Tag s | Book Business

Deadlines and Taxes

Two certainties in the life of a writer. Deadlines and Taxes.

You know what a deadline is. It has the word “dead” in it for a reason. And intrinsic to the reality of taxes is the April 15 income-tax filing deadline for those living in the United States.

But what about those taxes?

Many articles appear every Spring about taxes when approaching the filing date. But I thought we should explore a couple of items now, so there won’t be any surprises next year.

First, is the obligatory disclaimer. I am not a tax attorney or a tax accountant. I am merely discussing concepts and ideas that you may or may not use in your situation. And, as always, when it comes to your taxes, make sure to consult a professional. (We list some who specialize in working with writers in the annual Christian Writers Market Guide or the online version at www.christianwritersmarketguide.com. One of those is Chris Morris who can be found here.)

Some of you may roll your eyes and say, “I already know this.” But remember, there was a time when you did not. I get many beginner questions each year from debut authors who are discovering much of the business side of this industry for the first time.

Keep Good Records

One advantage of the self-employed writer is the ability to deduct certain expenses as they relate to the writing profession. Writers conference fees, purchasing books on writing, website hosting fees, promotional items used to market your book, etc. These are possible deductions, but you must have a record of each expense.

And I mean keep everything. Receipts, ticket stubs, bank statements, check registers, ATM receipts, mileage (when and where and how far). Nowadays some people use the camera on their phone to record the receipt. The problem is later organizing the information in one place. If you have good recommendations, post them in the comments below. (Tax Act provides an article with ideas here.)

Now is the time to start trying to collect your 2022 expense receipts if you haven’t already done so. Trying to find that receipt on April 14 might be a challenge.

Hobby-Loss Rules

If you are writing as a hobby or for something that only occasionally earns money, then you can only deduct expenses equal to the amount of your revenue. In other words, you can’t buy a submarine and claim it was for research for that underwater thriller you’ve been trying to write for years.

But if you have the intent to derive a living from your writing, you can show a loss (and maybe deduct that submarine!?). Proving intent is something judged case by case. If you show a loss in your writing business for five consecutive years, expect a red flag to appear in the IRS inbox. It is commonly understood that the IRS will accept that you are running a business if your writing work shows a profit in at least three of the last five tax years. But in an audit, the IRS can go back many years and determine if your deductions were valid. If disapproved, you will end up with a new, very expensive tax liability and additional penalties. Read these excellent articles if your business is in danger of being classified as a hobby:
When the IRS Classifies Your Business as a Hobby
What Every Self-Published Author Needs to Know About Taxes
IRS Hobby Loss Rules: Deductions for Doing What You Love

Separate Your Home from Your Business

As much as possible, keep your household income and expenses separate from your income and expenses for writing. It can be as simple as keeping a separate bank account. (This is one way to prove intent; see above.) And then keep records separately for the business using Quicken, Mint.com, or a spreadsheet.

If you work out of your home, consider exploring the home office deduction. But be careful. If you write occasionally from the home computer and that computer is used by other family members for things other than your writing business, it is likely you will not qualify.

Resources

I can recommend the book New Tax Guide for Writers, Artists, Performers and Other Creative People (Fifth Edition: 2016) by Peter Jason Riley. This is one of the few designed specifically for those in the arts.

Another good one is Carol Topp’s Business Tips and Taxes for Writers (2016).

Another is the “Tax and Business Guide for Authors” course at The Christian Writers Institute. It is currently priced at $99 for the multi-session course by a tax professional. Be sure to join the Institute (it’s free) and see if there is a price reduction or a sale, or an updated version of the course. However, $99 is a good investment if it saves you as much or more in the coming year.

For many of you, numbers are either a toxic topic or the equivalent of hieroglyphics. But take this issue seriously. The writing profession is ultimately a business. Granted a business based in the creative arts, but it is still a business. Talk to a qualified tax accountant if you have questions. Never rely on the hearsay of another writer who gives anecdotal information at a writers conference. The IRS won’t accept the excuse that “Shirley told me it was okay to write off my Australian cruise because I was researching an article about Sydney!”

[This is a rewritten and updated version of a post published in January 2012.]

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F Is for Foreign Rights

by Steve Laube

Publishing is a global concern. The new Penguin Random House (co-owned by Bertlesmann from Germany and Pearson from the UK) is the largest publisher in the world. The fourth largest publisher is based in the Netherlands. (See this link for a list of the top 50 largest publishers worldwide.) There are thousands of publishers outside the U.S. most of which publish in their native language. Therefore, in most contracts, the foreign rights or translation rights are negotiated.

Some publishers have a dedicated rights division which handles the licensing of your book into other languages. Your contract defines how any income is to be split between you and your publisher. (It is usually a 50/50 split.) Often we have negotiated with the publisher who is doing the English language edition to also manage foreign language licensed. However our agency has also handled the licensing for book published in Korean, Dutch, German, and Slovakian. It is quite fun to look on our shelves and find our client’s books also printed in Russian, Polish, Czechoslovakian, Indonesian, Spanish, Portuguese, and French.

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A Is for Agent

by Steve Laube

I thought it might be fun to write a series that addresses some of the basic terms that define our industry. The perfect place to start, of course, is the letter “A.” And even better to start with the word “Agent.”

If you are a writer, you’ve got it easy. When you say you are a writer your audience lights up because they know what that means. (Their perception is that you sit around all day thinking profound thoughts. And that you are rich.)

If you are an editor, you got it sort of easy. Your audience knows you work with words and all you do is sit around and read all day. In my editorial days I was often told, “I’d love to have your job.”

But tell someone you are an agent and there is a blink and a pause. If they don’t know the publishing industry they think “insurance agent” or “real estate agent” or “secret agent.” Or if they follow sports or entertainment they think “sleazy liar who makes deals and talks on the phone all day.” I resent people thinking that I talk on the phone all day. (Hah!)

Even at a writers conference I always have someone ask, “What is it that you do?”

Deal Maker

An agent works on commission. Fifteen percent of the money earned in a contract they have sold to a publisher on behalf of a writer. I will be bold to say that any prospective agent who asks you for money up front is someone you should stay away from.

This is the category that most people focus on when defining the role of the agent. But it is only one small facet of what we do. Two months ago I published a list of the activities our agency had recently done as a way to help dispel the myth that we are only deal makers. It is how we earn our living but only a small part of our work.

Don’t get me wrong. This is a crucial part of what we do. Our contract negotiations are critical to the long-term health of the publishing/author relationship. Last Fall I taught a course at a conference called “Landmines in Your Book Contract.” Each time I read one from an “offending” contract there were gasps in the room. There is a good reason to have a professional review any book contract you are ready to sign.

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B Is for Buy Back

by Steve Laube

Many authors are also speakers and as such usually have a book table in the back of the room where the audience can purchase a copy of their book during an event. This can be a very valuable source of income for the author if they have negotiated a “buy back” price (also known as the author’s discount) at the time of signing their book contract.

Check Your Contract Restrictions
It is crucial that you read your contract if you plan on selling copies of your book. No publisher will allow you to resell your books to a commercial account. In other words don’t try to buy thousands of books at your author discount and then re-sell them to Wal-Mart at a special price. That is a no-no. And is a logical restriction.

Also, there are a couple publishers that do not allow you, by contract, to sell your books in any public venue. If you scoff at this after signing the contract and are caught, you are in breach of contract and could face the consequences.

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D Is for Dispute Resolution

by Steve Laube

Pray that it never happens to you. But if there is a situation where you find yourself in a legal battle with your publisher regarding your book contract there are terms that will dictate how that disagreement is handled.

Here is one version from an old contract:

Any claim or dispute arising from or related to this Agreement shall be settled by mediation and, if necessary, legally binding arbitration in accordance with the rules of a mutually agreed upon alternative dispute resolution service. Judgment upon an arbitration decision may be entered in any court otherwise having jurisdiction. The parties agree that these methods shall be the sole remedy for any controversy or claim arising out of this Agreement and expressly waive their right to file a lawsuit in any civil court against one another for such disputes, except to enforce an arbitration decision.

Regardless of the place of its physical execution, this contract shall be interpreted under the laws of the State of XXXXXXXXXX and of the United States of America.

If you read this carefully you’ll see it lays out the rules that keeps a dispute out of the court system and forces the two parties to use binding arbitration instead.

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A Is for Advance

by Steve Laube

Whenever I lecture about money the room becomes unusually quiet. Instead of a common restlessness from listeners there is a thrumming impatience to reveal the punch line. The punch line that declares every writer will be rich.

Now that I have our attention let’s turn to the topic of the day. The Advance. This is defined as the money a publisher pays to the author in “advance” of the publication of the finished book. We read about the seven-figure advances in the news because they are unusual and quite substantial. The amount given to everyone else can be rather different. (Read the article where Rachelle Gardner answers the question “What is the Typical Advance.”)

Payout Schedule

The money is not given all at once. There is usually an amount given for signing the book contract and the balance comes at various stages of the writing process. Some pay half on signing, half on acceptance of an acceptable manuscript. Some pay one-third on signing, one-third on acceptance, and one-third on publication. There can be other triggers to create payments like an acceptable proposal for subsequent books in a multi-book deal. We even had one highly unusual situation where the total amount of the advance was divided up over the course of 15 months and the publisher paid the author monthly.

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What to Do About Morals?

In a post written last weekend Richard Curtis, agent extraordinaire, expressed surprise at a new morality clause that has apparently appeared in HarperCollins’ contracts. Read his post here [warning: there is some Adult content and comments included in the post].

What the general market doesn’t realize is that many Faith-based publishers have had a “moral turpitude” clause in their contracts for a long time. Moral turpitude is well defined in this post on Wikipedia. It is understood in the legal community as actions or activities that can get you fired from your job, deported if you are a foreigner in this country on a Visa, or have your contract cancelled if you are an author.

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Always Be Curious (The ABCs of the Writing Life)

by Steve Laube

Depending on where you live and your school district policies you may already be in a back-to-school mode or preparing for it.

It got me to thinking about the need for all writers to always have a “back to school” mentality.

Here are five things we can learn from always going “back to school.”

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Ten Commandments for Working with Your Agent

By request, here are my Ten Commandments for working with your agent. Break them at your own peril.

Thou shalt vent only to thine agent and never directly to thy publisher or editor. Thou shalt not get whipped into a frenzy by the rumor mill fomented by internet loops, groups, Facebook, or blogs. Thou shalt not covet thy neighbor’s success. Be content with thine own contract. Thou shalt not get whipped into a frenzy by the rumor mill fomented by internet loops, groups, Facebook, or blogs.
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Responding to Criticism

When someone tells me she’s not sure she wants me to read her manuscript, I know she’s not ready for publication. Such sentiment shows a lack of confidence and a fear of both rejection and criticism. Even though readers usually treat writers with respect, a critical word can puncture the heart.

Imagine the wounds delivered on Internet sites such as Amazon from readers who lack that respect. A major complaint I hear from distraught authors is that people download free Christian novels and then post hostile reviews. A cursory bit of research reveals some say they felt duped because they didn’t realize they were downloading a Christian novel. It is likely they just grabbed it because it was free and did not look at other reviews or the book’s description. These readers aren’t victims of duplicity, they were, at the very least, lazy and then blamed others when the book wasn’t to their taste. Unfortunately the temptation is for the author to strike back with a serrated reply.

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