Most writers operate as a sole-proprietorship. You and your writing business are one in the same. Sole-proprietorships are the simplest structure of the three entities. It involves no paperwork, corporate filings, board of directors, or special fees.
You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities. You do not have to take any formal action to form a sole proprietorship. The business itself is not taxed separately—the sole proprietorship income is your income. You report income and/or losses and expenses with a Schedule C and the standard Form 1040. The “bottom-line amount” from Schedule C transfers to your personal tax return.
Most writers hope that changing to a Subchapter S corporation (S-Corp) or limited liability company (LLC) will save taxes, provide better protection against liability, and impart greater legitimacy in the marketplace and with the IRS.
While I have yet to publish my first book, this question popped into my head today. Aside from the liability thing, an LLC is basically the same as a sole proprietorship but with a lot more paperwork. Sticking with small contracts and filing taxes as a sole proprietor may be sufficient for freelancers like web designers, small crafters on Etsy, or personal trainers.
For most UK authors starting out, the way to declare and pay any tax due on your royalties is to register as a self-employed sole trader with HMRC. Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income.
As a sole proprietor, you’ll report your business income and expenses on the Schedule C form of your personal income tax return. The business owner is subject to a personal income tax and a 15.3% self-employment tax.
Are book authors self-employed? Freelance income is self-employment income. What can freelance writers write off? 23 tax write offs for independent writers. Self-employment tax. Being a self-employed writer makes you eligible for the self-employment tax deduction. Freelance writers file taxes up to five times each year to cover both 1) typical annual taxes, 2) up to four quarterly estimated tax payments, which apply to self-employed individuals.
Self-employment as a sideline is associated with lower financial risk. Self-published authors can make between 40% – 60% royalties on books. The median income for self-published authors is under $5,000, and at the high end, 1.8% of self-published authors made over $100,000. Authors need to consider frequently asked tax questions, as payments on account spread the cost of the year’s tax for the self-employed, and business loss can reduce taxable income.
Authors are business owners and should consider creating a business entity for their book creation and marketing activities. As a sole proprietor, you can report your business income and expenses on the Schedule C form of your personal income tax return.
If you’re an indie author, you probably consider yourself a business owner. Creating a business name and marketing plan is key to establishing your brand and differentiating yourself from other authors. Operating book activities as a business may allow for deduction from federal income taxes.
Becoming an authorpreneur is for those who want to make a living off their writing or for business owners who want to share knowledge and expand reach in their industry. One effective book marketing strategy is the POEM method, which stands for Publicity, Online, Events, and Multimedia. Using these elements in tandem can create a significant impact.