Legal Issues

Deadlines and Taxes

Two certainties in the life of a writer. Deadlines and Taxes.

You know what a deadline is. It has the word “dead” in it for a reason. And intrinsic to the reality of taxes is the April 15 income-tax filing deadline for those living in the United States.

But what about those taxes?

Many articles appear every Spring about taxes when approaching the filing date. But I thought we should explore a couple of items now, so there won’t be any surprises next year.

First, is the obligatory disclaimer. I am not a tax attorney or a tax accountant. I am merely discussing concepts and ideas that you may or may not use in your situation. And, as always, when it comes to your taxes, make sure to consult a professional. (We list some who specialize in working with writers in the annual Christian Writers Market Guide or the online version at www.christianwritersmarketguide.com. One of those is Chris Morris who can be found here.)

Some of you may roll your eyes and say, “I already know this.” But remember, there was a time when you did not. I get many beginner questions each year from debut authors who are discovering much of the business side of this industry for the first time.

Keep Good Records

One advantage of the self-employed writer is the ability to deduct certain expenses as they relate to the writing profession. Writers conference fees, purchasing books on writing, website hosting fees, promotional items used to market your book, etc. These are possible deductions, but you must have a record of each expense.

And I mean keep everything. Receipts, ticket stubs, bank statements, check registers, ATM receipts, mileage (when and where and how far). Nowadays some people use the camera on their phone to record the receipt. The problem is later organizing the information in one place. If you have good recommendations, post them in the comments below. (Tax Act provides an article with ideas here.)

Now is the time to start trying to collect your 2022 expense receipts if you haven’t already done so. Trying to find that receipt on April 14 might be a challenge.

Hobby-Loss Rules

If you are writing as a hobby or for something that only occasionally earns money, then you can only deduct expenses equal to the amount of your revenue. In other words, you can’t buy a submarine and claim it was for research for that underwater thriller you’ve been trying to write for years.

But if you have the intent to derive a living from your writing, you can show a loss (and maybe deduct that submarine!?). Proving intent is something judged case by case. If you show a loss in your writing business for five consecutive years, expect a red flag to appear in the IRS inbox. It is commonly understood that the IRS will accept that you are running a business if your writing work shows a profit in at least three of the last five tax years. But in an audit, the IRS can go back many years and determine if your deductions were valid. If disapproved, you will end up with a new, very expensive tax liability and additional penalties. Read these excellent articles if your business is in danger of being classified as a hobby:
When the IRS Classifies Your Business as a Hobby
What Every Self-Published Author Needs to Know About Taxes
IRS Hobby Loss Rules: Deductions for Doing What You Love

Separate Your Home from Your Business

As much as possible, keep your household income and expenses separate from your income and expenses for writing. It can be as simple as keeping a separate bank account. (This is one way to prove intent; see above.) And then keep records separately for the business using Quicken, Mint.com, or a spreadsheet.

If you work out of your home, consider exploring the home office deduction. But be careful. If you write occasionally from the home computer and that computer is used by other family members for things other than your writing business, it is likely you will not qualify.

Resources

I can recommend the book New Tax Guide for Writers, Artists, Performers and Other Creative People (Fifth Edition: 2016) by Peter Jason Riley. This is one of the few designed specifically for those in the arts.

Another good one is Carol Topp’s Business Tips and Taxes for Writers (2016).

Another is the “Tax and Business Guide for Authors” course at The Christian Writers Institute. It is currently priced at $99 for the multi-session course by a tax professional. Be sure to join the Institute (it’s free) and see if there is a price reduction or a sale, or an updated version of the course. However, $99 is a good investment if it saves you as much or more in the coming year.

For many of you, numbers are either a toxic topic or the equivalent of hieroglyphics. But take this issue seriously. The writing profession is ultimately a business. Granted a business based in the creative arts, but it is still a business. Talk to a qualified tax accountant if you have questions. Never rely on the hearsay of another writer who gives anecdotal information at a writers conference. The IRS won’t accept the excuse that “Shirley told me it was okay to write off my Australian cruise because I was researching an article about Sydney!”

[This is a rewritten and updated version of a post published in January 2012.]

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I Is for Indemnification

by Steve Laube

Publishing is not without risks. Plagiarism, fraud, and libel by an author are real possibilities. Thus within a book contract is a legal clause called indemnification inserted to protect the publisher from your antics.

The indemnification clause, in essence, says that if someone sues your publisher because of your book, claiming something like libel (defamation) or plagiarism etc., your publisher can make you pay the fees to compensate for their losses. This is to “indemnify” which is defined as “to compensate (someone) for harm or loss.” Bottom line: The publisher has the right to hire its own attorneys (at the author’s expense) to defend against these claims.

Doesn’t sound like a happy clause does it? But you can understand why it is there. This clause and the Warranty clause are notoriously difficult to negotiate. (The Warranty clause is where the things the author guarantees or warrants are listed; i.e. the book is original, it is not libelous in content, etc. This clause will be more fully covered by me at another time) The language has been written by the publisher’s attorneys and are usually set in stone.

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A Is for Agent

by Steve Laube

I thought it might be fun to write a series that addresses some of the basic terms that define our industry. The perfect place to start, of course, is the letter “A.” And even better to start with the word “Agent.”

If you are a writer, you’ve got it easy. When you say you are a writer your audience lights up because they know what that means. (Their perception is that you sit around all day thinking profound thoughts. And that you are rich.)

If you are an editor, you got it sort of easy. Your audience knows you work with words and all you do is sit around and read all day. In my editorial days I was often told, “I’d love to have your job.”

But tell someone you are an agent and there is a blink and a pause. If they don’t know the publishing industry they think “insurance agent” or “real estate agent” or “secret agent.” Or if they follow sports or entertainment they think “sleazy liar who makes deals and talks on the phone all day.” I resent people thinking that I talk on the phone all day. (Hah!)

Even at a writers conference I always have someone ask, “What is it that you do?”

Deal Maker

An agent works on commission. Fifteen percent of the money earned in a contract they have sold to a publisher on behalf of a writer. I will be bold to say that any prospective agent who asks you for money up front is someone you should stay away from.

This is the category that most people focus on when defining the role of the agent. But it is only one small facet of what we do. Two months ago I published a list of the activities our agency had recently done as a way to help dispel the myth that we are only deal makers. It is how we earn our living but only a small part of our work.

Don’t get me wrong. This is a crucial part of what we do. Our contract negotiations are critical to the long-term health of the publishing/author relationship. Last Fall I taught a course at a conference called “Landmines in Your Book Contract.” Each time I read one from an “offending” contract there were gasps in the room. There is a good reason to have a professional review any book contract you are ready to sign.

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What to Do About Morals?

In a post written last weekend Richard Curtis, agent extraordinaire, expressed surprise at a new morality clause that has apparently appeared in HarperCollins’ contracts. Read his post here [warning: there is some Adult content and comments included in the post].

What the general market doesn’t realize is that many Faith-based publishers have had a “moral turpitude” clause in their contracts for a long time. Moral turpitude is well defined in this post on Wikipedia. It is understood in the legal community as actions or activities that can get you fired from your job, deported if you are a foreigner in this country on a Visa, or have your contract cancelled if you are an author.

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The Quest for Originality

Are you tired of being told by a publisher “We simply don’t do books like that”? or “Yours is certainly out of the box, but is not what we are looking for at this time”? What’s the Deal with Boxes? In general all books are sold under a category. Be …

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Checked Your Copyright Lately?

Have you checked your copyright lately? I mean, have you actually gone to the US Copyright Office web site and searched for your registration? You might be surprised at what you won’t find. Here is the link to start your search.

Most publishing contracts have a clause that requires the publisher to register the copyright, in the name of the author, with the US Copyright Office. This is supposed to be done as part of the in-house paperwork process.

If you do not find your book, don’t panic.

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