January begins a new fiscal year. It’s also the best time to organize your tax information for last year.
Whether your book has been out for more than a year, or you’re more than a year out before you finish writing your book, this is the best time of year to gather the information together for tax purposes.
On the income side, identify the sources from which you have received payment.
If you received royalties or an advance on royalties, you will need to file this as income because taxes have not been paid on this amount. You pay income tax on the full amount of the check or checks received during the fiscal year from royalties or an advance on royalties. Your agent or publisher will send you a 1099-MISC which you should receive in early February.
If you worked as an independent contractor and someone paid you more than $600 in the past year for your work as a professional writer, than you should expect to receive a 1099-MISC early in February. If you worked as an independent contractor but were paid less than $600 in the last year, you still need to declare this as income, but don’t expect to receive a 1099-MISC form. If you worked as an employee (writer, editor, teacher, workshop leader) then social security and income tax has already been taken out of your payments. Expect to receive a W-4 which declares your income and taxes paid to the IRS.
On the expense side, identify the purchases of goods and payments for services related to your writing which can be claimed as deductions. Photography, logo or graphics, website design, postage, photocopying, digital subscriptions to databases, books, conference fees, submission fees, professional memberships, stationary, computer, webhosting, cover art, copyright permission fees, publicist, indexing fees, and on and on. The expenses related to the business of being an author are specific to each author and their particular book and circumstances. I am not a professional tax preparer and cannot give specific tax advice. I can suggest how to get organized and seek out professional help if you have any questions or concerns.
Travel, meals, and entertainment. If these are legitimate business expenses, gather your receipts together and sum them up. If travel involves your personal automobile, you will need to keep a separate log of business and personal miles. You will need additional documentation to prove the receipts are from a legitimate business trip.
If you have dedicated space in your home where you conduct all of your business as a professional writer you may be able to deduct part of your expenses. Consult a tax professional or see the IRS documentation for how to claim a home office deduction.
January 31 deadline. If you paid more than $600 to an independent contractor (website designer, photographer, editor, etc.), the IRS requires you to complete and send a 1099-MISC form.
Here is the link to Form 1099-MISC
You must send a copy to the IRS by January 31st. If you run out of time to mail it in, you can file electronically. Failure to file in a timely fashion can result in a fine.
The public library and the post office are two locations where you will find most IRS forms. You can also search online where the majority of forms are available to download and print.
Some grumble and moan about tax season. I consider it a good time to take stock and make plans for the coming year. More income. Fewer expenses. How can I do that? That’s an enormous challenge for writers today. Avoiding the bottom line doesn’t make it go away. Making plans to meet or exceed the bottom line this year is one benefit from early tax preparation. It helps you see publishing as a business and become more strategic with your investments of time and energy.
Get busy and get to those taxes! Given how little authors make these days, it’s usually good news when you see the bottom line of adjusted gross income given your business deductions. Who knows? Maybe you’ll get a refund this year
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