Is writing a business or a hobby?

Most writers start young, writing magazines or poetry in secret, and revealing themselves in the sheer joy of putting words together. As they get older, many of them will put their talents aside to make a living in a less creative field, most will spend their lives writing occasionally, just for the fun of it, and a small percentage will go out into the world as professionals. writers

So how does a writer know if they have a hobby or work as a professional writer? The answer lies within a couple lines of the IRS tax law; It’s not creative writing, but for any writer hoping to make money off of her creative flair it should be required reading.

For the IRS, there is only one reason to be in business: profit. If your main motive is to become a famous writer, to put your words down on paper because you need to get them out of your head, or to push a particular point of view, you might be an amateur writer. Or, you could be in business…it’s all up to you.

Any freelance writer who treats their writing like a business can file their taxes like a business, once they understand what the IRS expects of freelance writers. And the benefits are great: A hobby writer must report all writing income, but can only incur expenses up to the amount of that income. Those in the writing business can write off all expenses, even if they exceed writing income. For part-time writers, this can mean big tax refunds on W-2 earnings.

For the IRS, the distinction between hobby income and business income is clear; A company is always motivated by profit. And, a business that has profit as its primary motive is always looking for ways to increase its income, even if they are engaged in a part-time activity.

Although the freelance writer may need a paycheck today, to be successful in the writing business, a writer needs a long-term business plan. Spending money on advertising, promotion, business classes, networking expenses, and the equipment needed to do your job are all part of growing a business. Travel expenses exceeding any earning potential, failure to keep records on article submissions, running your writing finances out of your personal bank account, and not having a set work schedule are all signs. that your goal may not be profitable.

Being an amateur writer is not a bad thing; You just need to understand the rules around hobby income and expenses, and make sure they’re reported in the right place on your personal tax return.

For the serious freelance writer, because the IRS views writing as a hobby, a professional writer’s tax return with repeated losses could be subject to an audit. If that happens, the IRS will ask you to show that you are operating as a business. For the writer with a written business plan, dedicated writing schedule, and good financial records, it’s usually an easy audit to win.

So if you want to be a professional writer, let those creative energies flow when you write, but when it comes to taxes and the bottom line, remember what the IRS says… file your taxes like a business, to everyone else, It’s a hobby.