Tax Tips – BOOKS!

One subject that is near and dear to all writers, editors and researchers are books. Although they are becoming, slowly, slightly overwhelmed by electronic media, books are still a vital part of our lives. How is THAT going to help on your taxes? This can be another long and lengthy subject but I will try to shorten my object lesson this time.

 First of all, ‘books’, per se, do not necessarily mean those large old dusty tomes of the past, although they are included. By books, I mean every single piece of printed [and now electronic] media. It could mean paperbacks, hard cover, books-on-tape, a bound essay or report, an e-book, newspaper, magazine, journals and newsletters. I could probably name a few more, but you get the picture.

 If you are a writer – then virtually everything you read is considered a ‘resource’. As you buy a book or periodical during the year, even if it is for pleasure reading, ask yourself this question: “Could I use even ONE sentence in this as an idea/prompt/quote/research for the pieces I write?” The majority, if not all, of the time the answer will be yes. I could read a Sci-fi book and like the way the dialogue works or the way the characters take turns telling a story – and use this as a lesson for how I want my memoir to appear. I could use a children’s story to pick up the moral for a romance novel. It all relates. Magazines, even pictures – provide prompts and, sometimes, research material.

 For the current year, every time you purchase any of the above [books, periodicals, e-media, etc], you can just save the receipt, or even better – pay for it with a credit card for easy tracking.  Notice the subliminal plug? Yes, Kitchen Table Stories is still available for purchase – visit www.Storycircle.org for details about the book. Back to the article: Add up all the charges, and at the end of the year – you have your total to use for current year purchases.

 What about older purchases, such as one year, two years – even twenty years? I may have mentioned this before; but there is a tax term called ‘placed in service’. If this is the first time you have ever written off books, you can go back and use older books and write them off as well. There are several methods of doing this and several methods of getting the value of the books. You can use them as a direct expense on the current year tax return, the next year’s tax return or amend a prior year tax return [up to 3 years back before the current year]. You can use a lump sum [say, $10,000] and capitalize it and write it off over a period of years. Your options need to be discussed with your tax preparer so that you get the best benefit of this write-off.

 Basically, the way you can get the write-off value of a book that comes from a prior year is to start by looking at the cover and the published date. If the book was printed in the past 2-3 years, then you would use the face value [or your cost] of the book. For older books, you can use the replacement value of the book or half the cover price. Generally, the suggested retail price is printed on the book [spine or by UPC code] in the case of paperbacks, on the front or inside the front page with the index & editor information [periodicals], or on the inside of the front fly leaf of most hard cover books. For an older book or a hard-cover book that shows no price, you can do a little research and see if the book is available on-line and that would be your ‘replacement cost’ or value of the book. For very old books, or out-of-print and rare books, I would get them appraised. These are going to be few and far in-between and on a case by case basis.

 One thing you DO have to be aware of: when you write off any printed material, you have to keep a record of each book you have written off for the required period of time that you must retain tax records – that is three years from the date you filed the return. You would not want to list a couple dozen books, write them off, then in a couple years use the same book and write it off again. For your own peace of mind [and your tax preparer] – make a list of the titles/authors of the piece you are going to use.

 One other short mention about books: give them away when you are done with them. Take them to your local library, to a school, a veteran’s home, a nursing home, or a charitable organization such as Goodwill, Salvation Army and churches. To get an idea of how you would value the books as a donation, use 50% of the face value. If your college books cost you $40 way back when – they are worth a $20 deduction to charity now. If your year subscription to National Geographic costs you [whatever they cost], use 50% of that price. Magazines – yep, you got it – half the cover price. This is called the ‘thrift shop’ or ‘comparable sales’ method for those of you who may prepare your own taxes and have tried to understand exactly what the software is asking you for.

 Okay, another real quick mention: books as gifts. If you buy books and give them out to family and friends as presents, you may write those off as well, even if you don’t read them yourself. Same with gift subscriptions. But that is a subject for another discussion, or something for you to talk over with your tax person. As always, these ideas are only general discussion/thinking topics and persons who may not be fully trained in the application of tax deductions as applies to your individual case should not use this information without first checking with your own tax preparer.

Tax Tips for Writers

Computers and all those gadgets

 

This is a big subject, but I will try to keep it general and brief enough to give you details but not overwhelm you with information. Can you write off your computer and all the little gadgets that attach or work with it? Absolutely – even if you didn’t buy it this year, you can write off a computer and all its supplies and peripherals.

 

First, let’s discuss when to write it off. If you bought it in the current year that you are dealing with your taxes, then that is simple – get the receipt and write it off. But if you got it in the prior year[s] – we use a law that is allowed by the Internal Revenue Service called ‘Placed in Service’. Well, since you have never written it off before, then the current year is the year placed in service – for your business. You cannot write off the full new price if it is more than a couple years old, but you can write off a large chunk of it. If you bought it in a prior year, you will have to allow for a reasonable amount of depreciation or get an estimate of replacement value. Those are things you should discuss with your tax person.

 

What items can you write off? A general list would be:

• The actual computer, monitor & attachments that came as the packaged set
• Additional items you purchased to go with the computer, such as printer, camera, flash drives, desk, carry case and speakers.
• Things you use with your computer such as paper, toner, software, power cables.
• Internet provider service, whether a sole item, bundled with your cable or bundled with your telephone service.

 

How much can I write off? This depends on whether your business made a profit or not. If you have a profit, you can write the whole entire computer off using something called a Section 179 Depreciation deduction. But if you don’t have a profit, then you must depreciate the computer and take a little each year, generally for five or seven years. But this is only for items that cost $250 or more. Each item that you purchased; such as the desk, software, carry case or printer should be written off separately. There are no limitations on how much income you made in order to write off the smaller items. A rule of thumb is this: if it cost over $250, it is an asset and should be written off over a period of years or as a special Sec. 179 deduction. If it is under $250, then it is an expense and should be written off in the year purchased or the year placed in service.

 

There are so many different places and ways you can use your computer as a write off, so in each individual case you will have to ask your tax prep person where it goes on your return. This information is for general discussion use and should not be taken as advice on how to prepare your own tax returns. Yep, I always got to throw that little CYA in there!

 

Story Circle Network

If you haven’t already checked out the conference site for Story Circle’s next conference in February – please do so soon. This is an event you won’t want to miss!

Deducting Telephone Expenses from your Taxes

The telephone, while annoying in its ability to interrupt you at the most inopportune moments, can be a useful tool and an expensive one as well. This is one tool that you must absolutely deduct from your tax return! 

Is it deductible? Of course it is deductible, but there are many little hoops you have to jump through in order to establish that it has a business use. Many people often ask me if they can deduct ‘part’ of their telephone bill from their taxes. A lot of the times, I have to say ‘No’ because all they have had in the past is one single phone line in their house. The law states that if you only have one phone line that is partially available for personal use, then you can deduct none of it unless you document every single phone call to determine which portion is business related and which is personal. I do not know many people who can do this or is willing to try. No, you are NOT supposed to use a percentage of your personal phone bill. You say you have been doing this for years? Generally, this will not stand up in an audit and it will be thrown out as an unusable deduction. There are always exceptions to the rules and I could probably argue this in your favor if you got called on it, but the ‘letter of the law’ can go either way. 

What you CAN deduct, if you only have that one line – is any long distance charges that are separate from the standard phone bill. That is easy enough to substantiate if you gather an entire year’s worth of bills, add them up and deduct the basic rate charges. Also, if you have a separate DSL or Dial Up charge for your internet service that is included on your personal phone, you may deduct it also. 

Now. This is the future. Most people have not only the one basic phone line, but a second line in their homes, either for their computer, their fax machine, a teenager or otherwise. If you have TWO or more lines in your home, then all except for the basic rate of the first line is deductible. Hopefully your phone company has the snap to list the two charges separately, although they do sometimes get a little confusing with all the taxes and surcharges they throw in there. Some people even go so far as to have two [or more] different phone bills sent to them.

Now for the cell phone. Let’s just say for general purposes that you have a home phone AND a cell phone; although people are starting to give up their home phones completely. If you go by the letter of the law and have only one phone and it is your cell – then you cannot deduct it. However, if there is another phone in the household, it does not matter if it is in your name or that you are paying the bill – you can deduct the cost of the cell phone service. No, you are not supposed to deduct just ‘half’ the bill because ‘I use it half the time’ for business. You deduct all of it. The only time you would deduct only a portion of the mobile provider bill instead of the full amount is if you are sharing one of the multi-plans with a significant other or child. Usually, you would deduct the cost of the full base rate for service and omit the second and third add-on charges for the spouse, child or whatever. For example, one plan that is quite popular costs approximately $100 per month and includes unlimited texting, photo sharing, turn on your coffee pot and more bells and whistles. Then, for an extra $10 a month, you get a second line for that other person, maybe even a third! Remove the $10 and you have your deductible amount.

Where do I put all this on my tax return? There are several ways and locations where this deduction can go – on a Schedule C, on form 2106, directly on the front page of the 1040 and also directly onto the Schedule A for itemized deductions. Those are not the only places where phone charges can be deducted, but generally they are the ones that would affect this target audience. As always, each person has an individual case and this information is to be used for discussion purposes only. Please do not use this information as substantiation for a deduction you are taking on your tax returns; but do contact your own personal tax person for proper placement of any deduction that you would use on a legal tax document.

Tax Tips for Writers

The following is a brief [sort of] discussion on Travel and using your expense as it relates to your writing.

 Many people ask me if and how much they can deduct for traveling. It’s an individual case-by-case discussion that is needed, but in general, yes, you can deduct your travel as it relates to your writing. Now, how do you do this? First, you have to determine one main question for discussion: What is ‘Ordinary and Necessary’? In the 2009 Standard Federal Tax Reports, paragraph 8520.026, they describe it thus: ‘Whether an expense is ordinary and necessary is based upon the facts surrounding the expense. An expense is necessary if it is appropriate and helpful to the taxpayer’s business. An expense is ordinary if it is one that is common and accepted in the particular business activity.’

 

 This is more for the beginning writer, so if you are a seasoned writer, you may wish to tune in to a later post. So what do you write about? Are you doing research on a particular area [mountains, beach, city, country, woods] so that you can get the ‘feel’ of the place? Are you eating at a certain restaurant so that you can sample a type of food, service or décor of the place? Or are you attending a conference, such as Stories of the Heart [Feb 2010], so that you can improve your writing? All this is Ordinary and Necessary.

 

Let’s back up now. What do you write about? First of all, treat it like a business. Tell yourself, ‘I AM A WRITER’. There, was that so hard? Now write it down. That is the beginning of your business plan. The Internal Revenue Code describes your activity this way:  A ‘Trade or Business’, although not defined in the tax law, has been characterized as an activity carried on for a livelihood or for profit. A profit motive must be present and some type of economic activity must be conducted. 

 

The next line of your business plan will be something like – ‘I am going to write poetry about beautiful parks in our country’; or – ‘I am going to write my memoirs and will need to go back to [insert place] several times so that I can see what it is like now, see if it sparks any memories’. Yet another could be something simple as ‘I want to write about traveling with two young children, 6 cats and a dog.’ You can be general about this at first, and always add to it later.

 

Second step in the business plan is identifying who you are writing for. Or what market do you want to target? Here are some suggestions of what you should write into your business plan:

 I want to write/sell a Fiction/Non-fiction book about [insert topic such as romance, thriller, murder, travel, quilting, horses, Dementia, a person].

I want to write poetry/magazine articles for a periodical(s) – such as AARP, Outside, New York Times, The Community Sun, etc

I’m writing children’s’ books.

I want to publish my memoir.

 

OK, now you are totally confused – but keep it simple at first. And general. I will mention the Business Plan and Ordinary/Necessary several times as they relate to several topics in the future. We’ll head on back to travel, the category we started this discussion with. What can I write off? Here is a general list of all you can write off:

 

Vehicle(s) and all related expenses – including RV’s, cars, boats, airplanes, boats, parachutes, trains and more.

Hotel or space use fees [slips, berths, rooms, campground fees, etc]

Meals – either the actual expense or a per diem rate.

Entry fees: museums, art galleries, park fees, golf course, amusement park, state fair, tram rides, etc.

 

Other expenses you incur along the way are discussed under a different topic – such as photos, suitable clothing, souvenirs, phone calls, gifts, books, samples and general supplies. These are NOT considered part of your travel, but can be O/N.

 

Where do I put these on my tax return? If you are just an individual, the easiest way to handle them is to include them on a Schedule C of a regular Form 1040 tax return. But there are other options such as Partnerships, Corporations, Non-Profits, Limited Liability Companies and more. Those of you that are already writing off your expenses – and hopefully selling your wares – may want to consider forming a Limited Liability Company, simply for the depth of CYA it gives you.

 

Income. Tough to come by these days. Do you have to show income when you start writing off your writing expenses? Absolutely NOT. At least not at first. This will be discussed later under the heading of Hobby Losses.

 

As always, before attempting to use any of this general advice, you should talk this over with your tax preparer to be sure you are fully informed of the tax implications and how they relate to you. This column is to be used as a general reference and is not a specific guideline for you to use unless you are fully informed in the proper use of these types of income and expenses. In other words – don’t try to do this yourself – but DO ask someone to help you and DON’T be afraid to use the expenses that you are entitled, by law, to use.

Story Circle Network

Story Circle Network is having their fifth national conference, Stories from the Heart, in the Austin, TX area on Feb. 5-7, 2010. I am pleased to be a Panelist on the Blogging Panel with a half dozen very talented ladies. Be sure and check out the conference web site and plan on attending this life changing event – you’ll be so glad you attended! The link for the conference is:  http://www.storycircle.org/Conference/

Story Circle Network – Star Blogger!

Recently, I was awarded with this Star Blogger Award, along with a few other fabulous bloggers. Be sure to come and visit the Story Circle Network, you won’t regret it. The link is : www.storycircle.org

New feature on my Blog!

Be sure to check out my new page (see heading of blog) that is titled ‘Books and Publishing’. Here you will find links to books and articles I have written or contributed to and ways to order copies. This site is currently under construction and I will periodically be adding new material and links – and hopefully a new book! Here’s a sample copy of one of the covers of a book featured here:

A visit with Janet Riehl

I have long been a fan, hopefully friend, of Janet Riehl, [see her blog to the right - Village Wisdom extraordinaire!] When I hear the music and stories in her words, I am left breathless at the inspiration and emotion she evokes. So it is to my delight that to share a chance to interact with Janet and learn more about her life work. Story Circle Network will be interviewing SCN member Janet Riehl on Thursday (10 AM Pacific Daylight Time and 1 PM Eastern Time). Janet will be discussing her new CD that contains her story poems and music. This is a follow-on product to her memoir Sightlines. Again, if you can mention this in your blog or to your writing friends, we’d appreciate it. Anyone with questions for Janet, can post them in the Comments section below her great guest blog that also includes a writing rompt.

Here’s the link to her blog where questions can be posted.

http://womensmemoirs.com/2009/06/story-poems-as-memoir/

HerStories Memoir Challenge – Month 4

Little Heathens – Hard Times and High Spirits on an Iowa Farm During the Great Depression By Mildred Armstrong Kalish

Filled with recipes and ‘making do’, Little Heathens transports the reader back to the days of the Great Depression with a refreshing story that immediately welcomes you. The writing is vivid, clear and refreshing with almost the flow of a novel. I really like the way Kalish breaks the book down into sections such as ‘Chores’, ‘Farm Food’, ‘Gathering Nuts’, ‘Leisure Time’ and ‘Animal Tales’ without actually disrupting the time flow of the story. Not only for the recipes and how-to-do-it instructions, I will continue to read and refer back to this book for its timeless advice and feeling of well being I get when I visit the Iowa farms of the author’s memories.

Above is the short review of a book I recently enjoyed. I had so much fun relearning some of the things I remembered from my childhood and visits to both of my grandparents’ farms in Missouri and the Aunt/Uncle farms in Iowa and our own small garden. The author’s family learned many ways to ‘make do’; which is something my mom taught me in life and I’ve often mentioned in my own memoirs. During today’s lean and distressing times, people would be well advised to look into their own lives and find better ways to ‘make – do’ as many of our families obviously learned during periods of war and depressions. Be sure and check out some of the other stories reviewed by myself and others at the