I use the word "dreaded" very lightly, though, because I actually enjoy doing my taxes. (Don't judge me. Statistically, I cannot be the only person to admit that.) I use tax software to organize and file my yearly taxes but, even so, it still takes a working knowledge of tax preparation to do it right.
This year, I am filing with a new occupation: a writer. Are you?
It all comes down to whether your writing is a hobby or a job. Hobby Writers file differently than Job Writers. There are benefits and downsides to each of those positions so it is very important to determine where you stand.
I do not pretend to offer professional advice: so, here is my champion disclaimer. *Ahem*
Don't take my bizarre love for filing taxes as professional advice because I am definitely not an accountant. I am still learning as a writer and, for me, this is just one more lesson.
Please refer to www.irs.gov and their publications for the rules and regulations that govern this topic and ask a real accountant for advice.
(Just remember--I write speculative fiction. I lie for a living.)
Okay, now that we've established that, I want to let you know there are a lot of things you can consider when trying to determine your own position as a Hobby Writer or a Job Writer.Do You Operate Your "Writing Job" in a Business-Like Manner?
For several years, I've been "grooming" my activities in preparation of becoming a Job Writer. Like any business person I, as a Job Writer, should do things to promote myself and my writing. These are some of the things I did to show I wasn't scribbling only for the fun of it.
- Joined a professional writing organization, such as Pennwriters, RWA, Pikes Peak Writers, the Maryland Writers Association, or the Science Fiction Poetry Association (to name some of my favorites.)
- Entered contests, either for the prize or for feedback.
- Networked by distributing business cards, using social media, or maintaining a website or blog.
- Kept a file of what I've sent to editors and agents--even the rejections.
- Attended conferences, took online classes or seminars (even free ones), and read books on the craft of writing and publishing.
Once you decide you are a Job Writer, you'll need to prove you can back up that claim. In the event of an audit, the IRS will look for key elements to determine your status. According to the IRS, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
I pulled this from the IRS website:
In order to make this determination, taxpayers should consider the following factors:
• Does the time and effort put into the activity indicate an intention to make a profit?
• Does the taxpayer depend on income from the activity?
• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
• Has the taxpayer changed methods of operation to improve profitability?
• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
• Has the taxpayer made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
Are You In It For The Money?
Do you write for the joy of it? Or because you want to see your work published and selling? Even if you are not yet earning royalties, you may still be a Job Writer. What it all comes down to is the time and effort you put into your writing--as well as a motive to earn a profit.
Before my novel was published, I was writing and submitting short stories and poems, while using Duotrope.com to track my submissions. Never knew it would come in handy at tax time, but it will--all because it shows nearly every submission and response I've ever sent. Likewise, my Query Tracker account is a record of all the agents I've approached. Both spreadsheets contain ample proof that I put serious time and effort into getting published.
Keeping a calendar will help, too, especially if you are big into events and activities. Mark the days and time for each activity you attend--and, while you're at it, mark off things like blog tours or days you devote to polishing your query.
Basically, keep a time card. Hobby Writers may not have an inclination to keep such records, but they provide valuable proof for Job Writers.
Do you depend on income from the activity?
I know I'm not ready to give up my day job yet, but that's not going to stop me from filing as a Job Writer. Every business starts off small and often incurs losses in the beginning--just as indicated in the next bullet point in the list. The point is, earning a living as a writer is my ultimate goal--and one day, I hope to support myself with my writing.
Losses and dry spells are to be expected, just like in any business. Besides, everyone in the publishing business starts off small. Think about that. Why would I be different?
Have you changed your methods to improve profitability?
What this basically means is: are you attempting to grow as a writer? Do you enter contests to obtain feedback? (Read more about that here) Do you take classes in person or online to improve your skills, learn new ways of promoting, or pick up new writing tips? Do you try different outlining or storytelling techniques, searching for a better method?
All of these things change the way we write and the way we attempt to get our projects noticed. If the ultimate goal is selling that novel, then those activities help you meet this requirement.
Do you have the knowledge needed to carry on the activity as a successful business?
Do not think this means you need a license or degree to be a writer. However, you do need to learn about publishing before you dive in. Lucky for you, there is a splendid place called the Query Tracker Forum, which is an excellent place to start toeing the waters. There is also a hoarde of fabulous publishing blogs and websites that help demystify the publishing process. The knowledge is out there, waiting for you.
You can also expand your knowledge through conferences, webinars, and reading newsletters from published authors. Even reading blog posts such as this one demonstrate your intent to learn more about the business of writing. (You're welcome, by the way. :D)
The last few bullet points discuss past, present, and future income.
These sound pretty straightforward to me.
I have yet to earn significant amounts from my writing, yet I have every intent to file as a writer. Why? Because I put a lot of money into my business last year--I went to conferences, I purchased tons of promotional swag, I paid for advertising, and I entered contests. What I spent far outweighed my income…and, hence, the day job comes in handy again. (Huzzah.)
If I was better informed before now, I would have filed sooner--I've been running a "writing business" for a few years now but I let my lack of reportable income keep me from filing as a Job Writer. I could have been deducting my expenses for as long as I've been a member of Query Tracker, because that was the year I decided I would pursue publication. Last year, however, the hobby officially became a job, so my own path was clear.
It's a tough decision that I had to make for my own reasons--and so must you, if you are still in the unpublished phase. You should become familiar with these IRS guidelines because you can get your "business" in order and look ahead to the future. Even if you aren't ready to declare yourself a Job Writer now, one day, you might. These points may help shape you as a professional writer and may even point you in a new direction of growth.
It's never too soon to get your business in order.
Ash Krafton is a speculative fiction writer. Visit Ash's blog at www.ash-krafton.blogspot.com for news on her urban fantasy "Bleeding Hearts: Book One of the Demimonde" (Pink Narcissus Press 2012) and the follow-up "Blood Rush" due May 2013.