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I’ve converted my previously published ebook into a series of articles, complete with PDF worksheets. So now, you can access everything you wanted to know about calculating and making estimated quarterly tax payments for free. Here’s a link to the articles:
I get this question sometimes by people who’ve cruised through the tax forms and realize that royalties often have a lower marginal tax rate than their other income and are not subject to self-employment tax. So if you’re receiving royalty payments from a publisher or self-published works, you should be able to report them as royalties and avoid self-employment tax and lower your federal tax burden, right?
Unfortunately, the IRS does not view book royalties as the same type of income as other royalties, such as mineral rights royalties. Here’s a teeny excerpt from the IRS for the naysayers:
The royalty payments made by the publisher to the literary agent and the royalty payments made by the literary agent to the author thus are not reportable under section 6041 and the regulations thereunder because such payments are payments to which 6050N applies. The publisher must file Form 1099-MISC reporting payments of royalties to the literary agent pursuant to section 6050N. If the literary agent is a corporation, no Form 1099-MISC is required pursuant to sections 6050N(c) and 6049(b)(4)(A). The literary agent must file a Form 1099-MISC for the royalties paid to the author regardless of whether the literary agent receives a Form 1099-MISC from the publisher.
What this means, is that if you are self-employed as a writer, then all your writing income must be reported on Schedule C and is subject to self-employment tax and your marginal tax right – after your writing deductions, of course. Which is why it’s so important to ensure you’re taking all the deductions you’re due for your writing business. Consider this, if you’re working a full-time job and writing (and most of us are) your marginal federal tax rate could easily be 25%. Add another 15.3% in self-employment tax to that and you’re paying in 40% of every net dollar earned from writing in taxes.
Sorry to report that there is no tax avoidance available to writers by electing the royalty route. If you try, you’ll likely get a terse letter back from the IRS along with a tax bill, complete with penalties and interest attached to the underpaid taxes due. Not the notice you want in your mailbox.
Over at the Killer Fiction blog we’ve just added a whole slew of new fab authors to our regular roster, and to celebrate, we’re having a “Start your New Year off with a Bang” bash. We’ll each be giving away daily prizes (such as amazon/bn gift cards) for twelve days, from Jan 10th – 21st, and one grand prize of a KINDLE!!!
The entry qualifications are posted on the blog sidebar, but basically, the more times your visit and the more people you tell to visit, the more times you’re entered to win the grand prize.
And why a Kindle, you ask? Besides the fact that ereaders are mega-cool, many of the Killer Fiction bloggers are former Dorchester authors who have received rights back on their previously-published books and are now making them available at a discounted price to readers everywhere.
So come join the fun over at Killer Fiction. It only takes a second to post, but the rewards can be huge!
Former Dorchester editorial director, Leah Hultenschmidt, received her walking papers from the struggling publisher almost two weeks ago when the entire editorial staff, except for one, was laid off due to cost-saving measures. This week, Sourcebooks, an independent publisher growing in size and popularity, announced that Leah started as the Senior Editor for romance and YA on Wednesday of this week.
I want to extend huge congratulations to Leah for obtaining another position and with a growing company. I also want to congratulate Sourcebooks for having the great business sense to acquire a wonderful editor who knows the romance industry so well and knows how to make a good book even better.
Leah was my editor at Dorchester and I can’t say enough about her. She is a pleasure to work with, down to earth, and smart as a whip. If you really want an editor who cares about your work, then you can’t do better than working with Leah.