Is Your Writing a Business or a Hobby?

Hi SEers! Welcome to another Mae Day on Story Empire. Recently, a post I made about being a disciplined writer, produced a few comments about whether writing was a hobby or a business. The IRS clearly has an opinion, but much of how the government views your writing is also determined by how you view it.

I’m going to draw on a Story Empire post I wrote in 2017. We have many new blog followers since then, and I believe rehashing the points may be a benefit, especially with tax deadlines looming.

Most of us go into writing hoping to make a profit. Sure, it’s our dream to have published works “out there,” but it would also be nice to see some success along with the realization of that dream. This is where things can get tricky.

There’s an old saying “to make money you have to spend money.” For writers that means marketing, something that usually comes with cost. It would be nice to write off those expenses come tax time, but what happens when costs outweigh profit? For most of us, that’s definitely going to be the case for the first few years. Possibly longer. So how do you keep Uncle Sam from seeing your efforts as a hobby.

I’m not an expert, but here are a few things you can do:

open laptop with detailed spreadsheet on screen

Detailed Record Keeping

This may seem obvious, but the more detailed records you can produce (in the event of a dreaded audit) the more favorable the outcome is likely to be. Keep receipts and make notations on each. In addition, use a spreadsheet to track and itemize by category. I use headings such as Advertising, Supplies, Fees, Contract Labor and a few others. Know what you can deduct and what you can’t. 

In addition to expenses, itemize your earnings and the sources for each. As a hybrid author, I earn royalties on my indie titles as well as paychecks from my publisher. I break everything out separately in a spreadsheet.

Open a Separate Business CheckingAccount

I have one that is used strictly for author expenses. By the same token, the royalties I earn don’t get mingled in with my regular household account. Income goes into my business account where it is easy to track, and the bottom line is always visible. It’s also easy to hook your account to PayPal for additional record keeping and a convenient means of paying outside vendors.

shot of a MasterCard credit card

Use a Separate Credit Card

I’m a PayPal fan, but there are times when I need to pay something by card due to the vendor. In that case, I have a major credit card that is used solely for my author expenses. And like a bank account, it can be hooked to PayPal. 

A Tax ID Number

If you do book signings where you sell physical copies, and your state charges sales tax, you need to sign up for a Tax ID Number. This is something you can usually do online. In Pennsylvania, I’m even able to register for alerts reminding me when filing is due. This could be quarterly or semi-annually depending on your state, but don’t forget to file. Even if you go a quarter without physical book sales, you still need to report your earnings (or lack thereof).

Credit Card Readers

These are handy little gadgets that turn your smart phone into a credit card reader. The one I use is from PayPal and comes in handy at book signings, offering chip and swipe or chip and tap. Funds are deposited directly into my PayPal account and customers receive an electronic receipt via email. I’m even able to calculate in sales tax. 

All of this may seem like a lot, but once you start publishing, earning royalties, and having the burden of expenses, you’ve entered the business phase of writing. Until that point, you may view your writing as a hobby. Uncle Sam will too if you don’t turn a profit in at least three of five consecutive years. That’s why it’s so critical to keep detailed records.

For more information on the difference between how the IRS views hobby vs. business, see the IRS website HERE.

Wouldn’t it be great if we could just create, write, and enjoy? Sadly, everything has a practical side. Even writing. So, is your writing a business or a hobby? Let’s get some discussion going in the comments.

Ready, Set, Go!

Bio box for author, Mae Clair

111 thoughts on “Is Your Writing a Business or a Hobby?

  1. Nice sharing. Writing a blog not just a hobby and yes that it can make you some passive income. But the most important part is that you could make new friends and share your ideas with people from different regions.

    I’m writing a blog as well. It would be grateful if you could drop in there.

    https://mystorytellings.com

    Thanks a lot. ❤️

    Like

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  4. So timely, Mae. I’m on the way to my tax preparer, Friday. She always reminds me that I can’t keep losing money on my business. I hesitate to tell her that I’m the only one who thinks it’s business. It’s too late for some of your suggestions, but there’s always next year!

    Liked by 1 person

    • Linda, I’m glad these suggestions help, even if you can’t apply them this year. It’s hard for writers to prove the line between business and hobby when their income isn’t on the plus side. I don’t know that I will have a release for 2021, so it’ll be a concern for me next year. Hopefully, I have enough of a back catalog to carry me through. Good luck with the tax preparer!

      Liked by 1 person

  5. A hobby I suppose, though I have been making a living from it for many years now. A hobby is something that you enjoy. I hate writing, to difficult but I enjoy what I have written when it is done. So “A Hobby”

    Liked by 3 people

    • What a very interesting way to think of your writing. You’re making a living from it, but because still consider it a hobby. I’m glad that you like the finished products you produce even if the actual writing doesn’t bring the same level of enjoyment. A very complex approach to writing, but I guess we all view it differently. Many thanks for dropping by to share your thoughts!

      Liked by 1 person

      • I probably did not explain that well enough (never mind the spelling and grammar mistakes), I was rushing at the time. I enjoy thinking about what I am going to write, building the ideas and the story in my head and when completed I normally (not always) appreciate the finished product. However the transfer of the story from my imagination to the written page I find tortuous, horrendous. A Trial. This has always been the case for me since my first short story was published back in the 1980’s, a joy to consider and create, a horror to deliver.
        For a number of years I moved away from writing. I purchased a couple of well known fiction magazines and became an editor and publisher chiming in every so often with fiction ideas for tales and stories that suited me or which (I assumed) would suit the readers. Yet your own ideas for stories rarely work as well when told by others as you imagine them to be when told by the originator and so I once again embarked upon writing them myself to find the same applies. I hate translating my tales to the page.

        Liked by 1 person

      • I see what you mean about struggling with the actual writing process. I think many writers struggle with that. I had a critique partner for many years who love to imagine stories in her head but had a hard time putting them down on paper. In any event, I am glad you found your way back to writing even if the process is somewhat laborious. The rewards are well worth the time invested!

        Liked by 1 person

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  7. I do all of these, Mae. I think it also helps to have a number of books out there, which obviously takes time, but shows commitment and being in it for the long haul. The IRS is delighted when we make a profit… and so am I, though it’s taken years (and years).

    Liked by 2 people

    • I agree completely, Diana. Having more books means more potential sales, and the better chance for income. As you said, though, it does take a while to build up to that point and start seeing a profit. If only we could slam-dunk it out of the gate! Happy writing! 🙂

      Liked by 2 people

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  9. I most definitely consider this a hobby, but one I’m becoming more invested in. I essentially like to learn, and that’s where the majority of my time is spent. My wife and I planned well for retirement, so we’re in good financial shape. That means I have more time to try new things. Writing is one of those things. I know the importance of keeping my body and mind active, and writing and learning about writing stimulates the creative portion of my noggin. I don’t think I’ll ever take this as serious as some, but I’m having a blast trying something new.

    Liked by 2 people

    • Pete, I think you have a wonderful attitude. There is nothing wrong with embracing writing as a hobby. It’s wonderful that you’re getting to explore so much about it in retirement. When I reach that point I hope to devote more time to my own writing.. Right now it’s hard working it in, but it’s something I love to do and will keep doing, business or not. I love your enthusiasm!

      Liked by 2 people

  10. I found this really interesting even though I’m definitely a hobbyist. I’m self-published on a shoestring budget which doesn’t allow for much at all in the way of promotion but every sale makes my heart zing and keeps me going. It would be lovely to earn enough to get the taxman interested!

    Liked by 2 people

    • The promotion angle is the hard one for most of us. Everything costs, and not everything works. I’ve been fortunate that my publisher did BookBub ads for me twice, which netted a lot of sales. I’d never be able to afford an ad on my own, but I have done other paid promotions, some that worked and some that didn’t. Like you, I get a little giddy with every sale!

      Liked by 2 people

  11. Thanks Mae. I remember going through all of this when I operated a cabinet shop. I look forward to being successful enough to have to think about this, but having been there, including being fined for not filing a sales tax return (in a month when I collected none), doesn’t thrill me. Your points are all good ones.

    Liked by 2 people

    • Hi, Dan. Glad you found the post worthwhile. I can so relate to that mention of when you collected nothing. I had that happen once as well, and although I wasn’t fined (in my state), I have a professional license in another field that was put “on hold,” until I straightened out the mess related to my writing business. I learned a lesson–file even when your sales for the quarter are zero! What an eye opener.
      It’s sad we have to deal with this stuff, but. necessary evil, I guess.

      Liked by 2 people

  12. PayPal is super convenient and easy to use. I use Square at book signings. PayPal’s one downfall is not having the ability for the funds to be deposited into your bank account (without additional fees). Maybe that’s changed? I haven’t checked in a while. If it hasn’t, Square is a great alternative.

    Liked by 3 people

    • I’ve heard great things about Square, too, Sue. I looked into both before I signed on with PayPal. To be honest, it’s been so long since I’ve done a book signing (thank you, COVID), I’m not sure what the fees are. I believe it was pennies, but it may have increased. Once places start offering signing events again, it’s something I will need to look into!

      Liked by 2 people

  13. Great post, Mae! My writing is more of a hobby, I would say. I’ve had sales but not to the point where I need a separate account to manage it. And I’m okay with that, for now. Eventually, I will reshape my mindset. For now, it’s just something I do on the side because I enjoy it. Still, these were great tips for when I’m ready to move to that level. 🙂

    Liked by 2 people

    • There is nothing wrong with writing for a hobby, Yvette. I think it’s great you invest the time in something that brings you pleasure. If down the road, you look at writing differently, the transition is not difficult. However you choose to practice writing, I wish you many prolific days ahead! 🙂

      Liked by 2 people

  14. It’s interesting that my sister and I were talking about this just yesterday. At what point does writing become a business rather than a hobby? I think marketing is the answer to that question. If you are writing just to be writing, there is no need to spend money to advertise your work. That to me is the deciding factor. Thank you for the tips, Mae. I’ve done all of these except open a separate bank account, but I do keep itemized spreadsheets throughout the year and receipts to back up every item in case of an audit. Thank you for sharing, Mae. It is timely and relevant!

    Liked by 3 people

    • I’m with you on the marketing, Jan. Once you start spending money to get your work noticed, you’re investing in your writing as a business. And those expenses can add up throughout the year, so it’s nice to be able to deduct a few of them when tax time arrives. It’s sounds like you are taking all the right steps in tracking your business.

      I do really like my separate bank account for income and expenses. It makes everything easier to track, and also sends the message I’m in this for the long haul, LOL. Glad you enjoyed the post and found it timely!

      Liked by 2 people

  15. As much as I want it to be a business, sadly I admit it’s a hobby. I spend more every year than I make. At this point I’m entertaining myself and that was a huge benefit in 2020. Fortunately, others seem to be entertained as well when they give me a chance. I dream of finding a promotional tool that doesn’t cost a fortune and actually produces. It would be worth a small loss just to expand my footprint.

    Liked by 4 people

    • If you ever find that promotional tool, I’d love to hear about it, Craig. I’ve thrown money at a lot of different promos through the years. Some have netted good results and others brought nothing but crickets. Even without treating my writing as a business, I would continue to do what I do. It brings me pleasure (heck, it’s a passion), and hopefully, like you said, it keeps a few others entertained, too. I’ve had good years and yuck years. Surprisingly, despite the mess of COVID and everything else that went on in 2020, it turned out to be a good year for me. I only have one release planned for 2021 (if I can pull it off), so I suspect it will be a downer. Even so, I’ll keep plugging away. It’s all we can do. Well, that and writing! 😀

      Liked by 4 people

  16. Thanks for an informative and helpful post, Mae. This is one I’ll refer back to often, I’m sure, though I can’t even stand to think about the upcoming work involved. Yeah, they pushed back the filing deadline to May 15, but I think they should push it even farther. Like June 15 … 2250! 😀

    Definitely passing this one along. 🙂 VERY useful ideas!! 🙂

    Liked by 2 people

    • Glad you found the tips useful, Marcia. Yep, I heard about the extended deadline. So glad they did that, but like you, I think a lot of people were hoping for longer. I suppose we have to take what we can get 😉

      Liked by 2 people

  17. Gotta admit that this one kind of hurt. Writing went from a hobby to a business then back to a hobby for me. A big part of that was how much time and money I could put into it. The second round of it being a hobby was more out of necessity due to other issues too. So, seeing it as such comes with a sense of loss. Definitely a special category for authors who rose to one section and then dropped to another.

    Liked by 2 people

    • Charles, I know that has to be difficult. As authors, we continually want to move forward, so it has to be hard taking a step back. Even so, it appears you haven’t lost your love of writing, and continue to pursue it despite your change of circumstance. You have plenty of books out there, so even now it’s hard for me to think of you as writing for a hobby. Maybe that’s the case at present, but you’ve established yourself. And moving ahead, circumstances can change again. I know how hard it is to work writing into a schedule that involves daytime employment and so many other commitments. Wishing you all the best with your writing.

      Liked by 1 person

      • It’s a daily struggle. I’ve questioned myself as to why at least 3 times a week. A big part of it is lack of sales regardless of what I do, which means no attention. Retiring 2 on-going series was rough as well.

        Liked by 2 people

      • I think we’re all struggling with lower sales right now. 2020 was actually a really good year for me, but I have basically zip on schedule for 2021 (one possible release if I can pull it off), so I know it’s going to be a down year. Still I plug on.I guess it’s all we can do.

        Liked by 1 person

  18. PayPay and Excel are two tools I’ve come to rely on heavily for the business end of what I do. (You don’t know how much it pains me to rely on spreadsheets, but they’re critical.) Great post, and so timely.

    Liked by 4 people

  19. What a great post, Mae. I wonder if there’s an in-between category of “writing because we must”? Sometimes a story grabs your heart and won’t release until it’s in print. Each of my stories haunted me until published. Along the way, I tracked expenses and income for the IRS, but I’d surely starve on that bottom line. 😊

    Liked by 4 people

    • I hear you, Gwen. That bottom line isn’t something most of are able to exist on. I’ve also looked at my writing income as an extra perk, but definitely not something I can retire on, LOL. Like you, however, I write regardless. Whether or not I ever earn a penny, writing is in my blood!

      Liked by 2 people

  20. Harmony is right about the UK being different, but it would still make sense to keep proper records. I do use PayPal as advertising sites charge in dollars, but that’s it. I’m serious about wri9ting, so I couldn’t put my hand on my heart and say it was a hobby. Just a career waiting to take off.

    The only way forward I can see is to ask a UK-based successful author. I’ll ask him when I haven’t just bombarded him with too many other questions. 🙂

    Liked by 5 people

    • Hi, Sarah. Yes, this post is definitely geared toward U.S. writers. Unfortunately, I’m not familiar with the regulations in the U.K, or elsewhere.
      I’m glad you have a contact that you can bombard with questions, LOL.
      Isn’t it great that PayPal is universal?

      Liked by 1 person

  21. Thanks for sharing these great tips, Mae. My full-time day job is what pays the bills, so for now, writing is a hobby that provides extra income. I often think if I were totally dependent on my writing income, I might not enjoy the process as much.

    Liked by 6 people

  22. Great post, Mae. I’m doing all of that except having a business account. Most business accounts over here come with hefty fees, so I’ve avoided that so far. I’m not even sure if our tax people differentiate the same as the American IRS does about hobbies, and it’s something I really should check out. Thanks for sharing 🙂

    Reblogged this on: https://harmonykent.co.uk/is-your-writing-a-business-or-a-hobby-story-empire/

    Liked by 7 people

    • Harmony, I had no idea business accounts in the U.K. come with fees. No wonder you wouldn’t want to open one. It would be interesting to see if the U.K. government looks at business vs. hobby the same way the IRS does. Sounds like you are doing everything possible you can to set your writing up as a business.
      Happy writing and many thanks for the reblog!

      Liked by 2 people

  23. Pingback: Is Your Writing a Business or a Hobby? | Story Empire | Welcome to Harmony Kent Online

  24. Great and timely post, Mae:) I keep records, and like you said, Paypal is a great way to pay and keep track. I want to charge myself for all the things I used to have others do, wonder what my tax preparer would say to that? Lol. This is way past a hobby to me.

    Liked by 8 people

    • I’m the same way, Denise. Way past the hobby stage. Sounds like you have everything in order.
      Had to laugh about charging yourself. Wouldn’t it be great if we could do that, especially given how many “hats” we wear?

      Liked by 3 people

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