How many books did you sell in 2007? What percentage of them were wholesaled? Did you have any interstate sales? What was your profit? Did you provide any writing services for a fee? How much freelance work did you pick up last year? Who cares? Your state and your government—that’s who.
As soon as you decide to write for money or turn your great idea or life experiences into a book for sale, you are in business and you must adhere to your country’s and your state’s tax and resale laws. What if you don’t? Heck, I never waited around to find out the consequences of dissing the IRS or the State Board of Equalization. From day one, even before I was able to show a profit, I reported the financial details of my freelance writing business and, later, my publishing business.
For those of you who haven’t figured it out, there are benefits to declaring your writing or publishing business. You get write offs. You can write off all legitimate expenses related to your book or your freelance business. Sure, save receipts for the punch and cookies you serve at your book signing and keep track of the mileage. Your new computer is a business expense, as are your office supplies—pens, paperclips, file folders, post-its and so forth. I wouldn’t try to deduct that new pair of slacks purchased for your presentation at the local Rotary Club meeting or the lipstick you bought because it matches the cover of your book. But, heck, tax laws change every day—check with your accountant.
I’m often asked during my workshops, “Can you suggest an easy bookkeeping system for my freelance writing (or publishing) business?†And folks, if you are an author, you are in business. Even if you’re collecting royalties, you still must keep records. Keep track of your royalty income, of course. But you’ll also incur expenses related to your book which are not picked up by your publisher—stamps for mailings, brochures/flyers, book festival fees, organization membership fees (PMA, SPAN and/or SPAWN, for example), long-distance telephone calls related to promotion, laptop to keep in touch while you’re traveling and so forth.
I keep one ledger for each of my books. Therein, I log each sale, date of sale, whether it was wholesale or retail and any tax collected. I have separate ledgers to keep track of my article activity (title/subject of article, publication, date queried, date requested, date sent, result or response and payment). I have a section for the payment of royalties, articles and client and other freelance work. And I handle receipts by tossing them into a file folder as I collect them.
Additional tips:
• Keep a small notepad in your car and note mileage for errands and trips related to your business or your book. This might include, trips to the post office to ship books, for example, to meetings related to your article work or book promotion and to deliver books to local booksellers.
• To avoid overwhelm at the end of the year, tally figures related to your book or your business each quarter.
• Connect with a good accountant or tax preparer who has experience with authors/writers.
• If you have a head for it, stay on top of tax laws related to your situation. I recommend Tax Mama, Eva Rosenberg at http://www.taxmama.com or, for tax help for authors in particular, http://www.theartrepreneur.com
If you want to make money through your writing—and it seems that everyone, these days, does—you’ll have to consider all angles, including your tax responsibilities. There’s no free lunch in this business and, once you start accepting money for your work or selling your books, you are in business.
Learn much more about the publishing business through my latest book, The Right Way to Write, Publish and Sell Your Book . This is a meaty 360-page monster of a book designed to educate you about the publishing industry and walk you through the entire process of writing, publishing and promoting your book. Use the companion Author’s Workbook for additional support and to help you more honestly and professionally evaluate your project and your potential as a published author. http://www.matilijapress.com/rightway.html