Sunday, October 16, 2011

Understanding Business Expenses by Brigitte Thompson

The Internal Revenue Service (IRS) requires that our writing expenses be ordinary and necessary in order for them to be acceptable. An ordinary expense is defined as common and accepted in our profession. A necessary expense means we need to spend this money in order to operate the business. The expenses must not be considered extravagant. They must be an essential part of doing business as a writer. It is important to differentiate between personal expenses and business expenses.

Writers are able to realize some unique deductions which may be considered personal for other taxpayers. For example, a book on the history of New Mexico used for researching my fiction manuscript based in that state could be deductible as a writer.

Other potentially deductible expenses include tickets to a ballet used to build the character of a ballerina I am writing about and an instructional DVD used to improve my public speaking skills. Most writers will call these expenses research or professional development. We need to be able to justify each expense if audited, so be sure it is legitimate and has the supporting documents to back up the claim.

Check out my book, Bookkeeping Basics for Freelance Writers, to learn more about deductible expenses and how to reduce the income taxes you pay as a writer. You can read about it on my web site and on Amazon.com.

11 comments:

  1. I never know what to keep when it comes to receipts. This post gives me a better idea. Thanks!

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  2. What if I'm writing a novel with a character who is a ballerina and I take my kids to a Broadway show --- Can I deduct the tickets as a business expense?

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  3. Bridget,

    This was a good write up. I play it safe and keep every receipt then show it to my tax man and ask if I can deduct it. It's worked well for me for the past 8 years. I've been surprised at what I was able to write off.

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  4. I recommend every writer get a copy of this book. She explains things clearly so I know now what I need to do for bkkping -- and HOW to do it.

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  5. Angie_B and Out612,

    Thank you for the wonderful compliments about my book! I'm glad it's been helpful :)

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  6. daddysgirl:

    Based on the example you provided, the cost of your ticket could be a deductible business expense. You could not write off the cost of tickets for your children though. That would be considered a personal expense.

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  7. Delaney98403:

    That's a great idea! I'm glad it's worked so well for you. Have you found an efficient way to store all those receipts throughout the year?

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  8. Ladonna_benjamin@cs..October 28, 2011 at 3:36 PM

    I'm so happy I found your blog! I'm reading through the archives and found a lot of insightful reading material. Thanks for putting this together.

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  9. I admit - I'm a lousy record keeper. If I hired a bookkeeper to do all of this for me - can I deduct the cost as a business expense?

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  10. @Ladonna_benjamin: Thank you for visiting :)

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  11. @AndyJaneKids: Yes, if the bookkeeper is working with records related to your writing business, you can write off the fees as a business expense.

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