Picking the right contest, part III: making the tax man happy

I have been writing for the last couple of days on how to determine whether to enter any specific contest or not. I intimated, in my patented winsome way, that it would behoove you to do a little background research before you invest time and money in entry fees.

I hinted gently that before you plunk down the green, you might want to ask yourself a few pointed questions. Is the contest credible, for instance? If it’s run by an organization, does it have a track record for awarding outside its membership? Do the judges win their own contests? Is it plagued by scandals? How good are the benefits for the winners? Would winning or placing in this contest give you notoriety or resources that are worth the investment of entering?

In short, I suggested yesterday that you begin to think of entering literary contests as an investment in your future as a writer, rather than as a gamble that may pay off big time. There are good investments, and there are bad investments, so select carefully.

What are the practical advantages of thinking of it as an investment? Well, prepping the average entry usually involves quite a bit more effort than merely printing out your first chapter and already-existing synopsis. There are generally formatting restrictions and length requirements that render it advisable to spend some fairly serious time tailoring the pages to the contest’s standards.

That’s time you could be using writing. Or querying. Or even having a life, as I’m told that non-writers do. If you choose to spend it entering a contest instead, make sure that the potential returns are worth the sacrifice.

Then there’s the money. Entry fees can be quite hefty, especially cumulatively, and not all contests give much in the way of tangible rewards, even to the winners. A high entry fee may be worth it if, say, the judges provide written feedback (as is the case with PNWA) or contest winners are If you enter many contests (or attend many conferences, or send out rafts of cover letters…), you might want to have a chat with your tax advisor about establishing your writing as a small business, so you can claim all of those entry fees as deductions.

Hey — contest entry is legitimate promotion for your work. Contrary to popular belief, you don’t necessarily have to make money writing in any given year in order to take tax deductions on writing-related expenses.

And this sometimes comes as something of a surprise to the average tax preparer; I know many writers who have been told point-blank by their consumer-minded tax guys not to bother filing a Schedule C until the first advance check arrives. So you might want to bone up on the facts a bit before you enter into that particular discussion with your tax advisor; here’s a nice brief summary.

I’m told by thems as know, though, that the IRS has changed its thinking about how quickly to expect artists to make money, recognizing that many talented writers NEVER make a profit on their writing, or even break even, yet still have legitimate business expenses. Printer cartridges, for instance. Reams of paper. The most recent agents’ guide. Conference fees. And so forth. (Poets & Writers online has a good article on recognizing what your writing expenses actually are.)

What they look for, I’m told, to differentiate between the hobbist writer and the professional, is evidence of a “profit motive” — proof that you are pursuing your writing in a professional manner, with the ultimate goal of selling your work for profit. Basically, they want to have some reasonable assurance that you WOULD be selling your work if anyone would buy it.

What kind of proof do they like? Well, again, you should ask a tax pro familiar with artists, but high up on the hit parade is evidence that you write on a regular basis and tangible evidence that you are consistently trying to find an agent and/or a publisher for your writing. So they not only don’t begrudge writers’ deducting the cost of stamps and envelopes – they regard buying the makings of SASEs as a mark of serious, potentially taxable effort.

It’s nice that someone does, no? Perhaps the IRS would send a representative to explain your profit motive to your carping coworkers who keep asking when your book is coming out.

Another way to prove that you really are writing with the intent to sell it, honest, is thorough making demonstrable efforts to increase your professional skills – which, for a writer, means not only learning better craft, but learning how to market as well. Continuing education efforts such as going to conferences and promotional efforts like entering contests fit very clearly within the profit-seeking rubric.

I mention this not only so you can make some inquiries in the months between now and tax time, but also to encourage you to apply the concept of the profit motive to any writing-related expense you may be considering. In the case of a contest, for instance, you might want to ask: how will winning it help you get my book published?

In other words, is entering this contest an efficient way to pursue my profit motive as a writer?

And I’m not just talking about ANY contest win here: I’m talking about any PARTICULAR contest you may be considering entering. The adulation and opportunities offered the winners vary so widely from contest to contest that it is almost impossible to generalize about any benefit accruing to all winners OTHER than boasting rights in query letters. If you do some basic checking in advance, you can save yourself quite a bit in entry fees by avoiding the contests that will not help promote you and your work.

Tomorrow, I shall talk about how to go about accomplishing that. In the meantime, enjoy the rare snow, Seattlites, and everybody, keep up the good work!

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