As a published author your life will get busier, and it will get entrepreneurial. You might have one or twenty published works, but no matter how many books you manage, you need to think like a business person. With 2011 coming to a close, I thought I'd run a few ideas past you regarding your growing indie book business...
(The following tips apply to US authors and might change per IRS policies.)
- You cannot hide your book income. Amazon, Barnes & Noble and any other book distributors you sell through will send you a 1099. This is a little form that these sites will use to report your income to the IRS. The days of getting paid under the table are over. And you will have to pay self-employment taxes on any income you receive that is greater than $400.
- I recommend opening a separate bank account to separate your personal income/expenses from your business income/cost of doing business. You may need to get a federal tax ID number, but that isn't necessary immediately. Your social security number will do for now (But check w/ your state). Also, consider using your publishing name as your DBA ("Doing Business As"), the name of your business. I use Nexgate Press as my DBA. With this account, my book distributors can direct deposit into my business account; a very clean and efficient way of doing business.
- Keep track of your expenses including everything from shipping receipts, paperclips, marketing expenses, production costs and other costs of doing business. All of these expenses will reduce your taxable income, so try not to miss anything. Be diligent in your records and you'll know for sure if you're making money... or not.
- As a business owner, you have to market your book(s). You might get lucky and start selling as soon as you upload your book, but that's not likely. Selling anything requires marketing. You have to announce the publication of your work and that will take cash, so expect to spend something even if you are on a low budget. There are several ways to market your book for free but advertising in places like Kindle Nation, Night Owl Reviews, Book Buzzer and Goodreads will cost you money. Being prepared will make the pill go down easier. Expenses are inevitable. If you are new to publishing, and you haven't made your money back after initial expenses, the good news is you'll show a loss for 2011 and you'll get some of that money back.
- You'll want to plan a budget for 2012. Include expenses for the works you plan to publish in 2012 even if you won't publish until later in the year. This way you can budget your future marketing and production expenses (editing, cover art, etc).
- Consider writing a business plan. All successful businesses start with a business plan. This is where you take time to look ahead and think about where you want to go with your writing business. How many books would you like to publish a year? How do you plan to market your work? What will your platform look like a year from now. A business plan is a great way to put your vision on paper, so you can look at your plans objectively instead of keeping your dreams locked inside your head. This is a business remember, not a floating book idea. Write down what you plan to do and then do it, step by step, until you succeed.
- HINT: If the work of publishing is overwhelming you, try hiring a friend or teen to do some of the busy work for you. Example: I pay my 16 year-old son to do some of my online work. It is very helpful and he gets a healthy $15 a week for easy work. This saves me about 3 hours a week and has freed me to do the more important things.
If you want to plan ahead for your 2011 taxes, click here. This page will inform you of the correct forms and other information you'll need for your taxes.
Here's another website to use as a resource that has helpful spreadsheet samples and more detailed tax information for writers.
Here's a website that gives detailed instructions on building financial spreadsheets for writers.
If you are in the writing/self-publishing business because you love writing, that's great, but don't let Uncle Sam catch you off guard when you start selling. Be smart and keep good records. If you need help publishing your work, I offer a few author services such as cover design and interior book formatting to lighten your load.
Good luck in 2012. BOOM!
Jeff Bennington ~ Author of all the books to the right ~~~>