#WriterTaxes, 2025 edition
Here we are again. Tax tips for authors and takeaways from an Authors Guild event on the topic.
Jess here, have a kitten first to deaden the pain of tax time.
Every year or so, usually when I’m buried in receipts and travel records and tax forms, I bring this incredibly boring and demoralizing topic up on the #AmWriting podcast, and every year, I’m reminded it’s boring and demoralizing. HOWEVER, as our goal has always been to flatten the learning curve for authors, I’m going in. It may be boring and demoralizing but it’s also an essential part of being an author (whether a hobbyist or a professional writer, but more on that later on).
On to the Authors Guild webinar on “Tax Tips for Authors.” Here’s the video to this year’s session and here’s last year’s session. Which reminds me. Join the Authors Guild if you are are able. There are qualifications involved and an approval process, but they are a phenomenal resource.
The webinar was guest hosted by Robert Pesce, CPA and treasurer of the Authors Guild Foundation, partner at CBIZ, was interviewed by Erin Lowry. She’s also done some work with authors and finances at the Authors Guild.
By the way, the Authors Guild also has videos with Robert Pesce on s corps and LLCs and authors in their resource library and I’ve linked them in the applicable text below.
First off, there are no big changes in the tax code this year.
Is your writing a hobby or a business? How many years can you report a loss before writing becomes a hobby rather than a business? You need to fulfill the following: a) You have to have an intent to make money. b) You have to rely on the activity to support you. c) You have to have an expertise. d) You have to profit for 2 of the last 5 years.
Is there any tax advantage to being an LLC? Most people start off as sole proprietors. Some people decide to form an LLC for legal purposes. If you do that solo, the IRS considers the person and the LLC the same thing FOR TAX PURPOSES (not legal purposes). Here’s the IRS website on this and the Authors Guild seminar on it.
What about an S corp? You can fill out a form (one page) to tell the IRS to treat your LLC as an S corp and then there’s no self-employment tax except on the portion of your profit that you take as a salary. Disadvantage: the S-corp has to run a payroll and file taxes, too and it’s a PITA. But for successful authors doing really well financially it can make sense. Here’s the IRS website on this the Authors Guild seminar on it.
Keep your work finances and home finances are separate (yep, Sarina is right about the credit card I’m supposed to be putting all of my work expenses on, damn).
Tools: Robert Pesce likes Quickbooks. He acknowledges Excel can be great (that’s what I do). You can download their bank activity to a spreadsheet directly and that can make things really easy.
If you are going to work with an accountant, find someone who has experience working with authors. I had to also find someone familiar with international tax laws since I speak in other countries.
When does it make sense to hire someone rather than using tax prep software? Depends on how you value your time and how you want to go.
Self-pubbed (independently published) authors may have expenses traditionally published authors do not. For example, Sarina has to pay her book cover designers and audiobook narrators, where I (as a traditionally pubbed author) don’t have to think about those things because my publisher pays for them.
Eligible for deductions: writers retreats, Authors Guild dues, research work/travel/tools, but be super careful because the deductions are only for YOU. You (the writer, taking a trip for research or writing or speaking or whatever) can deduct YOUR food, plane tickets, gas, rental car, etc. “Ordinary and necessary for your business as an author” works well as a guideline.
Receipts? Keep ‘em, as well as your credit card records.
Royalties are reported on schedule C, not schedule E, rents and royalties (those are different kind of royalties, not book royalties). This is if you are sole proprietor, may be different for an LLC or S corp.
What happens if we get documents for foreign countries, like 1099s, but for other countries? If traditional authors have contracts for foreign rights, foreign taxes might be withheld (Jess here: I fill out a form annually (6166) with my literary agent for various foreign countries where my books are published). This is a complicated question, and it seems this is a great reason to have a tax prep person.
What if you did not get a 1099 for miscellaneous income? Do have to report them? The answer is yes, you have to report all income, even if someone screwed up and did not send you a form. You can report it whether you have a 1099 or not, and you have to.
You report your income when you receive it, not when it’s earned. So if a check was written or dispersed in December 2024 but you did not get it until January 2025 or it did not hit your bank account until January, for the most part, you report that as 2025.
If you are getting paid as a self-employed author, you can contribute to a SEP-IRA.
If you are selling online, use a platform like Shopify or the like that collects state tax for you so you don’t have to deal with figuring that all out and reporting it yourself.
Quarterly estimated taxes. Ugh. We are all supposed to pay taxes as we earn our income, and the most common way is taxes are taken out in each paycheck. If you are self-employed, that’s clearly not happening. The solution is quarterly estimated taxes. April 15, June 15, September 15 and January 15. You estimate what you expect to make in the coming year and each quarter you pay that. The problem is author income can fluctuate (Jess here: you can really get bit in the butt where this is concerned) so if you earn more, you will have to pay more at the end, if less, you may get some back (or it can get applied to the following year estimate payments).
Rule of thumb: take a third of what you earn and put it in a separate bank account to cover taxes.
If you are an indie author who sells with Amazon, here are some resources on that.
One way you can make the tax bite easier as a self-employed author is if you are filing with someone who gets a W2, you could raise their withholding to account for the amount you might owe as an author in your self-employment tax.
Authors’ obligations to send 1099s to contractors we hire like cover designers? Any payment total in a year at or above $600 means you have to send a 1099 to that contractor by January 31. Get a W9 from them before you pay them so you don’t have to track them down in January.
Tax tips for authors on Social Security? SS is taxable, and the percentage depends on how much you earn. You might be able to time your income for writing to control the amount you earn if it will increase your bracket.
What is a red flag for an audit? 2% of tax returns are audited in general but if you file a schedule C it’s higher. If the deduction is legit and defendable and you can sleep at night, take advantage of the deduction.
Do you need to send a 1099 to a contractor who lives in a foreign country? If they pay taxes in that country, likely no.
If you are earning income for speaking outside your resident state, the income is reportable and yes, you must pay, and it is deductible from your resident state taxes. If you are physically in a state doing the presentation, taxed there. If Zooming? Less clear but it appears it’s not work completed in that state.
I typed as fast as my fingers would go, and did my best to capture accurate information from the webinar. If you have questions, go back up to the top and watch via the video links!
Good luck with your taxes!
Just started mine today. Maybe we could share about how we motivate ourselves to get it done (beyond having it done). My husband and I go out for lunch to celebrate.
Lots of great info here, but I want to address this: "You have to profit for 2 of the last 5 years." – That is not accurate. You're more likely to get audited if you never show a profit, but it is entirely legal to lose money at a business twenty years in a row. You still have to prove you are TRYING to make money and treating it like a business. Many people play it safe and don't claim business expenses until after they've made some income, and maybe then only deduct as much as they made, but if you have great records to show how you're trying to build your business as a writer, you can take a loss every year.