It's tax season again and, if you're like me, the procedure boggles the mind. To help you struggle through the task of giving the IRS their due, I asked Danica Favorite the following questions about deductions:
"For
a writer doing their own taxes (as opposed to having an accountant), what are
some legitimate writing deductions we might miss? Are there deductions we might
think are legitimate but aren't?" - Sandy
I'm so glad Sandy asked this question, because I think it's a great question. And I think my answers might surprise some people. There are a lot of legitimate deductions a writer can take for his or her writing business. But there are also a few deductions writers take that aren't deductible. I'm going to share a few of the most common.
The first thing I want to address
is what you CAN deduct. The IRS standard for what is deductible for your
business is what is REASONABLE and NECESSARY for your business. So what's
reasonable and necessary? That's something the IRS does not define, but as a
business owner deducting that expense, you should be prepared to explain how
it's necessary for your business as well as a standard business practice among
writers.
Here are a few suggested items you
might be able to deduct:
·
Ink, paper, mailing supplies, and other office
expenses.
·
Research materials
·
Conferences and other writing related education
·
Professional memberships
·
Advertising
·
Transportation Expenses
·
Meals and Entertainment
·
Business gifts
·
Legal and Professional Service
·
Other writing tools
·
Utilities
·
Computers and other equipment. NOTE! These
should be depreciated and only in the proportion of business use. Care should
be taken to determine the amount, if any, personal use can be attributed to
these items
One thing I'd like to point out as
a commonly missed deduction are your transporation expenses. When you take
trips to the post office to mail things related to your writing business, or
you're going to meet another writer for critique, be sure to track your
mileage!
As far as deductions that people
think are legitimate but aren't, I'm going to give the most commonly abused
deduction by writers (at least in my experience). Business clothes.
Unfortunately, the IRS has very specifically stated that the business clothes
you're buying to wear to conferences are not deductible. A lot of writers try
to claim it, but it's not legitimate. I know some writers have said, “but I
claim business clothes every year.” But there's a problem with that logic. If
the IRS chooses to audit those returns, that deduction will be disallowed, and
the writer will be responsible for paying penalties and interest on the
additional tax levied based on that mistaken deduction. Remember- just because
you've deducted something, doesn't mean that it's a legitimate deduction. Even
if you've gotten away with it in the past, the IRS has the right to take a look
at previous years' returns and change them.
Another deduction mistake is taking
a deduction for the entire cost of an item that is used for both personal and
business expenses. For example, many writers want to deduct the cost of their
Internet service. This is a legitimate business expense. However, if you have
the Internet service in your home, and the rest of your family uses it, then
part of it is personal use. So you need to apportion the amount of business use
and only deduct that amount on your tax return.
As you can see, there are a number
of great deductions you can take for your writing business. Just remember that
they need to be reasonable and necessary for your writing business. Keep in
mind that you need to only deduct the business portion of your expenses, and be
cautious about deducting anything that the IRS doesn't allow.
What business deductions do you take for your writing business? Are there any that you're thinking of adjusting?
~~~
Danica Favorite works as an online moderator for a major
publisher where she connects readers and writers with new fiction releases.
Having spent time in the corporate world teaching tax law and preparing taxes,
she much prefers fiction to numbers. You can connect with her at
www.danicafavorite.com.
