Do you have any expenses yet related to your manuscript?
Are you UNSURE of both?
Just because you have no income doesn’t mean you haven’t incurred expenses that you can claim on your tax return.
Long before your first royalty check is mailed to you, or automatically deposited to your account, there are items to consider, prepare, and plan for.
Start preparing your business by filing the proper documents with your government to show your company or side business or pen name (fictious name). That may cost a few dollars, if so save your receipt. This isn’t something that is always required, but if you do spend money you need to prove it.
Also, look to open a checking account only for writing purposes. This will help you separate your money from the income and expenses of your writing. Do not comingle writing funds with your day job salary or bills. This will assist you in assuring a profitable enterprise.
Invariably, expenses happen before income. This is supported by the old business adage you need to spend money to make money.
Expenses are the opposite of income, and Uncle Sam likes to know about both when it comes to your business.
The mileage for trips back and forth to the post office to mail your query letters needs to be tracked, as well as the receipt for that postage. Possible even the paper and enveloped used, the cost of toner and the printer, and the software purchased to draft the cover sheet. Did you have lunch with a potential publisher? That might be a deduction!
Note, if you expect to write off expenses for a particular item or cost then you may need to only use that item 100% of the time for your writing. In other words, you can't deduct your car payment if you only drove five miles that month for writing purposes yet drove hundreds for pleasure. When your vehicle is only driven for the business of your writing then you can consider it for full tax deduction.
I keep a file folder and envelope with all my tax documents I collect throughout the year. As any item crosses my desk that involves money I make a note of the reason or purpose on the receipt and place a copy into this folder. I also have a mileage log and enter details on every writing related trip - such as date, where I went, the purpose, and the distance. Each mile driven can decrease your taxable income by approximately a half dollar.
Are you receiving royalties from publishers, income shares from others who sell your work, or from personal sales? You may receive year to date tax statement for some of these business partners but not all. It’s your responsibility to assure you keep diligent records of all sales and income.
Did you pay to have your book edited, formatted, published, or printed? Some costs are large enough that it may be beneficial, or required, that you spread the deduction into parts over several years rather than all at once in the current tax year. An accountant can guide you professionally.
So remember, every penny that you earn and spend must be accounted for. This can save you money in taxes and preparation of the same.
As the poet Thomas Tusser wrote in 1557:
"A foole and his money be soone at debate: which after with sorow repents him too late."
Looking for some advice on the financial side of your writing? Just ask.
Richard E Todd, author of The Golf Rules series, Short Stories from the Long Links, and other titles has been heard on the PGA Tour radio station and seen in On The Green magazine. Contact him at Richard@AuthorRichardETodd.com and follow him on social media and at www.AuthorRichardETodd.com ✍ and www.TheGolfRules.com.⛳