Another open forum question – from kgmadman:

The IRS requires income to justify business expenses as a deduction. Are there any ways that aspiring, unpaid writers can deduct expenses such as WGA Registration fees, Copyright costs, writing software, etc.?

I’m no tax expert, but I’ll bet there’s a GITS reader who is – so I extend this question to everybody passing through.

I bumped around the Web with your question in hand and found a few links: here, here, and here. And a quick perusal suggests two things: First, the distinction between a “hobby” and a “business.” Second, if you do deduct expenses against future earnings as a writer, there seems to be a 5-year period in which you have to generate income from your writing.

But you would be well-advised to contact a tax adviser.

So not much help there, sorry to say. However let me take this opportunity to talk about something you may want to prep yourself for if and when you do start generating income as a writer: The loan-out corporation.

Many working screenwriters create loan-out corporations through which flows all their revenue and expenses. With a loan-out corporation, when a studio hires you to write an assignment or you sell a pitch or spec script, technically the studios make a contract with your loan-out corporation to ‘borrow’ your writing services.

Managing a loan-out corporation can be a hassle, it costs money to set up, there are annual state fees (at least in California), and some additional taxes to pay. However there are upsides to having one:

* Since you’re running all your expenses through the loan-out corp and not your personal tax forms, you are much less likely to get audited.

* You can put away money into some type of retirement fund to augment your WGA pension and personal savings. I’m not sure what the cap on that figure is, but it used to be $30K annually.

* By getting credit cards and checking accounts linked to your loan-out corporation, it becomes very easy to distinguish your business transactions from personal.

I’ve known writers who have handled their loan-out corporations themselves, but it can be a lot of work, so the easiest thing to do is hire a business manager to take care of the loan-out in addition to your investments, etc. Unless, of course, the dude’s name is Madoff – then all bets are off, witness the sad case of screenwriter Eric Roth.

For more information on loan-out corporations, go here . And John August answered a question about writers incorporating here.