Many of us don’t realize that, once we start to sell something, we’re a business. Do you make and sell pies or cupcakes? You’re a business. Do you knit sweaters or hats? You’re a business. Watercolors? Pottery? Calligraphy? Business.
So if you’ve published a book and are selling it — even if you haven’t broken even on your initial investment — you are a business. And that’s good news for you! Now, I’m not a CPA, so please don’t take my advice on the finances as gospel. But I’ve been in charge of our business’s finances for 20 years, and my non-profit’s for 4, so I do know something about it.
Here’s what you need to consider:
You don’t have to be an S-corp, an LLC, or incorporated to be a business and get the benefits thereof. As an independent contractor, a sole proprietor or a DBA (ie if you publish under a different name), you’re still a business. What that means is that you can write off your expenses and apply them against your income, if you file anything other than a 1040EZ tax form.
What are your expenses? Here’s a non-comprehensive list –
- Postage when you have a giveaway, send ARC copies out, or otherwise give away books for review/advertising (ie to generate word of mouth).
- The cost of producing your book (ie cover art, editor, proofreader, formatter, copyright filing, paper you used to print it).
- The cost of marketing your book (any paid advertising, even a $5 guaranteed listing for your free book promo). This includes services like MailChimp, your website hosting costs, purchasing a domain name, etc.
- The cost of paperback copies of your book (ie for giveaways, ARCs, etc).
- The cost of any signage you have produced for a book signing or book fair.
- The cost of entering a book fair.
- The cost to join professional organizations (ie I belong to the Alliance of Independent Authors, the North Carolina Writers Network, and several others that had membership dues to join).
- The cost of advertising materials like bookmarks and postcards and things you give out to people to advertise your book.
- Any legal or accounting expenses you incur.
- Mileage on your vehicle if you are driving to a book-selling-specific event (ie a signing). You can find the current mileage allowance on the government’s website. Last I checked it was about 54 cents a mile, but it could be more (or less). Keep a log and be very specific, with dates, locations and names.
- Any travel required for your promotion beyond driving (ie airfare to a signing). In this case your hotel and meals are expenses also, and any wining and dining of agents or publishers, bookstores, etc. Your child or spouse’s expenses don’t count!
In general, you can’t write off a home office anymore, unless absolutely NOTHING, and I mean nothing, happens in that office except writing. And even then, I wouldn’t do it. It’s a red flag for an audit. Same with cell phone (unless you have a dedicated line just for your writing) and other utility-like costs associated. If you do rent an office outside your home, that IS a business expense.
You don’t have to use a program like Quickbooks to keep track of all this. Excel has perfectly serviceable templates, at least until you get a half dozen books and find yourself doing a lot of book related things. Open a new spreadsheet and click Gallery, then Budgets. I use the Expenses sheet, and have added a Memo field where I specify exactly which book I was spending money on and what it was for (ie. Solomon’s Throne bookmarks). Any spreadsheet that lets you itemize an Account for your entry is fine, at least until you get into hundreds of entries. You want to specify your expenses into General Accounting Chart of Accounts, such as Advertising, Postage, Services (this is the production of your book, etc), Mileage, etc. Excel has a good starting list in that template, although you will need to add your own. You can find a standard Chart of Accounts easily online.
Since we’re coming to the end of the year, it’s time for you to put all your expenses in one place, and have them organized. You’ll need your income, too, although you should get tax forms from all your online retailers to submit with your taxes. You’re entitled to these deductions on your taxes, and Lord knows we all need all the help we can get! Take the time to learn what it means to you financially, now that you’re officially Joe Smith, Writer. It could save you some money!