In addition to paying taxes throughout the year, understand the expenses you can deduct. Jaime Santos is a partner at Treehouse Taxes, LLC, a small business tax firm that caters to self-employed individuals and small businesses. “We find that most creative people tend to underemphasize and misunderstand the tax-deductible expenses they have,” she says. “There’s almost a sense of guilt taking expenses.”
“It’s important to ask yourself, ‘What is the purpose of this expense? Is it to support my work as a writer?’ If yes, then it’s fair game,” Harpaz says. She keeps lists by categories, including supplies, travel, and services, such as computer repairs.
One of the largest expense categories for artists is research. “Your life experiences are informing your craft,” says Santos. “The business part of that is the money you spend to be informed.” For example, if writing about an artist, a charge to visit a museum to see that person’s work is a research expense. If someone writes about entertainment, a portion of fees for Netflix, Amazon, or Spotify could be considered research. Travel expenses count too – either for travel writers or those who have to be on location for an interview or other site-specific research.
Writers shouldn’t forget about the more mundane expenses that come with running a business. “The IRS is fine with a 50-50 apportionment on cell phones – no questions asked,” says Santos. “But at Treehouse, we find that that’s sometimes not enough.” Treehouse tax preparers encourage people to be practical and honest about their usage and find it can often be more than 50 percent.
Santos emphasizes that the IRS looks for the reliability of people’s numbers. This comes from dependable bookkeeping and consistency in numbers. “If you have a line on your taxes for your phone and it keeps changing each year, that raises a flag with the IRS that those numbers might not be reliable,” she says.
That said, she emphasizes the significance of narrative. One of her clients is a journalist who spent one year covering issues in her home region. After receiving a promotion, the client spent six months on assignment in Africa, and her travel expenses exploded. Santos put the travel expenses in the “other” category on the Schedule C so she could provide context. “That way, if something gets kicked from the machine reader to the human reader at the IRS, they can review the narrative,” she says. “It’s OK that fluctuation happens. It’s just important to try and communicate what’s behind it.”