Wednesday, February 11, 2015

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 FacebookTwitterPinterest, 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...

Income is money coming in. Yay! 

        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 $

        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 $  

        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.

Expenses is money going out. Boo! 

        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 $

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

        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 $

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

        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 $


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?


  1. Woah, that's complicated, but thanks for explaining what you do with it. My dad's been teaching me about tracking money lately, so it's relevant. :)

    And my oh my...that is a lot of books to have sitting in your basement! What on earth am I going to do--we don't have basements in Florida! ;)

    1. I know. It's yucky. But it's part of the job. You'll just have to find a closet for your books! LOL I do tend to go overboard when ordering author copies...

  2. Wow. I knew authors were treated as self-owned businesses (or something like that :P), but I didn't know it was that complex. Though, I guess if everything's kept track of--or if you don't do much book-related work--it's not that hard. Thank you, Mrs. Williamson! This is some valuable information.

    1. Oh yes. Being an author means being a small business owner. It's not my favorite. I'd much rather write and pay someone to do all this stuff. Alas, I don't make enough money to do that. So that means it's my job. Whee!

  3. Excellent, relevant post!!! Gives me an idea what being-an-author really looks like, and that is super helpful. Thank you!

  4. Wow, thanks for this post! I should keep it in mind.

    1. :-) Only for when you need it, Jessica. Otherwise, it's zzzzzzzzz... ;-)

  5. Sounds...tiresome. :-) I don't understand why authors (especially if they're an unknown author) never do anything to market their books... Thanks for sharing your process! :-)

    1. My guess is because marketing is boring and confusing and you never really know what works. But, yes, it is very important to make an effort.

  6. Thanks for listing your methods. My brother helped me with expenses and earnings for my self-published book and I got a taste of what it would probably be to keep track of it all.

  7. Thank you for showing this. (My brain hurts a little bit, but that is to be expected with numbers) I actually had no idea this could be so complex and tiresome. Nice to see the gritty bits of being published. :)

    1. It hurts my brain too. If you ask my husband, he'd tell you I whine and complain all day when I'm doing this project. Thankfully I only have to do it once a year!

  8. This is a lot to keep track of! Thanks for sharing this.

  9. Wow, the tax process for novelists seems so complicated. I know I want to be a part time novelist, so I guess I'll have to face this eventually. I don't know whether school or work is more stressful. *sighs* I'm also a little surprised that authors have to buy their own books. It makes sense now that I think about it, but it's just kind of weird.

    1. Yeah, it's not all fun and storytelling. Publishers usually give their author a certain number of books. It will be specified in your contract. And they send them to you right around the time of the book's release. When you run out, you need to buy more. Publishers will give you a discount on the books. It's usually between 40-60% off, depending on how many you buy at once.

  10. Thanks, Jill :) I like your system more than mine, so I'll borrow yours this year.

    1. You're welcome, Morgan! I hope it helps. :-)

  11. I'd highly recommend Money and Taxes in a Micro Business /and/ Business Tips and Taxes for Writers by Carol Topp. The first book is specifically written for teens, but I actually found it to have more information than the one for adults.

    Also, the same author/accountant put together a downloadable Excel file specifically designed to help authors track their income and expenses. Super helpful, especially if you're not versed in the language of Excel!

    1. Ooh, that sounds dreamy, Leah! Thanks for sharing that!

  12. Wow, thanks for sharing this! I knew an author was considered his/her own business, but I didn't realize it was this complicated! At least I know what I'm getting into now, lol

    Alexa S. Winters