Tag Archives: the business of writing

U.S. Taxes: Things to Keep In Mind, Part One

A guest post by Brenda Lindsey.

You have finally finished that book you dreamed of writing. As you are showing off that first advance check from the publisher, don’t forget about Uncle Sam. He will want to see that check also.


Yes, even if you don’t receive a 1099 statement from a publisher at the end of the year, you are still legally required to report writing income.  Amounts received as income from writing books, including but not limited to advances and royalties, are generally considered self-employment income. The Internal Revenue Service will want to see it reported on your Form 1040, Schedule C. (The exception would be if you are fortunate enough to continue receiving royalties after you have quit writing. In that case the royalties are “passive income” and would be reported on Form 1040, Schedule E.)

In addition to tracking the income you receive, you will also want to keep track of your expenses. A good rule of thumb is any expense that you would not otherwise have if you were not in this business, is a business expense. Items such as the business use of your computer, ink or toner, paper, legal fees, subscriptions and office rent are some examples of ordinary business expenses you might deduct from the income on Schedule C.  Other expenses would be things like travel, lodging, and meal expenses for attendance at conventions or seminars.  Get receipts for everything, and don’t lose them.  Or if you drive to a local book signing or conference, that mileage will be deductible.  Make sure you write down the beginning and ending odometer readings as backup for the deduction.


After deducting all your expenses, you will arrive at your net earnings. If your expenses exceed your income (and they may), then you will have a net loss. Net losses can be used to offset income from other sources. You do not have to have net earnings from your business every year. The rule is if you have net earnings in three out of every five years, the IRS will presume you are in business to make a profit (a requirement to deduct expenses on Schedule C). However, if your business does not have net earnings for three out of every five years, you should be prepared to convince the IRS that you are operating a business and not simply pursuing a hobby. Hobby losses are only deductible on Schedule A as an itemized deduction and have more limitations.


Net earnings from self-employment are not only subject to income taxes, but they are also subject to self-employment taxes. These “self-employment” taxes are comparable to the Social Security and Medicare withheld as FICA from a “wage-earner’s” paycheck by his employer. The percentage withheld is 7.65% and his employer matches it by paying in another 7.65%, for a total of 15.3%. The employer provides a form to reconcile the withholdings and the match to the IRS.

When you are self-employed, you are your own employer. You must remit the total 15.3% as self-employment taxes. This is reported on your Form 1040, Schedule SE. (There is a cap of $117,000 on the amount of earnings subject to Social Security.) If you forget about self-employment taxes, you may be unpleasantly surprised when you file your income taxes.

(Continued Tomorrow)

Editorial Comment:

The Fictorians are aware that many of our readers are not United States citizens, and consequently conduct their lives and businesses under statutes and regulations that are markedly different from those in the U S A.  Most of our posters for this month are American, and the few who aren’t are Canadian, so the perspective in this month’s posts will of necessity be somewhat limited.  Nonetheless, if you are one of those readers from somewhere other than North America, as you read of issues in our laws and practices, perhaps they will make you mindful of things you should be aware of in your situations as well.

Guest Writer Bio:
Brenda is a Certified Public Accountant and has over 10 years in public accounting experience, specializing in taxes for small businesses. She is currently the Controller of New Gulf Resources, LLC in Tulsa, OK. She is not a writer, but she is a reader, and she is related to Fictorian David Carrico, so she has a connection with the writing life.

Five Facts Every Business Owner Needs To Know About The Law


Welcome to Legal Month at the Fictorians!

Writers are business people. We own our enterprises and are responsible for them. While we often focus on the craft of writing on this site we felt a walk on the business side was necessary. We’re going to spend much of March looking at issues writers, and all business owners in fact, need to know about the law such as taxes, necessary record keeping, agents, contracts, indemnification and reversion clauses, copyright, creating your business, creating publishing company, and much more. An important note about this month: We’re not providing legal advice and if you have specific questions about the law and how it applies to your situation, please contact an attorney where you live.

Five facts about the law every business owner needs to know:

FACT 1 –  Anyone can sue you. 

Legal disputes are part of the cost of doing business. For the fiscal year ending September 20, 2012 (the most recent one I could find statistics on), the United States Federal Courts had 278,442 new civil law suits filed. http://www.uscourts.gov/Statistics/JudicialBusiness/2012.aspx  While this number represents a decrease in filings from the previous year it’s still a respectable number. Keep in mind too that this figure doesn’t take into account new cases filed  in a state court. While there are rules against frivolous or harassing law suits it is often difficult to show that any specific case was completely baseless and the other side should have known that their claim wasn’t legitimate when they filed.

Litigation is VERY expensive. A bit of prevention (and expense) can save you thousands on the back-end. A business lawyer’s job is to anticipate what could go wrong and try to give you the best possible protection in case the worst happens. Nothing is perfect though, and the more successful you become the bigger the target on your back.  Which brings me to my second point…

FACT 2 – Becoming a Corporation is Inexpensive and Provides You with a Level of Protection. 

You are almost always better off operating under a corporate umbrella rather than being a partnership or a sole proprietor.  Corporations are considered separate “people” from their owners under American law.  As a general rule a person suing a company can only collect their judgment  from the company’s asset, not the owners’.  Incorporating also allows you to keep profitable ventures separate from more experimental ones or ones losing money. It is fairly common practice for a real estate developer, as an example, to form a new company for every project that way if project X fails the business does not have to use its revenue from successful venture Y to pay off X’s debts. The owners merely pay off as much of X’s debts as they can with whatever assets X has left without jeopardizing their or that of their other ventures’ financial health.  Is it necessary for a writer to have a new company for every book? Not generally. Writing is not generally considered a high risk enterprise.

Another advantage to operating through a company is the ability to give yourself a salary and issue yourself a W-2. Being a W-2 employee has several tax advantages. It also means you qualify as an employee and not self-employed when the time comes for you to get a loan, whether business or personal.

FACT 3 – You Are Responsible For The People You Hire. 

Employees are a mixed blessing. They are fabulous because they let you do the things you love doing about your business – like writing – and delegate the things you like least or take too much time away from your main focus  – for example, maintaining a website or social media presence.  The also present their own special set of legal challenges.  But I’m to not going dwell too long on theses since that’s a several post long discussions. Let me point out two though.

Your employees are part of your public face. Their acting badly reflects on you. Choose your agents, publicists, editors, lawyers, accountants, and employees with care. In this highly visible world a stray (or not so stray) comment on a social media site can bring down an empire. After all, it only took the Doctor six words to bring down an administration.

Ensure you classify the people who work for or with you properly. While it might be tempting to classify your helpers as independent contractors spend time with a lawyer to make sure they qualify under the IRS guidelines. Understand that all exempt (from United States Federal Overtime requirements) employees are salaried, not all salaried employees are exempt. There are also state laws governing when an employee must be paid overtime. Again this is a classification issue and some up front time with a lawyer can save your business.

FACT 4 – You Will Be Deemed to Know the Law and What Your Contracts Say Even if You Don’t. 

Ignorance of the law is not a defense. Don’t sign any document you haven’t read. If litigation results a court will deem you to have known and understood a contract’s terms. Lots of nasty upsets can be avoided simply by reading a contract.  Know what you’ve agreed to. If you don’t understand, I mean really understand, what you are being asked to sign, DON”T SIGN IT and seek legal advice first. Renegotiate the unacceptable terms. Sometimes walking away from a bad deal is the best you can do.

FACT 5 – Words Matter.

This last one shouldn’t surprise you. After all, who knows that words matter than a writer? Fellow Superstar Attendee Mignon Fogerty aka Grammar Girl once asked me if it was true that lawyers litigated over the placement of a comma. The answer is “sometimes” as comma placement can change a sentence’s meaning. I’ve litigated the meaning of “unique”, and “exclusive” and, yes, exactly what a clause modified (i.e. did the comma mean anything?).

Do not accept a word you do not understand.  Contracts, especially older ones, use the word “witnesseth.” When I’ve struck the word and asked the other attorney what the term meant…well, let’s just say I manage to get it struck most of the time. Why? Because it’s unnecessary. “Witnesseth” means “to take notice of” rather than to “witness” a document. Since the word comes before the signature lines it’s a bit obvious that the person signing has “noticed” the document. We’re going to have posts focusing on specific words in indemnification and reversion clauses so I won’t belabor the issue about the meaning of words  here.

Keeping these principles in mind won’t guarantee that you’ll never have a legal dispute. But they just might let you know when to seek professional help from lawyers or tax professionals.

I hope you enjoy the upcoming month, and come back for more great information.


 The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney
to obtain advice with respect to any particular issue or problem. No attorney-client relationship has been created.  Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.

Business Plans for Writers

A business plan for writers – what an absurd idea! That may be your first reaction, but chances are that you already know how you want to your writing career to evolve. A business plan is the road map to launching and growing your career in a strategic, efficient manner. Everything you’re doing now – networking, writing, learning craft, blogging – it’s all part of a plan but let’s face it, we’re writers first and the less time we spend floundering or making mistakes with the business part of our career, the more time we’ll have for writing.

Here are the key elements for a writer’s business plan:

1. Company Description
Yup, you’re a company with accompanying tax write offs but let’s be more specific than that. Does your business include writing, editing, holding workshops, attending trade fairs, or other activities related to writing and promotion? As a writer, do you write short stories, novellas, novels, magazine articles, or some combination? What is your genre? Who is the target audience?

2. Operations Plan
This is a one person company, right? Wrong. For tax purposes you may be a sole proprietor or an incorporated entity but your company is bigger than one person. For example, who are your support groups – writers’ groups, critique groups, book clubs, blog group? Do you belong to interest groups locally or on-line such as science, knitting, bird watching, Sherlock Holmes fan club? These are important to note because they not only inspire you and provide valuable input they may also be part of your readership. Who are your mentors, critiquers and editors?

Bestselling authors have an organization. Take a look at the Acknowledgements page of their books. Most Acknowledgement pages list editors, research contacts, readers – anyone who helped them. For ease of organization, you can divide your support network into four categories: craft, business (contracts, taxes, editors, finances, etc), networking (conferences, on-line, writers groups, readers groups), and market access. Note any deficiencies you have in these areas and develop a strategic plan to deal with that aspect. For example, I need to know more about marketing strategies and so I’ve chosen to attend a seminar on marketing rather than a critique workshop to fill this gap. Finding the experts I need fills a gap in my organization and allows me to use my use my limited budget wisely.

Remember – it takes one person to have the idea and write the story, but it takes a community to support a writer and make the work available to the reader. Who is in your community?

3. Products and Services
We touched briefly on this in the Company Description, but now we need to get specific. You may be writing in one genre or several writing poetry, short stories or novels and writing for the children’s, young adult or adult markets. In the market you’re writing for, who exactly is the audience? For example, not all people who read mysteries love the same type of mystery or the same degree of graphic language. Those loving cozy mysteries (think Stephanie Plum series) may not like Ian Rankin’s gritty detective or James Patterson’s thrillers. What type of mystery/fantasy/romance do you write? Who will it appeal to? What are the sensibilities of the genre and does your writing reflect that? Where will your work be placed on the bookshelf?

If you’re editing or involved in some other aspect of writing (volunteer or paid), note that too. Depending on the level of your involvement, you may need to create separate business plans. However, having them listed in one spot will help you manage your time better when setting goals.

4. Marketing
It’s so easy to want to stay at home and only write or at most, to go to a writing meeting where we chat with like minded people. Marketing means getting out of our comfort zone and reaching out. The easiest way to do this is to have a plan and to follow it. A haphazard approach erodes confidence and the ability to present things in a comfortable confident manner.

For every product you need to have your elevator pitch, synopsis, chapter by chapter plot line, a great manuscript before you promote. Having these will help you understand your product so you can differentiate it and create a unique selling proposition. In other words, what distinguishes your story from others it the market? Why will your target market (children, young adults, mystery/romance/horror fans) like it?

Describe how your stories will be sold – book stores (which ones?), on-line, book clubs, and how you intend to get the books there. Even if you have a traditional publisher, you still have to market and sell, so be prepared to do that.

What are your promotional tactics? In other words, how will you reach your audience? Some examples are: tradeshows, school appearances, readings, book tour, social media marketing (Twitter, Facebook, etc,), reading clubs (local, Goodreads, etc), on-line advertising, conventions, local advertising and book trailers. Your website should appeal to the book buyer. One writer I know designed her site for teachers because they’re the ones who will be buying her books and will be allowing her to make school presentations. Who is your website designed for – readers, teachers, technical users (how to books), other writers?

There have been many good posts on marketing at Fictorians so just click on the Marketing category and you’ll receive a ton of information. Just remember to choose a few things to do (for example you can’t belong to every book club and effectively utilize all social media) and do them well.

5. Finances
Having a budget will focus your marketing strategy and allow you to develop and manage your business more effectively by allowing you to prioritize. Which convention/workshop can I afford to go to? Do I purchase business cards or have a professional design my website? What can I do for free?

After all the work we do to write our wonderful books, we can’t afford to fail now because we failed to plan the business part of our passion.