Among the important tax forms you’ll need to complete once you’ve become a self-publishing business is a Schedule C.
This form reports income or loss from a business that’s a sole proprietorship. It is attached to your Federal 1040 income tax form. You’ll be able to claim a number of deductions via this form.
You should complete Schedule C if the main reason for your author’s business was to generate revenue rather than serve as a hobby. In addition, you should have been regularly engaged in your business activities during the calendar year.
The first section of the form requires that you fill in your name, the name of your business, and your business address. As a sole proprietor, you probably would use your personal name for that of your business, unless you were an LLC.
A few lines in this section of the form can be confusing if filling it out for the first time. Line D asks for your Employer Identification Number; you don’t need one and can simply use your Social Security Number. Line G asks about your material participation in the business; as you actively participated in the business operations (and were not just an investor), you are a material participant. Line I involves contractors; you must send a 1099 Form to every contractor you paid more than $600 to during the year.
The next section addresses gross income. This is the heart of the form and helps you determine how much you will have to pay in taxes.
Line 1 asks for your gross receipts or sales; this is the total amount of services and products that you sold. So if you sold $20,000 in books, earned $10,000 in webinar registrations, and were paid $20,000 in speaking fees, your gross income would be $50,000. Do not subtract from this any product returns or costs to generate sales. Line 2 allows you to list those returns and allowances, the latter of which is if you’ve reduced the cost of an item in order to sell it (For example, your book sells for $10, but as cover had a slight crease in it, you sold it for $2; the allowance than would be $8). Line 4 refers to the cost of producing any goods you sold, and this usually is not applicable to authors.
The next section deals with your expenses. This is where you can make a number of deductions. Line 8 addresses the cost of advertising your business; this can range from flyers and business cards to social media ads. Line 9 allows you to deduct the expense of using your vehicle for business or to take a standard mileage deduction. If you contracted out labor, such as hired an editor or a book cover designer, you can list that on Line 11. Depletion on Line 12 typically does not apply to authors.
Line 13 for depreciation can, however, have affect you, if you’ve purchased a lot of new office equipment. Lines 14-16 deal with payments made to cover employee insurance costs and loans on buildings you may own for business purposes, so they usually do not apply to indie authors. Line 17 allows you to make deductions for any payments made to accountants (include tax preparation fees!) and attorneys who represented your business. Office and postage expenses can be deducted on Line 18. The cost of renting vehicles, office space and business equipment can be listed on Lines 20a-b.
Supplies such as books to run your business can be listed in Line 22. State and local sales taxes/licenses can be deducted on Line 23. Lodging, transportation, meals and even entertainment can be deducted in Lines 24a-b. Line 25 addresses deductions for telephone, Internet and other utilities use by your business. You probably will not use Line 26; it is intended for wages paid to employees but not to yourself. Line 30 is for the home office deduction. Line 27a is a catch-all for expenses that don’t fit lines 8-30; such items might include bank service charges, trade organization dues, trade magazine subscriptions, and training or conference registration fees.
By the end of the section, at Line 31, you’ll arrive at your net profit (or loss), which substracts all of your deductions in Section 1 from your gross sales or receipts back in Line 1.
The schedule’s third part addresses the cost of goods sold. As an author, you are not utilizing a factory or workshop to manufacture goods for sale, so this section is unlikely to pertain to you.
The fourth part asks for more information about your vehicle use, should you have claimed a deduction for it in Line 9.
The fifth part asks for a breakdown of the other expenses you listed in Line 27. Be specific; don’t use “Miscellaneous” as an explanation for expenses.
A final note: Before you write down any deduction, ensure that you have records to back up your claim. This should include receipts, at the very least.
My name is Rob Bignell. I’m an affordable, professional editor who runs Inventing Reality Editing Service, which meets the manuscript needs of writers both new and published. I also offer a variety of self-publishing services. During the past decade, I’ve helped more than 300 novelists and nonfiction authors obtain their publishing dreams at reasonable prices. I’m also the author of the 7 Minutes a Day… writing guidebooks, four nonfiction hiking guidebook series, and the literary novel Windmill. Several of my short stories in the literary and science fiction genres also have been published.