Up to date for tax years 2021 and 2022.
If in case you have a narrative, inspiration, or the rest you wish to inform the world, there’s by no means been a greater time to do it.
It’s simpler than ever earlier than for authors to self-publish their work and receives a commission. The standard publishing gatekeepers can’t cease you now! There are such a lot of choices, from printing laborious copies to promote in bookstores to publishing digital eBooks to be used on Kindles and different e-reading units.
It’s thrilling once you begin creating wealth as a self-publishing writer however don’t let that pleasure distract you from studying how one can report your earnings appropriately for tax functions. Get began with these six tax preparation suggestions.
1. Discover all of your revenue from self-publishing and eBooks.
Should you promote $600 or extra in printed or digital books to a writer, you need to obtain Type 1099-NEC or Type 1099-MISC within the mail after the tip of the yr.
Should you promote books your self and settle for bank cards or different on-line providers for cost, you need to typically obtain a Type 1099-Ok from the bank card processing firm.
As of 2022, cost settlement entities (PSEs) should ship you Type 1099-Ok in the event that they processed $600 or extra in transactions throughout the yr. Earlier than 2022, cost platforms weren’t required to report enterprise transactions to the IRS except you made no less than 200 separate transactions totaling no less than $20,000 in a calendar yr — so issues have modified fairly a bit!
You could report no less than as a lot complete enterprise revenue as proven on all of the 1099 types you obtain. You could additionally report revenue from e-book gross sales no matter receiving a Type 1099. For instance, in the event you offered books for money at an out of doors market, you must also report that revenue. Even in the event you obtained lower than $600 from a writer, you need to nonetheless report any revenue you made, regardless of how little.
2. Report your writing revenue and bills from self-publishing with the correct kind.
Whenever you promote items and providers, even eBooks, on the web, the Inner Income Service (IRS) considers you to have a enterprise. Except you arrange your writing enterprise another means — like a company, partnership, or one other kind of small enterprise — you might be by default outlined as a sole proprietorship within the eyes of the IRS. In that case, you need to report your revenue on Schedule C along with your Type 1040, Particular person Earnings Tax Return.
Don’t be confused by Schedule E, Supplemental Earnings and Loss. It’s true that “royalties” are reported on Schedule E. Nevertheless, the IRS specifies that royalty revenue and bills as a self-publishing writer should be reported on Schedule C, not Schedule E.
3. Should you make a web revenue, count on to pay self-employment tax.
You could file Schedule SE, Self-Employment Taxes if in case you have a revenue from your corporation. Self-employment tax consists of Social Safety tax and Medicare tax. It’s calculated as 15.3 % of your web self-employment revenue (12.4 % for Social Safety + 2.9 % for Medicare). That’s the revenue you earned as a self-publishing writer after allowable tax deductions for enterprise bills.
Whenever you use TaxAct® to e-file, our tax prep software program mechanically calculates your self-employment tax for you and enters it in Schedule SE, if required.
4. If in case you have a web loss, you could possibly offset a few of your different taxable revenue.
Writing and promoting books isn’t at all times worthwhile within the first yr. In case your bills exceed your revenue, you could possibly deduct your corporation loss. If in case you have different revenue, like from a standard job, you’ll be able to deduct your corporation loss to assist offset that revenue and scale back your tax invoice.
To fulfill the {qualifications} for this deduction, be sure you are treating your writing prefer it’s a enterprise fairly than only a interest. Use cautious file preserving of your corporation bills and save receipts or vital paperwork resembling royalty statements.
5. Don’t overlook about deducting enterprise bills.
Retaining good data and treating your writing as a job can even serve you effectively once you’re on the lookout for enterprise bills to write down off come tax time.
You may calculate your deductible bills by preserving monitor of your cash when producing and publishing your work. Issues like journey bills, the dwelling workplace deduction (together with something from workplace provides to your complete workplace house), and different associated bills can add as much as a good tax break for skilled writers.
6. You might also have state and native tax obligations.
Should you stay in a state with state revenue tax, you need to embody your corporation revenue in your state revenue tax return.
You might also have to gather state gross sales tax on any gross sales and file excise tax returns. Make sure you analysis your state’s guidelines and decide how typically you might be required to file excise tax returns. Doing so will enable you to keep away from any late cost and submitting penalties.
