes down tremendously
mary rosenblum Absolutely, bravo.
mary rosenblum And to be honest, a home computer or web design business is going to be very similar, tax-wise, to a pro writer.
mary rosenblum BUT...do NOT count on that 'they don't audit small business' thing.
mary rosenblum If the IRS thinks you're using your 'small business' writing to deduct a lot from your big paycheck from your day job...watch out!
gskearney I use the poorhouse deduction...not making enough to have to pay taxes on it. --gk
mary rosenblum Well, there you go, gary. :-)
mary rosenblum THat's the best way out...'long as you can eat.
mary rosenblum This is the Tuesday Forum with me, Mary Rosenblum, LR Web Editor, fiction and nonfiction writer. Today we're talking about being a writer by the IRS's definition! If you're new here, remember that you need to click on the 'Ask a Question' button or the 'word bubble' next to the red question mark at the top of the screen, or use the ask a question icon in order to ask a question. Your regular 'send' bar won't reach me! You can also type /ask in front of your question to reach me.
mary rosenblum BUT...the only way you get ANY deduction is to PROVE to the IRS that you are trying hard to be a pro.
mary rosenblum What does that mean?
mary rosenblum It means you have records...you keep a log of what you write and ...
mary rosenblum here you go all you 'I just haven't sent anything out yet' writers...
mary rosenblum WHERE you SEND it.
mary rosenblum Here's another good reason to acquire rejection slips. They are worth money.
mary rosenblum If you say, well I'm an aspiring pro, but I"m not sending anything to editors...
mary rosenblum do you think the IRS is gong to call you a pro?
mary rosenblum That's about as professional as keeping a personal journal.
mary rosenblum If you can show the agent a record sheet or notebook that lists your finished pieces, where you sent them and when...
mary rosenblum lists your rejections and/or sales...
mary rosenblum you are clearly TRYING to build a career, sales or not.
susannah I keep a log of what, when, where and end result-good enuf?
mary rosenblum Should be.
mary rosenblum Combine that with receipts and records of purchases, phone calls, mileage, conference attendance, mileage...
mary rosenblum what records would you keep if you were running say, a dry cleaning business?
tory Mary do you think travel to critique group meetings would count as mileage for buisness? I know I NEED it.
mary rosenblum I do. As long as you are discussing a saleable work, it counts.
coach and don't forget- just because the IRS doesn't audit small businesses much, doesn't mean your state won't. My brother in law owns a roofing business here in CA and the state sends someone almost every year to make sure his books are in order
mary rosenblum And sometimes you just get audited...not likely since you're not costing Uncle Sam much, but it CAN happen.
munchkin As a tax professional during tax season, your "stuff" must b
munchkin e !00Kusiness use of you cannot deduct it on your return.
mary rosenblum You'll have to check with your tax professional on exact numbers...
mary rosenblum and it's a good idea to make sure that your tax preparer is up to date on ...
mary rosenblum rulings that affect writers and artists...not every H&R Block preparer, for example, will know those specifics.
gskearney I send my stuff from a post office where I can get receipts for postage as well. That can certainly add up.
mary rosenblum That's a good way to do it, gary. I actually record the actual postage when I send short story ms out, since I prefer to save a trip to the PO and use regular stamps...
mary rosenblum It's in my log of work in/work out.
mary rosenblum Since all novel ms go by a delivery service like Fed Ex, I get receipts from those.
mary rosenblum Again, you need to discuss particular deductions with your tax preparer, but the records need to be there in the first place in order to be able to deduct anything.
mary rosenblum And you will save yourself money by having those records in a form which will make the work easy for your accountant.
mary rosenblum That is what this Forum is about...record keeping. If you are a professional writer, you are essentially a small business.
mary rosenblum Munchkin, since you are a tax person...a CPA?...how do you suggest people find someone who will find an accountant when needed?
tory Mary, do you know if it will work against us IRS-wise to submit to non-paying outlets to get started (after, of course, rejections frompaying markets)?
mary rosenblum Tory, you need to demonstrate to the IRS that you are trying to become a professional writer...if getting your work published helps you sell to paying markets..
mary rosenblum that should only help support your claim.
sol How do you find a good accountant?
mary rosenblum You might ask local writers, or simply call listings in the phone book...
mary rosenblum and see if you can find someone who is familiar with writers.
tolkienlvr Does anyone know ...is there a certain
tolkienlvr -uctions like this, when using the 1040A. For those who do
tolkienlvr their taxes themselves. ? :)
mary rosenblum I can't help you at all there, tolkien.
mary rosenblum You chould do a web search..google...and see if you can find resources for writers who file on their one.
mary rosenblum own..
mary rosenblum but that's not something I"m going to even try, thank you. :-)(
speckledorf I used Turbo Tax for us. It has a place for business expenses and is user friendly.
mary rosenblum Oh yes...if you are self employed and making anything...Bravo said , but, I don't personally know the number...you will pay self employment tax.
mary rosenblum That can be an unpleasant little reality, believe me.
mary rosenblum Keeping records of your submissions, the postage each submission cost you, (don't forget the postage on that SASE), and the dates of return and the outcome..
mary rosenblum will not only provide you with good numbers when you're ready to do taxes, but it will also provide you with a good tracking system for your own career.
mary rosenblum It's easy to forget where your work has been, once you have five or eight or ten pieces out.
mary rosenblum And DO keep track of your payments!
mary rosenblum YOu will only get tax forms from publishers who paid you over a certain minimum amount...
mary rosenblum if it is less than that amount, a form is not required...
mary rosenblum but you need to keep a record of that income and count it.
sol I've recently finished the LRWG course, and am now on my own. Nothing has been published yet, but should I start keeping records now? If nothing develops with respect to monies for the next two years, or more, will this years records still be valid?
mary rosenblum Do keep records, sol. It used to be required that you 'made money' two years out of five to be considered self employed...
mary rosenblum Now you are merely required to demonstrate that you are seriously attempting to make money.
mary rosenblum And that means behaving like a professional writer and documenting that behavior.
geezer some professional organizations have health insurance. Does that exist out there in writer's land?
mary rosenblum It does. A few of the professional writers organizations offer some form of health insurance. I believe MWA does, I think Writers Union does or did...
mary rosenblum I don't know about RWA. Anyone know about that one?
mary rosenblum You have to publish to belong to most of these organizations, though.
gskearney Re records: Keep a spreadsheet or even just a text file with oldest entries at the bottom. That way it's easy to delete old entries, and for God's sake make backups just like you do for your writing. --gk
mary rosenblum No kidding!
mary rosenblum Even a spiral notebook works if you're low-tech.
mary rosenblum It's a good idea -- I think, at least -- to make periodic print outs...certainly at the end of the year.
mary rosenblum Just incase your hard drive dies and your backup medium turns out to be compromised.
lil-duv Mary that includes your paper, ink cartridges for computer, envelopes etc.... as well doesn't it?
mary rosenblum It does if you ONLY use it for writing, lil.
mary rosenblum You cannot deduct it if your kids are printing out their homework and using the computer.
mary rosenblum When my kids lived with me, I had a computer/printer/internet access that were off limits to my kids entirely.
mary rosenblum We had a separate family system.
mary rosenblum That was mostly for the protection of my hard drive and ms from viruses...
mary rosenblum but it also featured in my ability to deduct my computer-related expenses safely.
mary rosenblum My accountant tells me that this is where most writers get into trouble...
mary rosenblum trying to deduct things that are really shared by family.
mary rosenblum This is the Tuesday Forum with me, Mary Rosenblum, LR Web Editor, fiction and nonfiction writer. Today we're talking about being a writer by the IRS's definition! If you're new here, remember that you need to click on the 'Ask a Question' button or the 'word bubble' next to the red question mark at the top of the screen, or use the ask a question icon in order to ask a question. Your regular 'send' bar won't reach me! You can also type /ask in front of your question to reach me.
mary rosenblum The issue of 'meals and entertainment' for example, is a sticky one.
mary rosenblum You can deduct some of it, but not all, and restrictions apply.
mary rosenblum If you are at a conference, do keep your receipts, but keep some notes about what went on at that meal if anything.
mary rosenblum A conference with your agent is different from lunch with a writer friend...
mary rosenblum and 'business lunches' are another sticky IRS area.
mary rosenblum Do go read my interview with John Caton, CPA. He's my accountant and handles a lot of writers and music artists.
mary rosenblum He DID answer some specific questions during my interview, and I'll have him back this coming year for another round of quesitons.
mary rosenblum You can find my interview with him at Surviving and Thriving: Interview Transcripts.
sol Will do. I'll look forward to his next Question Period.
mary rosenblum He does have good, specific answers. :-) That's why I pay him.
mary rosenblum Keep records even if you're not making any money and choose NOT to file as a self employed professional.
mary rosenblum Not only will it give you a clear overview of what you spend versus what you make..
mary rosenblum when you DO choose to file as a self employed writer, you'll have those records to demonstate...
mary rosenblum that you have been trying seriously to do this for some time...
mary rosenblum and you'll have established good habits of record keeping.
lil-duv would it be possible to get an interview re:Canadian taxes and writers?
mary rosenblum Lil, if you can connect me with someone who would like to do an interview, I'll be happy to do it.
mary rosenblum I just don't know any personally.
sol Oh, ya. Accountants need to get paid, too . . .
sol Another tax deduction?
mary rosenblum Yep.
lil-duv I'll talk to my friend
mary rosenblum Oh, please do, lil! That would be VERY helpful to the Canadian students and website folk!
mary rosenblum This is the Tuesday Forum with me, Mary Rosenblum, LR Web Editor, fiction and nonfiction writer. Today we're talking about being a writer by the IRS's definition! If you're new here, remember that you need to click on the 'Ask a Question' button or the 'word bubble' next to the red question mark at the top of the screen, or use the ask a question icon in order to ask a question. Your regular 'send' bar won't reach me! You can also type /ask in front of your question to reach me.
mrsmouse Last year I made money writing; this year I have not...
mary rosenblum Well, that's the self employed writer model, Mrs. Good for you for making money last year!
mary rosenblum And to be honest, the expenses involved in writing are not huge, generally...
mary rosenblum so it doesn't take too many sales to at least come out in the black!
mary rosenblum Which is another good reason to keep records..it's SO nice to realize you didn't cost yourself money doing this.
mary rosenblum Sort of takes it out of the 'hobby' category right there... :-) If you're feeling insecure about your status as 'writer'. Nice ego boost.
gskearney You may also want to use income averaging later if you do make a big sale. You can offset part of that income by applying it to the previous lean years, but only if you have good records.
mary rosenblum Yes, that is something that can be helpful if you sell a 20,000 novel when you had 3000 worth of income last year!
sol And you know, establishing those good habits will reinforce the belief of BEING a writer!
mary rosenblum That's it, sol, and this is ...in my opinion...the strongest reason for starting professional record keeping practices now.
mary rosenblum You ae saying to yourself every day, 'I am a writer'.
mary rosenblum And that is a conversation that will help you in the long run.
mrsmouse ...should I still file as a self employed proffessional?
mary rosenblum Sorry, didn't get the second part of your question right away, mrs.
mary rosenblum You don't have to make money to file as self-employed writer. The current rules state that you must...
mary rosenblum demonstrate the INTENT to make money.
mary rosenblum Which is why you need the records.
mary rosenblum Now realize, the intent to make money is a potent statement.
mary rosenblum If you wrote one short story and sent it to one market and when it was rejected you tossed it...
mary rosenblum even a nice clear set of records isn't going to convince anyone that you are trying to be a pro.
mary rosenblum What does it mean, 'intent to make money'?
mary rosenblum It means you are writing and submitting...not once a year, but often.
mary rosenblum Now if you're writing novels only, your submission rate will be much less frequent, but you need..
mary rosenblum to make it clear that you are trying to establish a career, not merely write that one book and see if it ever gets published.
mary rosenblum That is a big difference. Records alone to not mean you are trying to be a pro...
mary rosenblum they merely document the process of trying to be a pro to the IRS>
lil-duv could it not be considered that you write the novel this year, receive advance this year and royalties after that?
mary rosenblum That's how we all get paid, Lil.
mary rosenblum But you might have a hard time saying you are a pro to the tax man with only a single novel sold and out...
mary rosenblum unless you can show that you have others either in the works, or out.
mary rosenblum I can't tell you 'yes, you can do this' or 'no, you cannot do this'...
mary rosenblum for that you'll need a pro.
mary rosenblum But if you can say to an agent, 'Look, I am spending all my free time writing and querying and submitting and I really mean to make my living this way'...
mary rosenblum then you are a pro in the IRS's eyes.
mary rosenblum If it's ...well, I work a forty hour week and every couple of week, I work on a chapter of my next novel... Want to guess how that agent will likely respond?
mary rosenblum ARE you TRYING to make a living writing or are you simply working on something and HOPING that you'll have that bestseller and make a fortune?
mary rosenblum Trying and hoping are not the same things!
mary rosenblum And of course, this is a VERY subjective area...
t green are Trying to make a living and Trying to supplement my family income the same in the IRS's eyes?
mary rosenblum Subjective, t, but I would assume that if you can demonstrate that you are putting in time in an attempt to make money, you're fine.
mary rosenblum A lot of things can go into 'trying'.
mary rosenblum Attending conferences, meeting editors there, belonging to a local writers organization, belonging to pro organizations that will admit you, resource books on writing and marketing...
mary rosenblum these could be called 'trying' and help demonstrate that you are serious.
lil-duv attending LR?
mary rosenblum I'm sure. Attending writers workshops at conferences...
mary rosenblum I don't think there is a list of 'signs of professionalism'...but use some common sense...
mary rosenblum and...heheh...this will also make you think about what you can do to further your career.
mary rosenblum Because these things don't just impress the IRS...they DO help you become an established writer.
mary rosenblum Yes, they'll get the tax man to maybe respect you, but they ARE methods of futhering your budding career as a writer.
mary rosenblum If you ACT like a pro, you begin to be SEEN as a pro, sales or not.
sol Yep. I can see that, alright!
mary rosenblum It's true. Nobody knows whether you have sold or not unless you tell them.
mary rosenblum But if you show up at conferences, hang around with the editors and agents...
mary rosenblum chat with writers, and generally act like you belong there...you WILL belong there.
mary rosenblum Nobody asks for an ID card!
lil-duv I meant being student at LR, not just attending chats
mary rosenblum Oh, I'm sure, lil.
mary rosenblum Any course or workshop you take to improve your skills is going to help support your claim that you are trying to be a pro.
sol Hmm. This is VERY encouraging!
mary rosenblum Back when I first started out...I went to every conference that was local enough that I could afford it...
mary rosenblum shared a room with three or four other new writers at the hotel, and basically spent my time learning who was who and talking to everyone in the business I could strike up a conversation with.
mary rosenblum I am NOT comfortable with people, am essentially shy, and it was VERY hard to do...especially since I didn't feel I had any right to even speak to these pros!
mary rosenblum But I darn well did it, and it really did pay off...
mary rosenblum in networking...tips on what anthologies were open that were not in the usual market lists...
mary rosenblum big name writers who later were happy to blurb my first novel...
mary rosenblum suggestions and help from established writers...
mary rosenblum Aside from any tax considerations, it's a great way to make yourself a professional.
sol Hmm. Another very encouraging piece of info. I suffer from similiar 'ailments' that have caused setbacks for me. Time to forge ahead!
mary rosenblum I think writers are essentially non-social...most of us...or why would we spend so much time inside our own heads? LOL
mary rosenblum But it's a welcoming bunch of people for the most part, and promoting your career is definitely a good thing.
mary rosenblum Networking has its benefits and as you do begin to sell and establish yourself, it brings you requests for submissions among other things.
mary rosenblum Whenever you have the chance...go hang out with writers.
mary rosenblum Well, this has been another good Oregon Hour...and now I have to get back to the novel course...
mary rosenblum it's nearing completion and I'm VERY pleased with it!
mary rosenblum Looks lovely in it's formal typeset.
mary rosenblum Do join us for our casual chat on Wednesday, same time as this forum..
mary rosenblum it's just a chance to get together anc talk about writing.
mary rosenblum Have a good week, all. Write well...

Return to Forum Transcripts