It’s Tax Time! Are You a Hobbyist or a Business?

When most of us strike out to be a successful writer we think of all things writing such as:

-          Traditional vs. Indie publishing

-          Do we need agent

-          How to engage readers

-          Finishing the Damn Book

-          …and more

What we don’t typically thing about are the tax consequences of that journey to becoming a successful writer.

One of the first things to determine, especially in the beginning, is whether you are conducting your writing as a hobbyist or a business.  If you limit yourself to just writing and don’t incur any expenses and/or earn any money in your writing journey then the question is somewhat mute, although, if you are incurring expenses do keep a written record of them so that you can consider them later, potentially as startup costs.

To be considered a business, you have to have – and be able to demonstrate – a serious intent to make a profit.  This is detailed in the Form 1040 Schedule C and related instructions found at the two links below:

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

If you don’t care whether or not you make any money with your writing but just happen to, along the way, receive money for your efforts then you fall into the category of being a hobbyist and the way you reflect your income and expenses is explained in IRS Publication 529:

https://www.irs.gov/pub/irs-pdf/p529.pdf

But be careful!  You can’t pretend to be a hobbyist just to avoid certain taxes such as the Self-Employment taxes and this is spelled at the following IRS link:

https://www.irs.gov/uac/is-your-hobby-a-for-profit-endeavor

So, if you want to know if your writing journey is a business or a hobby, use the link above to see if you pass or fail the test of being a hobbyist, and definitely read the Schedule C and related instructions.