Color me shocked.
A few months ago I had a conversation with an author that went something like this:
ME: I appreciate you driving to the Visitor Center to sign books. Make sure you keep track of that mileage and gas expense, and so forth.
AUTHOR: What do you mean?
ME: What do you mean, what do I mean?
AUTHOR: Why would I keep track of that?
ME: So you can write it off.
AUTHOR: I can write that off?
ME: You do file a Schedule C, right?
AUTHOR: What's a Schedule C?
That sound he heard next was my head hitting the desk.
ME: We have to talk....
And then we did.
If you are an author, you should talk to your CPA (I am not a CPA, I don't play one on TV or on stage, and I am not giving firm, actionable advice--but your CPA can and will). Tell him what you are doing, and ask him how to form a DBA (Doing Business as), or if worthwhile given your situation, an LLC or some other entity...and take advantage of the tax loopholes the multi-millionaire crooked lobbyists have been bribing your crooked politicians for decades to implement.
For example, here are some of the things that, in most circumstances, you can write off as legitimate expenses:
1. Home office
2. A portion of your utilities
3. Electronic equipment (computer, cell phone, etc.)
4. Paper, ink, pens, staples, tape, and other office supplies
5. Dog food (okay, maybe not this one)
6. Lunches / dinners (travel)
7. Gas and/or mileage
8. Storage costs
10. Internet costs
11. Thank You gifts for your favorite publisher (Yes, I actually get these, and YES, they are a tax-write off in most instances. And yes, I like good cigars and good red Zinfandel).
And that list? It's not complete.
Let's say in the year you got that stack of Benjamins you did a lot of research, some travel, had to buy a new printer, etc. Maybe your expenses are $800.00. That means you would only pay tax on $200.00. OR if your expenses are higher than royalties, you might actually have a legitimate LOSS to set off against other gains, or use as your CPA advises.
Once I explained this to an author, I could "see" almost as much as I could "feel" his shaking head in his hands wondering just how much money he had left on the table over the years.
WHAT TO DO?
1. Call your CPA immediately and schedule an appointment;
2, Take in whatever he asks for, including a copy of your published books (or if new, your most recent manuscript) to prove what you are doing, tangibly so.
3. Find out what you can write up, what business form to create (DBAs do not require formal corporate filing; you use your SSN. For example, Savas Beatie LLC is a formal corporate entity; Theodore P. Savas is an author, DBA as Savas Publishing Company.
This is easy, and you will quickly find out how much money you can save. There might also be a way to amend your previous returns to include expenses from prior years you failed to claim. Ask your CPA and find out what is right for you.
Go for it.