Wednesday, May 16, 2012
The Real Wednesday & the Indie Author
As an indie author you are an entrepreneur. You are self employed and as such, you are responsible as any other business person out there. Like it or not this involves a number of hats you wear that you didn't count on...like accounting, marketing, and branding yourself to you customers. It's a whole 'nother ball game.
The Author Business: The Practical Guide to the Business of Being a Self-Published Author. I talk about some of these pitfalls and other hats. For example taxes and accounting. There are tons of books about how to write and publish a book, but after you get your first royalty check you become a sole proprietorship. Or if you are a larger entity, a LLC, or INC (limited liability corporation or incorporated). For this blog I'll focus on the Sole Proprietorship. That's what most of us are to begin with anyhow. Many of you new readers may not know that I have a MBA and worked as a marketing and accounting consultant for fifteen years. So I wrote/write this with experience.
When you uploaded your first book with Amazon or wherever, they asked for your social security number, didn't they. You had to choose what kind of taxable entity you were. They issue 10-99's at the beginning of each year for all those royalty checks they sent you. I use the US equivalent here because I live in the US. It is important to know your tax laws or it will come back and bite you in the butt, if you are not prepared.
I'll use my figures here as an example. I had four books published with Amazon,CreateSpace, and Smashwords (Barnes and Noble, Diesel, etc are part of my Smashwords accounting)last year. My income from my books was almost $5,000. Not a lot but just enough to put me in a higher tax bracket or two. Considering I'm an unknown quantity as far as fiction goes...that's not too shoddy.
The cost of internet, which is how I write, promote and publish my books comes off as an advertising expense. If I drive to a book store for a book signing...another deduction under mileage or actual vehicle expenses. When I buy photo paper for bookmarks, printer ink, regular paper, etc it's an office expense. When I bought my new computer and monitor they were deducted and depreciated over the next five years. My writing software, Word, was a straight 179 deduction. When I attend conferences, it's a straight deduction under professional/trade. When I teach a seminar, that's income but it also has its expenses also like travel, meals, lodging etc.
Now, yes, if you make over $500 profit you will have to pay self-employment taxes, but there is a little line on page one which allows you to take half of that right off the top before your adjust earned income is calculated.
Keep every receipt whether it is income or a possible deduction for your end of the year accounting. Now, if you are a hugely famous author...you probably have an accountant. For me, I save money and do it myself. The total amount I earned was zero taxable dollars from last year. Want to see how I did it? The pamphlet is available at Smashwords.com and will cost you $0.99, but it wills save you hundreds. I know tax season is officially over as of April 15th, but you need to start planning for next year. While I'm not against paying my government for the privilege of living in this country, I also want to keep every penny.
Keep writing and loving the Lord.