Tax Time! Where Authors Make Money—And Where They Spend It

Jill Williamson is a chocolate loving, daydreaming, creator of kingdoms. She writes weird books for teens in lots of weird genres like, fantasy (Blood of Kings trilogy), science fiction (Replication), and dystopian (The Safe Lands trilogy). Find Jill on Facebook, Twitter, Pinterest, or on her author website.

It's tax time. Blerg.

Thankfully, I have a tax man who is brilliant, but it still takes me 1-2 full days to get all my paperwork and information together to give to him so he can do my taxes. It's not my favorite time of year, especially when it turns out that I have to pay more money.

Double blerg.

As I go though this mundane project and list everything $$$-wise related to my "business," I decided to share my accounting categories to give you a peek into the nitty gritty of an author's business. For the most part, I'm leaving the actual dollars off. And you should know that no author is the same. Some don't buy copies of their books and try to sell them. Some never speak or teach. Some don't do any advertising. But all of us have some income and some expenses, and we need to list those out to be able to do our taxes or have our taxes done. Hopefully this will give you a good idea of the money involved in an author's business.

I create this paperwork in a Microsoft Excel spreadsheet. In all the categories below, I will list each item separately and the amount I spent (which I have a receipt for). Then I print this out and turn it in to my tax guy with all my tax forms. I don't give him all my receipts, but I do keep the receipts in a big envelope in case I'm ever audited. Eww...

JILL WILLIAMSON'S WRITING INCOME         

Income is money coming in. Yay! 

Royalties

        Here I list each company that sent me money during the year. This encompasses any portion of advances that came in, royalties, or self-publishing payments. Some of mine are: HarperCollins, Marcher Lord Press/Enclave, Bethany House Press, Lightning Source, Nook Media, Amazon Digital Services (USA), Amazon Services Europe, and On-Demand Publishing (CreateSpace). 

                Total Royalties $

Freelance Services

        Here is where I’d list any money that was paid to me for services I provided, like editing or cover design.

                Total Freelance Services $

Book Sales

        Here I list money I made from selling my own books, be that in my online store or at events where I had a book table.

                Total Book Sales $

Speaking and Teaching

        Here I list any money I made speaking and/or teaching at schools and writing conferences.

    Total Speaking and Teaching $

Other

        Here I list the money I made doing paid critiques at writer’s conferences.

                Total Other $

I add all these up and get my: TOTAL  INCOME $  

JILL WILLIAMSON'S COSTS OF GOODS SOLD

        This section is a complete headache for me. Here is my chart for the 2013 year. I went ahead and left these dollar amounts on here so that it wouldn't be terribly confusing. These are amounts I spent buying author copies of my books so that I'd have some to sell and give away.

Also, inventory cost is what the books are worth. They're worth what I paid for them. So I need to count up how many books I have, tally the costs for each, then add all that together to come up with an amount that all those books are worth. That is merchandise sitting in my basement. I need to account for it on my taxes.

1. I list a chart with each of my book titles, how many I had in my house at the start of the year, and the total cost of what that was worth (Cost of Inventory) at the beginning of that year.

2. Then I list my purchases. This is me buying author copies of my own books to sell. I list the added inventory on my chart. And I also list the costs I paid for those books. That gives me an amount for Total Book Purchases.

3. Then I list any gifts from publishers into my inventory, as authors usually get a certain amount of free books to use for promotion.

4. All this gives me a Total Inventory In for the year.

5. Then I subtract the book sales I had that year. I keep a separate Excel Inventory file for each year that I log any sales, giveaways, and new books into.

6. Here I subtract any books I gave away that year for giveaways or donations, etc.

7. And that gives me a Total Inventory Out for the year.

8. Which gives me the Inventory at End of the year, which, hopefully, matches the amount of books in my basement on Dec 31.

JILL WILLIAMSON'S WRITING EXPENSES 2013

Expenses is money going out. Boo! 

Advertising

        Print Media: Here I list purchases like stock photos for blogs, flyers and postcards for events, mailing labels, business cards, etc.

        Promotional gifts and prizes/contest entries: Here I list entry fees and promotional giveaway items that are not my own books, like books I give away on Go Teen Writers when I interview a guest.

Total Advertising $

Car and Truck Expenses               

        Total Mileage for 2013           X miles at .xxx cents per mile = $

                Total Car and Truck Expense $

Dues and Subscriptions               

        Here I list dues to any professional organization I’m a part of or subscriptions to magazines like Writer's Digest.

                Total Dues and Subscriptions $

Postage

        All the postage fees for things I mail out for business-related items go here.

                Total Postage $

Supplies

        Equipment: Computer equipment, cords, a second monitor, a keyboard… things like that go here.

        Other: Toner cartridges, copy paper, bubble mailers, book display easels, etc.

                Total Supplies $

Telephone

        Since I use my cell phone for business, I get to write it off my taxes.

                Total Telephone $

Travel

        Here I list each city I went to and the dates I was there. I list airfare, cab, hotel, parking, metro passes, etc.

                Total Travel $

Hotel, Meals, and Entertainment

        I no longer save receipts for every meal. My tax guy has a chart that averages a deduction per day that usually works out in my favor.

                Total Hotel, Meals, and Entertainment $

Other Expenses               

        Internet Services: Web hosting, website costs, social media services, domain purchases and renewals, etc.

        Book Publishing Costs: This is where I list self-publishing costs like title set-up charges, ISBN purchases, and US Copyright fees.

        Fees for operating a business: Business license stuff goes here.

        Conference Fees and Table Fees: Here I list costs for getting booths at conferences or attending conferences.

        Freelance Professional Services: Here I list items I commissioned, like custom artwork, book covers, ebook formatting, typesetting costs, editing charges, proofreading, etc.

        Books, Magazines, or audio recordings for research or portfolio: This is where I get to deduct any books, magazines, or audio files I bought for research. Have to be very careful here, but you are allowed to deduct those you use. I also list any magazines I purchased because I had an article inside and wanted to own a copy.

        Gifts: Any gifts I bought for my publishing house, editors, or agent are listed here.

                Total Other Expenses $

TOTAL  EXPENSES $

And that's that. Whew!

It really does take me two days to write all this out. If I was a good girl, I'd use QuickBooks regularly and that program would do the work for me. Sadly, I just don't have time to keep up with QuickBooks.

Another thing to note, I'm bad at budgeting. The first five years I had any income to report, I spent nearly as much as I made, so I was just about breaking even. I try to spend less these days. It's not always easy.

Any questions?