We're entering tax season, and I urge all writers to remember that taxes apply to everyone. I've often said that writing is a business, and one of the reasons I feel writers choose the traditional publishing path is because they want other people to look after that nasty business stuff. As an indie writer, it's your business and therefore your responsibility.
Most businesses pay their estimated taxes quarterly. This avoids an enormous bill at the end of the year, and it's required by law to be within 10% of your end of the year rate. I get that this all sounds about as exciting as a knitting session, but it's vital if you want to run a successful business as an indie writer rather than a hack job that muddles through a hobby.
The majority of indie writers sell less than 500 copies annually, so it's not as if their tax bill is large. However, if you have plans of making a living at this, understanding the tax bill is kind of a big deal. Separate your business accounts from your personal accounts so it makes deductions and write offs easier to explain to the IRS, and spend some time figuring out how to best estimate your taxes(based on your income selling books). I strongly recommend filing as an S-Corp since it will simplify your taxes(you have to set up an S-Corp in advance), and you file it on your personal returns(although quarterly).
I cannot stress enough not to forget this. Most writers just want to tell grandiose stories, but you'll be telling those stories from jail if you ignore the IRS. Anything you sell is subject to their jurisdiction, so as unsexy as it might be, know it and abide by it.
Some will tell me that this post has nothing to do with writing, and those people are what we call "fools." This is as much a part of what you do as editing. None of this is easy, and it certainly isn't why we sat down at a computer to tell our stories, but nitnoid things like this are why many writers fail. If you have at least a working knowledge of this before you begin, you start out ahead of 90% of your peers, and that can mean the world when trying to get off the ground.
Most businesses pay their estimated taxes quarterly. This avoids an enormous bill at the end of the year, and it's required by law to be within 10% of your end of the year rate. I get that this all sounds about as exciting as a knitting session, but it's vital if you want to run a successful business as an indie writer rather than a hack job that muddles through a hobby.
The majority of indie writers sell less than 500 copies annually, so it's not as if their tax bill is large. However, if you have plans of making a living at this, understanding the tax bill is kind of a big deal. Separate your business accounts from your personal accounts so it makes deductions and write offs easier to explain to the IRS, and spend some time figuring out how to best estimate your taxes(based on your income selling books). I strongly recommend filing as an S-Corp since it will simplify your taxes(you have to set up an S-Corp in advance), and you file it on your personal returns(although quarterly).
I cannot stress enough not to forget this. Most writers just want to tell grandiose stories, but you'll be telling those stories from jail if you ignore the IRS. Anything you sell is subject to their jurisdiction, so as unsexy as it might be, know it and abide by it.
Some will tell me that this post has nothing to do with writing, and those people are what we call "fools." This is as much a part of what you do as editing. None of this is easy, and it certainly isn't why we sat down at a computer to tell our stories, but nitnoid things like this are why many writers fail. If you have at least a working knowledge of this before you begin, you start out ahead of 90% of your peers, and that can mean the world when trying to get off the ground.
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