April, Come She Will
...and with Her, the 15th

by Karin Beuerlein

I used to make fun of my boyfriend on a regular basis because of his taxes. He’s a symphony musician and a self-employed bass teacher, and his tax forms look like calculus. He sheds big salty tears every year when it’s time to wrestle the clingy tentacles of his IRS submission from his largely uncooperative tax software. It takes him days to finish. I, on the other hand, dial up the number they send me in the mail, spend 20 minutes on the phone, and find a sweet surprise in my savings account within a few weeks. I was so smug.

Word to the wise: when teasing, dish out only what you can take back. 1998 was my first year to make money from my writing in addition to my full-time job, and I had no clue how to break it to the IRS that our simple, beautiful relationship was going to change. Or even if it would. Now my boyfriend is smug. “You might screw it up if you do it yourself,” he says sweetly. “Why don’t you hire an accountant this year?”

I did better than that. With a little creative Web surfing, I found Darlene Cypser, tax attorney and author of The Writer’s Pocket Tax Guide, an extremely helpful information source geared specifically toward free-lance writers. If you’re just starting out as a writer and you’re trying desperately to make sense of IRS forms, the WPTG is for you. Even if you’re a seasoned professional, chances are this site can answer any nagging tax questions you have.

Do I Qualify as a Business?
This is the first question you have to answer as a writer filing taxes. If you have made income from your writing during the year, you have to report it. But how?

Like this. The IRS asks you to distinguish whether you are writing for profit or as a hobby. The distinction determines what forms you use and the kinds of expense deductions you are allowed. The decision is largely subjective -- are you writing for fun, or with the intention of making a profit? Most likely, if you’re here reading this, it’s the latter, and you’d like to be able to deduct your expenses.

However, if you don’t have regular writing income, you may have to prove to the IRS that you are engaged in a business and not just dillydallying around. According to Cypser, some of the hallmarks of a writer “in business” are making regular queries, tailoring articles to fit certain publications, researching markets, and spending substantial time on task. So don’t light the living-room fire with your rejection slips! Keep detailed records of submissions and rejections -- they serve as proof of your intent to make a profit.

The IRS will presume you’re in business, no questions asked, if you chart a profit in three of your first five years, “even if all you ever do is hide in a closet and type on your computer and no one has ever heard from you or of you,” says Cypser. This is a helpful rule, for example, for the novelist who publishes occasionally but doesn’t have a staggering record of submissions and rejections to prove her intentions. If you make a profit the first year but flounder the next two, you may apply to the IRS to defer the decision about whether you’re a business until after the fifth year. This is done with Form 5213.

If you have no income from writing and no sure prospect of making any, you are probably in the hobby stage, which means you should check out Schedule A and its instructions. You may still be able to deduct most of your writing expenses, but you cannot claim a net loss.

If You’ve Taken the Plunge
If you’ve made the leap to full-time free-lance writing, then it goes without saying that you’re a business. But don’t forget that you will owe self-employment tax (your contribution to Social Security), and you must make quarterly estimated tax payments on pain of stiff IRS penalties. (You still file your 1040 forms only once a year like everybody else.) More information on this topic is available at the WPTG.

If you are still fighting 5:00 traffic and the boss’s picture is hanging on the back of your door with dart holes in it, you do not have to make quarterly estimated tax payments. However, if your net profit from writing for the year is $400 or more, you will owe self-employment tax at the end of the year. To take the sting out of this payment, Cypser says, you can fill out a W4 to increase the amount withheld each month from your regular paycheck.

On to (Gulp) Schedule C
This, unfortunately, is where you have to be if you’re recording profit or loss from a business. I’m sorry about that, fellow former 1040-EZ users. Cypser encourages us to find joy in small things, like “the fun part of Schedule C,” which is Lines A and B, where you put your name and profession. (Pssssst. It’s “writer.”) Even I can get this right.

And Cypser doesn’t stop there. No, hallelujah, she takes you line by line through Schedule C, outlining what kinds of expenses you can deduct.

Do you advertise your writing services in the Yellow Pages or on the Web? Deductible. See Line 8. Do you buy paper, envelopes, and stamps for article submissions? Do you rent a post-office box for your business mail? Do you pay dues to professional associations? Deductible, deductible, deductible. Lines 18, 20, and 27.

Trickier topics are travel, car, and home-office deductions. You must be very careful to please the IRS in these areas, because Mr. Auditor is picky, picky, picky about what constitutes business travel and what makes up a home office. I will leave it to Cypser to explain this to you. Please refer to your WPTG.

A tip for this year from Cypser: Record your expenses as you incur them, in an account book with columns that correspond to the categories of Schedule C. I’ve started doing this, and it’s so much fun that I sometimes buy things just so I can record them in my log. “Stamp, 33 cents.” Is this weird or what? At the end of the year, all I will have to do is add up the columns and record the totals on the appropriate lines of Schedule C. No crying, screaming, or drowning in a shoebox of receipts. (I keep my receipts for each month, by the way, in a #10 envelope tucked in the back of my ledger.)

You can go with computer software if you like, but if your business is young and your accounting is relatively simple, I recommend the manual method. It’s fast and there’s no learning curve. Also, I’ve seen the ugly side of tax software: my boyfriend’s program talks out loud, and when it’s stuck on something and my boyfriend can’t make it stop, it’s a special kind of hell.

No Fear
Above all, remember that 1998 was the year that the government took away the IRS’s laser guns and torture equipment. They’re not going to come after you unless you deduct numerous flights to tropical locations as business expenses the first year. Be honest and thorough in your accounting, and you have no reason to fear an audit.

Armed with The Writer’s Pocket Tax Guide, you will be mighty and invincible. Trust me, it may well keep you from hiring an accountant, even though I know you were looking forward to recording that expense in your ledger. (Schedule C, Line 17, if you must know.)

Now, if you’ll excuse me, my boyfriend and I are going to race to the end of Schedule C. See you at the finish line.

-- KB
©1999 Karin Beuerlein

Karin Beuerlein is a technical writer for the University of Tennessee by day, and a fiction writer by night. With a novel, a screenplay, and several short stories completed, she is now at work on her second novel. Currently, her first novel is a finalist for the James Jones Fellowship for the First Novel.