Welcome to our section devoted to topics related to the income you earn and expenses you incur through writing. Hopefully, that income will grow over time and you’ll find effective ways to minimize your expenses. The menu at left displays the pages currently available to you in this area.
In the U.S. (and, we assume, most countries), if you treat your writing as a business and not a hobby, you can deduct writing-related expenses. Treating it like a business implies that you —
- Work at it with a reasonable expectation of making a profit
- Track your business income and expenses separately from your household accounts
- Spend time improving your craft, learning about your industry, developing and marketing your product
How Authors Get Paid
Authors work as freelancers or independent contractors as opposed to employees. Publishers and distributors calculate all their payments to an author at the end of the year and issue a 1099 tax document. Authors are responsible for paying income tax on this income, and because authors are considered self-employed, they may be subject to a self-employment tax depending on the net amount of income earned.
It’s important for authors to keep track of their payment schedules with various publishers (may be quarterly or semi-annually), aggregators (may be monthly or quarterly) and direct distributors (is usually monthly).
TIP: We recommend creating an annual calendar that shows when you expect to receive payments for what accounting periods.
Example: Your publisher tallies from January through March as 1st quarter (Q1) sales. They then wait until then end of the 2nd quarter (which would be June 30) to make sure they have all reports in from all booksellers and distributors for Q1. They then take the month of July to calculate royalty statements for all authors, and you received your statement and payment on or around August 1st.
Example: You distribute directly through Amazon. They tally your sales monthly, then issue you a royalty statement on the 15th of the next month. So, January sales are reported to you on February 15th. You then receive payment for that amount at the end of the following month or March 31st.
The more places you sell you books and the more money you earn, the more convoluted this can become. You may want to discuss your situation with a tax accountant who is familiar with federal and your state tax laws. If possible, try to pinpoint the income threshold where you’ll need to start paying taxes on your writing income.
Author and accountant Jana DeLeon has shared a 7-part series on Self-Employment taxes to help you understand how to track this income during the year and identify whether you’ll need to make estimated tax payments quarterly to the IRS. As we showed you in our examples above, calculating how much you’ll receive when will help you understand when you’ll need to start paying these taxes.
Authors should track all expenses associated with their writing. These become tax deductions that reduce your tax liability. Start a file folder for receipts. A general and incomplete list includes:
- Research or craft books you buy
- Online classes or workshops
- Memberships in writing organizations
- Office supplies
- Travel to meetings and conferences (don’t forget mileage)
- Contest entries
- Website expenses for your author website
A Simple Budget
Planning is key. The longer you’ve been writing and tracking your income and expenses, the easier it will be to create a simple budget. You can do this in Excel or Quicken. You can also use a 12-month calendar. Simply jot estimates of how much you’ll spend on various things.
- When your writing chapter membership is due and amount.
- When you book a conference, what registration fee you’ll pay.
- When you attend a conference, a ballpark of travel and meal expenses.
- How much you’ll spend on contest entries in specific months.
These don’t have to be written in stone, but a budget will help guide you and keep you on track.