File Taxes As a Published Writer
Self-employed authors are generally considered small business owners under the U.S. tax code. This means that you must pay self-employment tax and pay income tax on your writing income. As a self-employed writer, you will probably complete three forms: Schedule C, Schedule SE, and Form 1040. You also may have to pay your estimated taxes quarterly. The tax code is enormously complex, and you are encouraged to get professional help when filling out your taxes.
Completing Tax Forms
- Gather proof of your writing income. You should receive 1099 forms from your publisher. These forms will state the amount of royalties that you have received. If you self-publish through Amazon, then they will send you separate 1099-MISC forms for each country where you earned royalties.
- If you write pieces for hire, then you should also get a 1099-MISC from the publisher.
- Even if you don’t get a 1099-MISC, you are responsible for keeping track of your writing income and reporting it to the IRS.
- Get Form 1040 (Schedule C). If you earn income from your writing, then you are a self-employed business owner. Your business could take many different forms: a Limited Liability Company (LLC), partnership, corporation, or S corporation. If you didn’t create a corporate form, then you are a sole proprietor, which is the default.
If you have a sole proprietorship, then you will report your profits and losses from your writing on Form 1040 (Schedule C).
- You can instead use Schedule C-EZ if you are claiming business expenses of $5,000 or less.
- You can get Schedule C from the IRS website. You should also download the instructions, which will walk you step by step.
- This article will explain filing taxes if you have a sole proprietorship. If you created a different corporate form, such as an LLC or a partnership, then you should seek the advice of an accountant.
- Complete Form 1040 (Schedule C). On this form, you will include your gross receipts or sales and calculate your gross profit and gross income by following the instructions.
- You will also be able to claim business deductions. On Schedule C-EZ, you include the sum total of your business expenses on Line 2. On Schedule C, you have to itemize business expenses by category (such as “advertising,” “supplies,” “legal services,” etc.)
- See Identify Deductible Business Expenses for more information about what you can claim as a business deduction.
- Get Form 1040 (Schedule SE). If you earned money from your writing, then you will need to pay self-employment tax on those earnings. Self-employment taxes include FICA taxes (for Social Security) and Medicare taxes. You can download the form and its instructions from the IRS website.
- Complete Form 1040 (Schedule SE). Schedule SE includes both a “short” schedule and a “long” schedule on the same sheet. Generally, you must use the long schedule if you earned more than $118,500 when totaling both your self-employed income and any wages or tips from a job.
- You include your net profit or loss from Schedule C on Line 2 of Schedule SE. You then multiply this amount by a formula to arrive at your self-employment tax. Follow the directions on the form.
- You also can take a deduction for one-half of your self-employment tax. You will enter this amount on Line 27 of your 1040 form.
- Get Form 1040. After completing Schedule C and Schedule SE, you should get Form 1040. Unfortunately, you cannot use Form 1040-EZ. You can download Form 1040 from the IRS website.
- Download the instructions as well and follow them to help you complete your form.
- Complete Form 1040. On this form, you will identify all sources of income and make adjustments based on allowable expenses, such as the student loan interest deduction or alimony paid. If you have never filled out this form before, then carefully go through, line by line, and see if you need to report information for each line. Remember the following:
- Report your business income or loss on Line 12, “Business income or (loss)” and not on Line 7, which is for wages, salaries, and tips. If you also earned wages, salaries or tips from another job, then find the amount on your W-2 form and include it on Line 7.
- Include your deduction for one-half of your self-employment tax on Line 27.
- Take your standard deduction or itemize deductions on Line 40. If you itemize, then you need to complete Schedule A. You can download Schedule A from the IRS website.
- Remember to sign your form. If someone prepared the form for you, then have the preparer sign.
- Pay any tax amount due. If you owe taxes, then you can pay online, by phone, or with a check or money order. If you write a bad check, then you will be penalized $25 or 2% of the check, whichever is greater.
- You can pay online at www.irs.gov.payments using either online transfers from your checking or savings, or you could pay with a debit or credit card.
- You can also pay by phone by calling vendors listed in the 1040 instructions. These vendors charge a convenience fee.
- Make checks or money orders payable to the “United States Treasury.” Don’t send cash. Write your name, phone number, and Social Security Number on the check, along with “[the tax year] Form 1040.” You will also need to include Form 1040-V, which you can download from the IRS website.
- Assemble your completed documents. Attached your W-2 forms (if any) where requested on the 1040. Then line the schedules up behind the 1040. Do not include correspondence with your tax forms.
- The instructions will tell you where to mail your return, which will depend on the state where you live.
- Complete your state taxes as well. Don’t forget that you also have to file a state income tax return. Each state’s return will be somewhat different. However, many require that you enter information from your federal tax return, so you should complete your federal return first.
- You can find your state’s forms by searching “your state” and “income tax forms.” If you can’t find anything, then contact your state’s Tax Division.
Paying Estimated Taxes Quarterly
- Check if you have to pay quarterly. Generally, you must make quarterly payments if you do not have an employer withholding your self-employment and income taxes on a regular basis. This means that self-employed writers need to make quarterly payments. To check if you are required to file quarterly, download Form 1040-ES, Estimated Tax for Individuals.
You will also need your prior year’s tax return.
- You won’t have to make quarterly payments if you owe less than $1,000 in taxes for the year.
- If you have another job in which an employer withholds taxes, then you can avoid paying estimated quarterly taxes by increasing the amount of withholding. Submit a new Form W-4 to your employer and list on the form how much more you want withheld.
- You also have the option of not making quarterly payments and paying a penalty instead. The IRS will calculate the penalty and invoice you for it after you file your annual tax return. Tax experts, however, recommend that you pay quarterly.
- Complete the worksheet. Form 1040-ES has a worksheet you must fill out. You have to estimate the amount of income you expect to receive in the current year. You will also have to calculate your estimated self-employment tax, so that you can deduct 50% as a deduction on your income taxes.
- Like many writers, you might make uneven amounts over the course of the year. This can make estimating your annual income difficult. For example, you might sell a lot of books or sell several articles in the first three months of the year and then have a dry spell.
- If you make uneven amounts of money, you can use the “annualized income installment method.” You should see Publication 505, Chapter 2 for more information. You should also probably meet with an accountant, as well, since this method is difficult for many people to understand.
- Make your quarterly payments. For 2016, the quarterly payment due dates are April 18, June 15, September 15, and January 17, 2017.
These dates will change depending on the year. See Form 1040-ES for information on how to pay using the phone or online.
- If you want to pay by check or money order, then you should complete and mail in a voucher along with your payment. Vouchers are included with Form 1040-ES. You should include your name, address, and Social Security Number in the area provided on the voucher. Make your check or money order payable to “United States Treasury.”
- The address you mail payments to depends on where you live. Form 1040-ES includes this information.
- Find an accountant. If you have questions, then you should meet with an accountant or other tax professional. You can find a qualified accountant by getting referrals from your lawyer, business colleague, or another writer.
- You can also get a referral from the Society of Certified Public Accountants in your state. Search the Internet for your state Society’s website.
- You can also look in your phone book for an accountant.
- Once you have the name of an accountant, call and schedule an appointment. Ask ahead of time how much the accountant charges.
- Find free tax help. The Volunteer Income Tax Assistance (VITA) program provides free tax help to people with disabilities, the elderly, people with limited English skills, or those who make $54,000 or less. You should call 1-800-906-9887 to find the nearest VITA program.
- There is also tax counseling designed for the elderly. You should call 1-888-227-7669 to find locations.
- Use software. There are many software programs which will help you file your taxes. You can research software online and compare prices. The most popular online tax preparation programs include:
- H&R Block
- Jackson Hewitt
- Hold onto your tax returns and all supporting documents for at least three years from the date the return was due.