1. ♥ Romancing the IRS ♥
Jean C. Gordon

2. Make Writing Your Business ♥
Business vs. Hobby
Business losses deductible
Hobby losses nondeductible
Profit in 3 of 5 last years

3. Make Writing Your Business ♥
Facts and Circumstances
Nine factors
No one factor controls
Other factors considered
Not a matter of numbers

4. Make Writing Your Business ♥
Facts and Circumstances
How you approach writing
Writing expertise
Time and effort

5. Make Writing Your Business ♥
Facts and Circumstances
Success with similar activities
History of income or loss
Amount of profits

6. Make Writing Your Business ♥
Facts and Circumstances
Expectations that assets will appreciate
Your financial status
Pleasure or recreation involved

7. Watch for Deductions ♥ What’s Deductible Ordinary expenses
Necessary expenses

8. Watch for Deductions ♥ Ordinary and Necessary
Professional fees and dues
Continuing education
Telephone expenses
Supplies
Travel

9. Watch for Deductions ♥ More Ordinary and Necessary Equipment
One-half self-employment tax
Home office expenses
Health insurance premiums
Miscellaneous

10. Watch for Deductions ♥ Professional Fees and Dues RWA dues
Chapter dues
Other writers’ associations

11. Watch for Deductions ♥ Continuing Education College courses
Online courses
Materials and supplies
Photocopy expenses
Books for research
Conference/Seminar fees
Textbooks

12. Watch for Deductions ♥ Telephone Expenses Cell phone FAX transmissions
Toll calls

13. Watch for Deductions ♥ Supplies and Expenses Business cards
Website development & hosting
Computer software & supplies
Online charges
Postage & shipping
FAX supplies

14. Watch for Deductions ♥ More Supplies and Expenses Photocopy expenses
Stationery
Equipment repair
Gifts & greeting cards
DVDs, films & videos for research
Clerical help

15. Watch for Deductions ♥ Travel Expenses — Car Between jobs or locations
Publisher/agent meetings
Purchasing supplies
Professional society meetings
Parking fees and tolls

16. Watch for Deductions ♥ Travel Expenses — Car Actual expenses
53.5 cents per mile 2017
54.5 cents per mile 2018
Additional for tolls, parking.
Not just conferences: meetings, interviews, research.

17. Watch for Deductions ♥ Travel Expenses — Out of Town Airfare
Car rental, taxi, bus, train
Parking & tolls
Lodging
Meals
Tips
Phone calls

18. Watch for Deductions ♥ Equipment Purchases Cell phone Copier
Calculator
Recorder
Computers & printers
Modems & computer peripherals
Desk and other office furniture

19. Watch for Deductions ♥ Equipment Purchases
Depreciated: over 5 or 7 years
Section 179 expensing: up to $500,000 for 2017; $1 million for 2018
2018 Deduction Limit = $1,000,000 (one million dollars) This deduction is good on new and used equipment, as well as off-the-shelf software. To take the deduction for tax year 2018, the equipment must be financed/purchased and put into service between January 1, 2018 and the end of the day on December 31, 2018.
2018 Spending Cap on equipment purchases = $2,500,000 This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true "small business tax incentive" (because larger businesses that spend more than $3.5 million on equipment won't get the deduction.)
Bonus Depreciation: 100% for 2018 Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. Bonus Depreciation is available for new and used equipment.
The above is an overall, "simplified" view of the Section 179 Deduction for For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read this entire website carefully. We will also make sure to update this page if the limits change.
Here is an updated example of Section 179 at work during the 2018 tax year.

20. Watch for Deductions ♥ Self-employment taxes Social Security Medicare
6.2%/12.4% self-employed
Up to $127,220 in 2017; $128,700 in 2018
Medicare
1.45%/2.9% self-employed
All income
7.65% and 15.3%

21. Watch for Deductions ♥ Home Office Expenses
Deductible mortgage interest
Real estate taxes
Homeowners insurance
Utilities
Repairs and maintenance
Depreciation

22. Watch for Deductions Safe Harbor Method Square footage up to 300 x $5
Limited to $1,500 a year
No depreciation
Can deduct mortgage interest and taxes
No rental use
Can change choice yearly

23. Watch for Deductions ♥ Miscellaneous expenses
Business liability insurance
Subscriptions
Resume preparation

24. Watch for Deductions ♥ Retirement plan contributions
Self-employed plans
Employer-sponsored plans
Individual retirement accounts

25. Retirement Savings Plans ♥
Getting started
Accountant
Financial planner
Stockbroker
Bank investment officer
Mutual fund companies
An accountant, financial planner, broker, bank investment officer, or insurance representative can help you determine which is best for you. Most types of retirement plans can be set up with mutual fund companies.

26. Advantages of tax deferral ♥
Tax savings
Why do you want to invest for retirement in a qualified retirement account instead of a regular bank or brokerage account? To gain the tax lowering advantages of tax deferral. You don’t have to pay current income tax on your account’s earnings and, with many plans, you don’t have to pay tax on your contributions, either. You generally will have to pay income tax on withdrawals during retirement, but many people are in a lower tax bracket then
$5,500 a year contribution

27. Filing Your Return ♥ Forms and schedules
Schedule C-EZ or C (profit or loss from business)
Form 4562 (depreciation and amortization)
Form 8829 (business use of home)
Schedule SE (self-employment tax)
Once you have all your income, deductions and credits, you’re ready to report them to the IRS. The following are the most common forms writers need to file. You may not need them all.

28. Estimated taxes ♥ Federal taxes State income tax Income
Self-employment (15.3%)
Pay online (
Increase withholding at job
State income tax
When To Pay Estimated Taxes
For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return, see underpayment of tax below for more information.
Using the EFTPS system is the easiest way to pay your federal taxes for individuals as well as businesses. Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using Electronic Federal Tax Payment System (EFTPS). If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you have paid enough in by the end of the quarter. Using EFTPS, you can access a history of your payments, so you know how much and when you made your estimated tax payments.
Underpayment of Estimated Tax
If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.

29. Estimated taxes ♥ When to pay January 15 (Sept. 1 to Dec. 31)
April 15 (Jan. 1 to March 31)
June 15 (April 1 to May 31)
Sept. 15 (June 1 to Aug. 31)

30. Estimated taxes ♥ Avoiding penalties Annualize Owe less than $1,000
Paid 90% of current year’s tax
Paid 100%/110% of last year’s tax, if less
Generally, taxpayers have to pay equal payments and can be charged an underpayment penalty for any quarter your payment is short. But if you receive income unevenly during the year, as authors usually do, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments.
2017 and 2018: Adjusted gross income $150,000 or less ($75,000 married filing single) = 90%
AGI greater than %150,000 ($75,000) 110%

31. Tax Cuts and Jobs Act ♥ Mostly individual taxes Tax rates lowered
$4,050 (in 2017) personal exemption eliminated
Child tax credit doubled to $2,000
New $500 credit for non-child dependents like elderly parents
Today's rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
-- 10% (income up to $9,325 for individuals; up to $18,650 for married couples filing jointly) % (over $9,325 to $37,950; over $18,650 to $75,900 for couples) % (over $37,950 to $91,900; over $75,900 to $153,100 for couples) % (over $91,900 to $191,650; over $153,100 to $233,350 for couples) % (over $$191,650 to $416,700; over $233,350 to $416,700 for couples) % (over $416,700 to $418,400; over $416,700 to $470,700 for couples) % (over $418,400; over $470,700 for couples)
Here's how much income would apply to the new rates: % (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly) % (over $9,525 to $38,700; over $19,050 to $77,400 for couples) % (over $38,700 to $82,500; over $77,400 to $165,000 for couples) % (over $82,500 to $157,500; over $165,000 to $315,000 for couples) % (over $157,500 to $200,000; over $315,000 to $400,000 for couples) % (over $200,000 to $500,000; over $400,000 to $600,000 for couples) % (over $500,000; over $600,000 for couples)

32. Tax Cuts and Jobs Act ♥ Mostly individual taxes
Standard deduction raised from $6,350/$12,700 (2017) to $12,000/$24,000
State and local tax deduction limited to $10,000
For new homeowners mortgage interest deductible on only first $750,000 vs $1 million debt

33. Tax Cuts and Jobs Act ♥ Business tax changes
Corporate tax rate reduced from 35% to 21%
Special provision for businesses – like most writers – with pass-through income
Pass-through income taxed at individual rates

34. Tax Cuts and Jobs Act ♥ Pass-through provision
New 20% deduction on pass-through income
Sole proprietors
Partnerships
Limited Liability Companies
S-corporations

35. How the Deduction Works ♥
Applied to the lesser of
Eligible business income or
Taxable income (before the deduction)
Minus any capital gains

36. How the Deduction Works ♥
Example One
Author has a “day” job with a $100,000 salary
Also earns $50,000 from writing
Taxable income after standard deduction and SE taxes is $133,500
20% deduction applied to the $50,000
Example 1: Jack, a single taxpayer, has a “regular” job where he earns a $100,000 salary as an employee. He also “moonlights” as a consultant and earns $50,000 of net profit via his Schedule C sole proprietorship. Now suppose that after accounting for deductions for self-employment taxes and the standard deduction, Jack’s taxable income is $133,500 (before application of the pass-through deduction).
Here, Jack’s business income of $50,000 is less than his taxable income of $133,500. As a result, the 20% pass-through deduction will be applied to Jack’s $50,000 of business income, resulting in a $10,000 ($50,000 x 20% = $10,000) deduction.

37. How the Deduction Works ♥
Example One
Writer earns $100,000 writing
Taxable income after standard deduction and SE taxes is $73,000
20% deduction applied to $73,000
Example 2: Jill, a single taxpayer, is a real estate agent who earns $100,000 of net profit via her Schedule C sole proprietorship. This is Jill’s only source of income. After factoring in Jill’s deductions for self-employment taxes and the standard deduction, her taxable income is $73,000 (before application of the pass-through deduction).
Contrary to our first example, here, Jill’s taxable income of $73,000 is less than her eligible business income of $100,000. Therefore, Jill’s 20% pass-through deduction will be applied to her $73,000 of taxable income. This results in a $14,600 (73,000 x 20% = $14,600) deduction.

38. Questions ♥
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