How To

How to Deduct Expenses Writing Income

INCOME TAX sched C
INCOME TAX sched C
Member
By Alrady
eHow Community Member
(62 Ratings)

Self employed? Writer? Passive? Active? Hobby? Using Turbotax or a tax preparer that is experienced can save on your tax bill. IRS says that ALL self employment income is to be reported and taxed. Now more than ever you need to deduct all LEGITIMATE expenses.

If you generate more than $400.00 NET income you will want to revisit your deductions with a tax professional so that you can understand all the fuzzy areas and minimize your tax liability.

Difficulty: Moderate
Instructions

Things You'll Need:

  • 1040 schedule C AND
  • SCHEDULE SE
  • TURBOTAX, TAXACT OR OTHER SOFTWARE
  • You can do it without software but why? tax software is a deductible expense.
  1. Step 1
    TAX SOFTWARE: Writer income
    TAX SOFTWARE: Writer income

    TAX SOFTWARE: Normally you will fill out schedule C as sole proprietor or LLC. Make sure if you own more than one type of business you fill out a separate schedule for each business. As a writer you will fill out schedule C using the business code 711510 for writing income. You may qualify to use the EZ version. See resource box for link to the forms.

  2. Step 2
    IRS TAXES SELF EMPLOYMENT
    IRS TAXES SELF EMPLOYMENT

    SELE EMPLOYMENT INCOME: All self employment income is supposed to be reported and taxed. If your net income is over a few hundred dollars you need to revisit deductions as your income will be subject to Self Employment tax which is about 15%. This can drive up your tax bill quite a bit. Net income is the income AFTER your expenses are deducted. Self Employment tax is also partially deductible.

  3. Step 3
    TAX deductions software
    TAX deductions software

    DEDUCTIONS: List of some deductions that are allowed for your home based business. This is not complete list. The internet and telephone connection. Depreciation on laptop (if 100% biz use), trade journals or subscriptions, domain names, home office, printer costs, travel if you travel for writing purposes. Car expenses (unless you claim mileage) parking and tolls. Unrecoverable business loans, office supplies,tape recorder, retirement plans such as SEP. 50% of entertainment of business related meetings. Interest on Business loan.
    BUY and USE a mileage record book . Use Software to track expenses

  4. Step 4
    Walking on the edge
    Walking on the edge

    NOT DEDUCTIBLE: There are more but these are common mistakes. Other may tell you these are deductible, but they are not. Check IRS publications.
    Do not deduct club dues.
    Do not deduct earnings you have not recieved as a "loss"
    Do not deduct more than 50% of entertainment expenses. BUT and USE a record book logging date and who you meet with, the expense and the purpose of meetings or entertainment etc.

  5. Step 5
    INCOME Is Good
    INCOME Is Good

    HOBBY INCOME: Back to that hobby income issue. Three factors can determine if IRS considers your business a hobby. FIRST INCOME: If you have income 3 out of 5 year that is good. You are in business to make money, and all decisions should come from that purpose. Hobby income is usually decided by if you are making a profit within 5 years. As a writer there may be exceptions.

  6. Step 6
    Time can determine IRS standing
    Time can determine IRS standing

    Hobby Income: The amount of time you put into the activity can determine whether it is a hobby or not SO KEEP A CALENDAR. Buy and use software to keep your tax related appointments recorded.

  7. Step 7
    Not that kind of record - sillly!
    Not that kind of record - sillly!

    Hobby Income: Do you act in a business like manner? Separate Income and Expenses from personal income and expenses. Have a business checking account and credit or debit cards. Keep good records.

Tips & Warnings
  • There is so much more that could be written. If in doubt talk to tax professional. When choosing tax professional check out difference between tax preparer and tax attorney.
  • I have added a few sites I just found from search to save you time. I have not reviewed them thoroughly
  • I am not tax expert you need to read up, check forms and publications, use tax software or a professional.
Photo Credit

megrocksphotography

Comments  

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karileighk said

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on 7/9/2009 Thanks. This is excellent.

cajunc said

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on 7/7/2009 Good information here!

Linda
cajunC

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on 6/16/2009 Adding to favorite. VERY useful info. 5*s

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on 4/18/2009 Thank you for the information about taxes especially the self employment tax. Important to know all these things.

kaytay said

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on 3/20/2009 great tips on deducting writing expenses

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