It's getting to be that time of year, when we all pull out the shoe box (or Ziplock bag) full of receipts from our writing career and organize them for our income tax returns.
Remember, that I live in Ontario, Canada, so many of my tax-related tips might only apply to writers who also live in Canada. But I do believe that many of them are transferable to other countries. Please make sure you check the fine print carefully before you complete your income tax return.
My advice: BUY the "Do Your Taxes" type of computer software. It is SOOOOOO much easier if you have software in your corner, because the program will help you to figure out what you need to do. If you can afford it, pay an accountant. But I'm guessing that many of you, like me, can't.
These are the categories that you need to complete to submit your writing-related tax return.
Declare all income you make from writing related activities. This includes:
- payment sent via contracts for all stories/novels sold
(this is the part where I admit that I have not yet sold my first novel, so I don't have much experience in this matter. I would assume that if you have a book deal with a publishing house, they would send you summaries of your royalties for the year.)
- reprint sales for foreign market translations
- podcast reprint income
- payments you receive for speaking about writing
- the money you make for selling books/magazines for more money than you paid for the book/magazine (I often buy several copies of an anthology or magazine that carries one of my short stories at the "contributor discount" price. When I sell copies at appearances, I charge the amount printed on the back. I declare the difference as income.)
- money from the Public Lending Right (PLR) program (money paid to authors to offset sales losses due to their books being held in public libraries)
Whenever you travel to a convention, keep track of all of your receipts. I usually charge as much as possible to ONE credit card, then use the monthly credit card statements to track the expenses. This is particularly important if you're a Canadian and going to several conventions in the USA, since you must declare all expenses in Canadian dollars on your tax return and doing all of the conversions is time consuming. If you charge to a credit card, the conversion is done by the credit company. The categories for travel are:
- meals (you can only claim 50% of the cost of each meal)
- other transportation charges (cab, airport shuttle, public transport, tolls)
Books and Magazines
Did you know that you can claim all of the books and magazines you buy as a "Supplies B" expense? Of course, you probably shouldn't claim Canadian Gardening but you can claim Locus. So every time you purchase a book or magazine, keep the receipt and place it in your "business shoe box" for tax season.
Every time you mail a submission to a magazine, keep the receipt from the post office. These are listed under "Supplies A" on your return.
Computer related supplies
You can claim a variety of computer related charges to your business. These are also part of "Office Expenses" along with Supplies A and B as well as stationary. For me, these expenses include:
- depreciation on my computer, netbook, and printer (done via the Capital Cost Allowance [CCA] section on the tax return)
- software, including MS Office and whatever Anti-virus software you purchase each year
- the main bag/purse/backpack you use to carry your laptop
- the cost to retain my domain name for www.suzannechurch.com
- the cost for my web page hosting service
- the cost of my Flickr account for uploading photos
- a portion of your internet service provider costs (aside from personal use - determine which fraction applies)
Use of your vehicle
If you use your car to get to conventions, or monthly writers' group meetings, you can charge a portion of your vehicle to your business. You will need to track several things:
- the kilometres travelled in the entire year AND the kilometres travelled for your business-related activities
Let's say you drove 12,000 kms in 2011 and 375 kms were for your writing-related activites. Then the percent usage for your car is 375/12000 = 0.03125.
- gas used in the entire year. Multiply this times your percentage use to determine gas used by writing-related activities.
- insurance paid for your car for the year. Multiply this times your percentage use to determine insurance used by writing-related activities.
- license fees paid - then multiply times the percentage use
All of the work that you do to promote yourself, your stories, etc can be charged to advertising. For instance, I often print little chap-books of one short story and distribute them at the conventions before the nomination deadline for awards. That way, many people will have the opportunity to read the eligible story and might be more likely to nominate the story for an award. Of course, this is harder to do with a book, but it can be done for poetry and short fiction. You can also claim the cost of business cards, buttons, ribbons, stickers, bookmarks, or any other swag you might bring to promote yourself at a convention or appearance.
All conventions charge "memberships" to attend. Also, groups like SFWA, SFCanada, and HWA all charge membership fees. Put all of these expenses in the membership section of your return.
Each time you eat out with a group of writers, either for a writers' group meeting, or for a get-together at a convention, you place all of these expenses in the meals section of the return. Like meals eaten during travel, you can only claim 50% of the charge for the meal.
Business Use of Home Expenses
IF you do your writing from home and you don't pay for an office (let's face it, most of us write at home) you can claim a portion of your home expenses. You must calculate the square footage of your house and determine what percentage of your house you use for business-related expenses.
An important CAVEAT here: you can ONLY claim Business Use of Home Expenses if your business has a NET PROFIT. If you spent more on your writing business than you made as a writer (which is VERY common for those of us trying to sell our first novels) then you CANNOT use home expenses to increase your loss. You CAN carry the amount forward to the next year as "unused portions" and your software should have a section for this carry-forward.
So that's about all of the information you need.
At this point, you probably hate me for turning your brain into tax-induced-jello, but we all need to do our tax returns. Hopefully, this checklist will help you to track expenses for next year.
- save receipts
- buy tax software
- stay organized throughout the year
That last point is key. Because otherwise, you'll find yourself with a mountain of paperwork to do in the month of March.
Your writing is a business, so treat it that way!