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Taxes For First Time US Authors -- The Very Basics
Preface: I’m not a tax professional. Filling out Federal Tax forms is the bane of my existence. The following is a very simple overview based on questions we get every year from first time authors. Please consult a trained professional if you feel like you’re in over your head.
If you live in the US and earned royalties on your first book in 2008, you should receive a US Federal Tax Form 1099 Misc. from your publisher by the 1st of February. The question we get most often from 1st time authors about now is, “What do I do with this?”
If you live in the US, you owe Self Employment taxes on your publishing income, wherever it was earned.
Publishers are required to send you a 1099 Misc. if you earned more than $10.00 in royalties. However you only have to report that income if the total from all your publishers is over $400.00. You will owe Self Employment Tax (app 15% Social Security and Medicare taxes, in addition to Income Tax) on the profit from your writing income.
Your profit may or may not be the entire amount reported on your 1099s, depending on how you chose to file. You have two choices:
1) file a Schedule SE, Self Employment Tax form, and report all your income on that form
2) file a Schedule C, Profit and Loss from Small Business form, and treat your writing as a business. (If your business earns a profit of more than $400.00 in any tax year, you will also need to file a Schedule SE, Self Employment Tax form.)
You can download the forms you’ll need at IRS.gov, along with the corresponding instruction booklets. Before you file a Schedule C, I’d strongly suggest you research what are, and what are not legitimate business expense. Getting “creative” here is probably not a wise thing to do.
Karen Woods’ “It’s Taxing” is a great book for authors, whether you’re a first time author looking for advice or a veteran looking for things you may have missed. You can find Karen’s book at http://www.sleepingbeaglebooks.com -- see Karen’s Guest Blog post below.
Margaret Riley
AKA Shelby Morgen
www.ChangelingPress.com
