Back from the DFWcon writing conference and carrying a mixture of motivation and dread. I got excellent advice from the classes I attended and from my consultation. It was inspirational but at the same time hammered home exactly how much work I have yet to do on my current project. There are some things I’ll need to grapple with before diving into revisions, but for now, I’m going to get back on the topic of the Business of Writing.
Fortunately, the conference included a panel – Death and Taxes: What Every Writer Needs to Know about Federal Income Taxes presented by Diane Kelly, a writer and former CPA. It was an excellent primer and my only complaint – she needed more time!
I have to go back and address something I touched on in my previous posts. I mentioned the IRS profit litmus test for whether your business is an actual business or a hobby and that you needed to show a profit for three out of five tax years. Turns out, this is an often circulated myth.
Mrs. Kelly specifically addressed this and pointed out big corporations operate at a loss or in bankruptcy all the time. But, it only reinforces my statement – you’ve got to treat it right. Treat your writing like a business and it will be considered one. If you put in the hours, keep the records, and suffer the blood sweat and tears, then you are a business, period.
Now on to income. Before you can have an income as a writer, you have to submit works for publication. So, while you can operate at a loss, you have to be actively seeking profit. You will want proof that you are submitting, pitching or proposing works.
Track all of your submissions. For short stories,the writing marketplace Duotrope has an online tracking system that is extremely useful. As you submit, you can track the date sent, date of reply and even the type of reply (whether it was a form rejection or a personal rejection, etc.) along with the story title, genre and word count.
All of this information can be placed in a new spreadsheet or a new page in the same spreadsheet where you are tracking income and expenses. Go ahead and include every story you have on this sheet. Don’t be shy. It’s sort of a list of your ‘inventory’ and will be extremely handy to reference as your catalog grows .
Further, any correspondence you receive from a publisher needs to be filed away. Yep, every rejection and acceptance. I have separate folders in my Gmail account for these because the vast majority of submissions are electronic. Like most starting writers, the bulk will probably be typical form rejections, but it still proves you are actively pursuing an income.
And it bears repeating – You ARE a writer. It IS a business. This means you value your work and you think others should, too. DON’T give it away. And for Pete’s sake, don’t pay publisher’s to accept your work. Write for markets that value their talent and aim for getting that check in the mail. Sure, I’ve given away work before if I felt the exposure could help my career, but in general, everything you craft has value and should be treated as such.
Once you finally make a sale, you may get paid in several ways. Short story markets often pay a flat, by the word rate. Pro rates right now are at 5 cents or more per word. With anthologies, they may pay by the word or pay royalties – a percentage of every book sold paid out to the writers. Books are a bit more complicated. There may be a lump sum advance and royalties. Royalties may be paid quarterly or in yearly sums, all contracts will differ on how they are disbursed.
Regardless how it is given, you record the income the moment you have it in hand – essentially, this is cash basis accounting. It means all of your income is reported the same tax year you receive it. So, if you get a royalty check from your 2012 book sales in January of 2013, the income is recorded for 2013. The same goes for deductions. If you buy a ream of paper with a credit card on December 31st, 2012 you report that deduction for the 2012 tax year even though you’ll be paying the credit card bill in 2013.
Recording this income is simple. Date, name of payee, check number (if applicable) and a description of the sale. These go in the positive column of your spreadsheet.
Another extremely important thing when selling intellectual property is rights management. Anytime you sell a story or book, you will presented with a contract. Read it. Twice. Three times. If you have any questions, you can ask the editor or publisher, though I’d recommend a neutral source. If this is for a novel, I’d highly recommend reviewing the contract with an attorney. And make sure you keep a signed copy – signed by BOTH parties.
Add a single column for a date to the ‘story inventory’ spreadsheet I mentioned above to track one more thing – when rights expire. Publishers typically purchase exclusive publishing rights for a specified period of time – maybe six months to a year. You’ll want to track this because once their rights expire, all rights revert back to you. You can then sell the story or novel again whether with a different publisher that accepts “reprints” or as a self-pub. Be incredibly leery of any contract that is open ended or calls for full rights for extended periods of time.
Ok, so it wasn’t short but hopefully helpful. Maybe it will inspire more of my writing friends to take the plunge and declare themselves to be full-fledged Professional Writers! Any questions or comments?