Did you ever think ...

[zx1ninja 2,396]

Did you ever think about the IRS when you were writing that book?

 

I didn't give it much thought until now. Self employed I get, but when I'm not able to buy dinner much less pay any bills on the income it's a hobby. Perhaps I should have thought this out a little more.

[Wes B 947]

Your costs might even be eligible to be deducted as a business expense IF, you have made a profit 3 out of the past 5 consecutive years. If you have not, any income you did make must still be declared as income.

 

"The House" Always Wins....

[Ky_GirlatHeart 1,973]

Does IRS mean Internal Revenue System? I have no idea.. Lol.

[William D'Andrea 801]

    I remember once, years ago, I actually sold one story to a magazine which paid $.02 a word.  I received a payment of a less than $10.00.  I did not frame the check.  I instead cashed it, and invested the proceeds in a breakfast at a local I-Hop.  From that I received a satisfying reward. 

[lynnmosher 8,108]

4 minutes ago, Ky_GirlatHeart said:

Does IRS mean Internal Revenue System? I have no idea.. Lol.

 

Close. Internal Revenue Service.

[zx1ninja 2,396]

16 minutes ago, Wes B said:

"The House" Always Wins...

Yes it does in the long run.

 

4 minutes ago, Ky_GirlatHeart said:

Does IRS mean Internal Revenue System? I have no idea.. Lol.

Yes, it does. 

 

3 minutes ago, William D'Andrea said:

I instead cashed it, and invested the proceeds in a breakfast at a local I-Hop

To bad a decent meal with my wife is about all I'll get, barely. 

 

 

[HK1 2,135]

1 hour ago, zx1ninja said:

Did you ever think about the IRS when you were writing that book?

Not as much as I'll have to think about it next year when I have to include my royalties when I do my taxes.

[Johne 2,132]

1 hour ago, zx1ninja said:

Perhaps I should have thought this out a little more.

 

Do you owe taxes on revenue you've received from selling books? Because if you do, I'm impressed. I'm not there yet, but I'm working on it.l

[zx1ninja 2,396]

11 minutes ago, Johne said:

Do you owe taxes on revenue you've received from selling books?

As it turns out, yes. IRS says you're self employed and have to pay taxes in the neighborhood of 33% as a result.

 

The plus side is you can deduct expenses, so keep track. Unless you can show it's a hobby. Luckily in my current case I'm pretty safe with that.

 

I'm not 100% clear, still have a lot to learn, but once you start claiming deductions they start looking at profit or loss. If you lose more than five years they may audit. Simply because they don't consider that normal. 

[Johne 2,132]

45 minutes ago, zx1ninja said:

If you lose more than five years they may audit. Simply because they don't consider that normal.

 

They don't don't follow enough writers, then.

[zx1ninja 2,396]

1 minute ago, Johne said:

 

They don't don't follow enough writers, then.

Probably right. LOL

[Nicola 1,759]

Is this a good reason for a writer to incorporate? I already own a company, and authoring is part of that mix. The company absorbs profit and loss and smooths things over.

[Wes B 947]

5 hours ago, zx1ninja said:

As it turns out, yes. IRS says you're self employed and have to pay taxes in the neighborhood of 33% as a result.

 

The plus side is you can deduct expenses, so keep track. Unless you can show it's a hobby. Luckily in my current case I'm pretty safe with that.

 

I'm not 100% clear, still have a lot to learn, but once you start claiming deductions they start looking at profit or loss. If you lose more than five years they may audit. Simply because they don't consider that normal. 

I think it may be a bit more complicated than this...

 

The tax laws do change, and i may not be up to date, but as I understand it, it's the IRS that defines whether it's a hobby or not, and that depends on whether you've turned a profit over 3 of the past 5 years. If you have, then you can deduct business expenses, otherwise, they don't care what you've spent.

 

OTOH, you can derive income from a hobby or a business, and they want a cut, no matter how you managed it. They may tax one at a different rate than another, but they get some, either way.

[zx1ninja 2,396]

23 minutes ago, Nicola said:

Is this a good reason for a writer to incorporate? I already own a company, and authoring is part of that mix. The company absorbs profit and loss and smooths things over.

I would personally find someone who knows and find out for sure, but I think yes.

 

16 minutes ago, Wes B said:

I think it may be a bit more complicated than this...

It probably is, but I also saw a couple other caveats that I saw so consult an actual tax person because I know nothing!

Edited February 28 by zx1ninja

[Jeff Potts 639]

On 2/27/2021 at 4:29 PM, zx1ninja said:

The plus side is you can deduct expenses, so keep track. Unless you can show it's a hobby. Luckily in my current case I'm pretty safe with that.

 

Until a contract is signed...it's a hobby.

[Chris Brown 168]

I shared this the other day, and it might be helpful to you:

https://www.authorsguild.org/whats-new/seminars-member-events/tax-tips-for-authors-2021/

 

And that's just the IRS and state dept. of revenue... Business licenses, sales taxes, and business personal property taxes (yes, really) all can get pretty expensive and obnoxious to keep up with!