Render unto Caesar.
Some of us just want to write. Some of us want to be paid writers. With self-publishing, more of us can pull that off. Awesome. But with money from writing, comes the inevitable consequences. Income taxes.
Note, the following info is only going to apply in the U.S. If you’re anywhere else – I have enough of a headache figuring out my local tax system. Good luck with yours.
If you are making money from writing in the U.S., congratulations! And be prepared for pain. As writers we count as self-employed. Meaning we pay about 12.5% taxes on any profit. It bites.
I can’t help with the bill, but if you’re doing your own taxes, there’s ways to streamline it a little. I’ve done this a lot.
I honestly don’t know if online tax-prep programs will handle this. If you work like I do, making bits of income here, there, and everywhere, you might not have all the neat documents a tax preparer would want. So, to do it by hand, you are going to need:
Form 1040 Schedule 1.
Form 1040 Schedule 2.
Form 1040 Schedule C (Business Profit/Loss).
Form 1040 Schedule SE (Self-Employment Tax).
Form 1040 Schedule V (for paying taxes by check or credit).
Pencils, paper, calculator, caffeine, and a few hours free.
The 1040, Schedule 1, and Schedule 2 all come in the usual 1040 booklet; around here, the libraries have them available for anyone to pick up. C, SE, and V you’ll need to download from irs.gov.
Start with Schedule C. The numbers you’ll get off there will apply to at least three later forms. Don’t forget to put on your business code; for a writer, it’s 711510 (Independent artists, writers, & performers). When it comes to a writer’s expenses, shipping and office supplies (envelopes, packing tape, etc.) should go on line 18. Printing and other materials, line 38. As a writer you may not have inventory, so don’t worry about it much. Royalties will go under your gross profits.
Note: If you got royalties from Amazon and read the fine print, it says to use form E to report royalties. This is inaccurate. The IRS itself says freelance writing royalties go as business income on schedule C like they always have. Oy.
Make liberal use of the calculator. I can do some multiplication in my head, but I draw the line at trying to multiply long numbers by 0.9235. Too many decimal places to keep straight.
Schedule C will give you the numbers you need for a line on 1040 Schedule 1 (line 3) and another on Schedule SE (line 2). Now you can hack your way through Schedule SE.
On SE, page 1 is important. Page 2 only matters if you want to defer some of your taxes. I ignore it. SE will give you how much you owe for the self-employment tax (goes to Schedule 2 line 4) and a deduction for said tax (Schedule 1 line 14).
From here pick either Schedule 1 or 2, whichever you want to do first. Schedule 1 gives you an amount for Other income (1040 line 8) and adjustments to income (1040 line 10a). Schedule 2 gives you the amount for 1040 line 17, if any (odd taxes like alternative minimum and excessive advance), and for line 23 (adding the self-employment tax to the rest of the taxes you owe).
Now that you have all those other forms filled out, you have the writing-related numbers you need to tackle the 1040 itself. Go for it.
I find it takes me about an hour checking out what forms I need for this year, another to total up all the income and expenses I’ve been keeping records of. Once I have all the forms and info, I like to set aside 2 afternoons. The first I load up on caffeine and use scrap paper to work out all the numbers; takes about an hour, hour and a half. Then I put it down and do something else the rest of the day. Preferably with no numbers.
I sleep on it, then go back and check all my calculations before I fill out the paperwork. Do that, copy all the forms for records, write the check, and with luck it’s over for the year. Ow.
Of course, my end goal is to be paying thousands to the IRS, because that’d mean I’m earning tens of thousands! *Insert evil laughter here.*
…The caffeine high will wear off. Eventually.