How to Deduct Expenses Writing Income

INCOME TAX sched C

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By Alrady
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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.

Step 1

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.
Step 2

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.
Step 3

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
Step 4

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.
Step 5

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.
Step 6

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.
Step 7

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.