Tax Tips for Authors #1 – Income

UPDATED WITH LINKS TO 2012 IRS FORMS

It’s a cringe-worthy topic, I’ll grant you, but if you’re earning ANY income as an author you need at least a passing knowledge of how to prepare for tax season. And I’m just the gal to help you out.  

A crime fiction writer? Indeed.

In my other life, the one where I’m not finding creative ways to slaughter fictional folk, I’m a CPA. During tax season, I prepare a few returns and audit tax returns for a local accountant before he sends the files off to that hellish entity called the IRS. 

Everything you need to know about personal and business tax reporting is available on the IRS website (www.irs.gov). In these posts, we'll cover income, expenses, self-employment tax, and which IRS forms to use. My advice is not intended to replace that of your accountant; I hope simply to help you prepare for your annual tax filing.

So, let’s begin at the beginning:

by jnatiuk

Filthy Lucre (i.e., Sources of Income)

Gold, shekels, hard cash, or payment via Paypal. If you’ve got it coming in, the tax man wants part of it.

But how do I know how much to report?

Never fear, the IRS has a rule for that. For authors, our royalty income is documented on an IRS form called the 1099-MISC (follow the link to see the form). The payer (Amazon, Smashwords, your publisher, etc.) will send you a 1099-MISC to document your royalty earnings for the prior year. You should receive your 1099-MISCs by mid-February.

A copy of the 1099-MISC goes to the IRS, who will match it against the income you report. So it’s important to ensure that you receive a 1099-MISC from each outlet where your books are sold, and to include the royalty income on your tax forms.

And what about all the hard copies of my book I sell to friends and relatives?

by lusi

Good point. Authors also earn income from hawking our wares (physical books) at launches, fairs, book club meetings, signings, etc. You must track the income from these sales yourself, and report it on your tax forms.

You might also earn income from speaking engagements or running workshops (online or face-to-face). If you perform this work as a consultant, each organization that you provide the service for should send you a 1099-MISC if they pay you $600 or more during the year. If you organize the events yourself, you must track this income and report it on your tax forms.

Make sense? If not, feel free to ask questions below and I’ll do my best to provide answers.

Be sure to check out related posts on:

• everybody's favorite topic, expenses,
• navigating the dark waters of IRS forms, and
• calculating your self-employment tax.