With tax season approaching, I thought it would be a good opportunity to compile five posts from the archives containing tax saving strategies for writers. The first, LLC or S-Corporation? has also been one of our most popular posts, so it seems many are looking for advice as they begin to prepare for filing their taxes.
Many people believe that taking the home office deduction makes you automatically audited or that it drastically increases your chances of being audited. I don’t think it automatically causes you to be audited, but I do believe that it is something that auditors look at, and it does, I believe, increase the chance of you being audited, albeit still a small chance.
While the simplest way for a small business, a writer, to report their income and related expenses is on Schedule C of their personal tax return as a sole proprietor, the two most popular entities for authors thinking about expanding beyond a sole proprietor are LLCs and S-Corporations.
While it is understandable that most writers would prefer to concentrate their time on their writing, writing is a business and you will need to spend some time keeping the business of your writing organized and making sure you’re taking care of all of the tax deductions that you should be. The worst way to track your business expenses is to throw everything in a shoebox.
Here are three simple steps to staying organized so that at the end of the year you or your accountant can easily get the information needed for your tax return–from the fewest number of sources–to summarize the income and expenses related to your business. [Read more…]
If you have sold your textbooks in foreign markets, foreign publishers may withhold foreign taxes at the source before the money is paid to your agent and before it is paid to you. If they are doing that, and you earned, for example, $10,000 in a foreign country, 10 percent, or $1,000, will have been withheld from your payment. Your agent would have received $9,000, and withheld his 15 percent commission on the $10,000 you actually earned. So you would end up getting about $7,500. [Read more…]
One of the things that can affect your tax returns is the income that you report from writing in the form of royalties, advances, etc. Many of you will have literary agents and those agents will report to you what you’ve earned at the end of a year on a 1099. While the IRS says that agencies are supposed to report to their clients the gross income amount that was received, most agencies report on the net basis, and the IRS doesn’t seem to be aware of, or care about that. But as an author, you really need to know on what basis your agent is reporting income because it could potentially affect your tax return. [Read more…]
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Textbook Writing | Textbook Publishing | Contracts & Royalties | Taxes | Copyright | Marketing | Supplements | Indexing | Ebooks & Open Access | Textbook Proposals | Academic Writing | Academic Publishing | Academic Editing | Academic Books | Grant Writing | Time Management | Social Media for Academics | Tenure & Promotion [Read more…]
Dear “New” Author,
Here’s some textbook writing advice I wish an “old” author had given me. It’s simply a scrambling of pointers based on learning the hard way – through mistakes.
Book and Supplement Copies
Buy copies of your competitor’s books and supplements. Every executive editor has access to “the list” that identifies titles and the estimated numbers of these books selling in your market. They don’t like to share this list, but they should tell you the top three competitive books. Another great resource for books is the publisher booths at your annual association meeting. All the books are there for viewing and available at discount prices. Regarding supplements, it’s best that you don’t write these. Publishers hire people just to write them. It’s too much to write a major textbook and the supplements. Trust me on this. But if you have to write them, request supplement desk copies your publisher has created for their other textbooks, and the closer to your book, the better. The editor is right; forget about the supplements until the text is completed. They have the option not to print your book until the very end and all writers should know this gruesome fact. [Read more…]
Q: “I’d like some feedback on the idea of a textbook author incorporating in some fashion, rather than operating as a ‘sole proprietor.’ What are the advantages and disadvantages of incorporation? What are the tax advantages and disadvantages?”
A: Stan Gibilisco, TAA Member
“I tried this when I lived in Hawaii and discovered, to my horror, that my royalty income was subject not only to their income tax, but to their ‘sales’ tax as well (they call it a general excise tax). I figured that if I formed a Nevada corporation and had all my income channeled into it, and then became an employee of that corporation, the royalty income would not be subject to that onerous tax. It was a beautiful theory, but, like so many theories, did not work. The legislators in Hawaii had thought of that before I did and the law was airtight. Love it or leave it. I left. [Read more…]