What could be better than being a writer? Daydreaming over coffee, working on your laptop in bed, getting together with other literary lovers to talk about the latest bestselling sensations…
Unfortunately, everyone who’s ever done it for real can tell you that, while parts of that picturesque daydream are true, there’s a lot more day-to-day grind than you might think.
Whether you write full-time or just on the weekends, being a professional writer comes with a lot of other responsibilities beyond wordsmithing. One of those responsibilities is taxes. And for a group of people notoriously bad at math, the prospect can be daunting.
Don’t worry! I’ve been a freelancer my entire adult life, and I’ve been reporting writing income from my books — I write fantasy and superhero novels! — and from freelancing since 2014. It was scary at first: you never forget your first writing tax bill. But once you know the basics, you’ll breeze through the process!
What taxes do writers pay?
There’s a lot of different people who can call themselves “writers,” from content marketers to poets. In order to make a living off our craft, lots of us even do multiple forms of writing.
Every writer’s tax return will look a little different. In general, though, the IRS considers writers to be self-employed — unless someone’s paying them a regular W-2 salary to come into an office and write. As self-employed workers, indie and freelance writers have to deal with some extra taxes.
No matter what kind of prose (or verse) you get paid for, here are three types of taxes you might have to pay on your writing income.
Self-employment tax is, naturally, something all freelancers, independent contractors, and small business owners pay. It’s a fancy way of saying we need to cover the employer’s half of FICA, short for Federal Insurance Contributions Act.
Whether you’re self-employed or at a traditional 9-to-5, all earners in the US pay into FICA, the fund that supports Social Security and Medicare.
When you work a regular W-2 job, you pay 7.65% of your paycheck in FICA taxes. Your employer then matches this, giving the IRS another 7.65%.
The difference for self-employed people: They need to pay both the employer’s 7.65% and the employee’s, for a whopping 15.3%! It hurts, yes, but it’s a price worth paying for a life of freedom.
Your tax obligation doesn’t end with your doubled FICA taxes. You pay those on top of your regular income taxes.
These go to the IRS and — depending on where you live — your state.
In addition to owing more money out of pocket, self-employed writers also need to pay taxes quarterly. CPA Soo Lee, who has more than 10 years of tax experience, explains that this is because “none of your taxes were withheld from your income.”
Fortunately, we only need to do this if we expect to owe more than $1,000 in taxes for the calendar year, so it might not apply to you if writing is your side hustle. There are also lots of ways to reduce a hefty tax bill, which we’ll get to in a moment.
Of course, whether it’s from freelance assignments or book sales, writing income can vary a lot from year to year.
Not sure how much you’ll owe? Lee explains that you can “look at your prior year’s tax return to calculate estimated taxes,” as they’re also known.
You can use Keeper's free quarterly tax calculator to figure that out! If you income varies substantially from month to month, you can also use the annualized income installment method to pay your quarterly taxes. In a nutshell, this involves paying more when you're earning more, so you can hang onto more of your money when you need it most.
How to reduce your taxes as a writer
The good news is, self-employed writers can reduce our taxable income by taking advantage of tax breaks.
Write off what you spend on work
Most writers don’t rent out office spaces or hire staff to handle the boring stuff on our plate. (Oh, what a delight that would be!) But at the end of the day, we’re still business owners. And that means we have business expenses we can use to lower our taxable income.
For example, we’re among the few people who get to treat books as a tax break — and that’s just the start of it.
Buy a comp title for your novel-in-progress? That’s a tax write-off. Pay for tickets to a movie you’re reviewing? That’s a tax write-off. Writing software like Scrivener, renting a vendor booth at a comic convention, taking a business lunch with a potential client: all of these are tax write-offs.
Other write-offs for writers (try saying that five times fast!) include:
- 💻 Your computer, as well as any writing software you install on it
- 📂 Fees for writing portfolios, mailing list services, or other web-based services
- 🌐 Website hosting and domain registration
- ✉️ Platform fees, if you release writing through services like Substack or Patreon
- 📣 Paid advertising
- 🏠 A portion of your home office and equipment
- 🎓 Writing courses and continuing education
- 🖼️ Editing and cover design fees
- 💳 Dues to writing alliances, writers' unions, and other business memberships
- 🗺️ Travel expenses for conferences or research trips
- 💼 Fees paid to a literary agent
- 📓 Research materials, journal subscriptions, and books
That said, you do have to track all these expenses throughout the year, and you’d probably rather be writing. If the thought of it gives you a headache, don’t worry! Keeper can scan all your purchases and automatically deduct the ones your business qualifies for!
CPA Soo Lee explains that, to be deductible, a business expense has to be “both ordinary and necessary” — meaning, they’re typical for your industry and needed to do your work. As an example, she points out that, “for a blogger who writes restaurant reviews, the costs of a fancy dinner can be claimed as a business-related expense.”
Sorry, writers, coffee from your favorite coffee shop doesn’t count — unless you’re reviewing it for a coffee website or meeting up with your agent there.
Pay attention to business losses
If you ever find yourself spending more on writing than you're bringing in, there's some good news that can soothe the sting. You can use that business loss to save at tax time —- for years to come, if necessary.
Let's take a step back. It's not unusual for indie authors, especially, to find that their business expenses exceed their book sales for the year. Editing and cover art cost money, and maybe it takes a while for your new book to find its audience. So you end up with a business loss.
Here's what happens:
- If you're a full-time writer with no other income sources: You won't owe taxes that year
- If you're a writer with a day job: You can use your business loss to offset your W-2 income. So have a $45,000-a-year office job and lose $1,000 publishing a book, you'll only pay taxes on $44,000
Now, say a full-time writer has a business loss of $1,000 and pays no taxes that year. The following January, she gets a publishing job with a $30,000 salary. She can actually carry her unused loss of $1,000 forward, subtracting it from her publishing salary. So she'll only pay taxes on $29,000 her first year on the job.
You can learn more in our article on business losses.
Save money on taxes… and for retirement!
Businesses often put some of your wages aside for retirement plans. Guess what? As a small business owner, you can, too!
These contributions will be tax-free until you pay out. While they can’t lower your self-employment tax bill, retirement contributions are a great way to reduce your income taxes!
Self-employed writers have a few plans we can use to save for the future.
Contribution limit: Up to $6,000 in a year, or $7,000 if you’re over 50
This reduces your personal federal and state income taxes, since you’re acting as an employee of your own business.
Lee notes that you can make pre-tax contributions to a traditional IRA account “up to the lesser of your actual earned income or the contribution limits.” However, you can only contribute each year “until the date [tax] returns are due” — no exceptions.
Contribution limit: 25% of your compensation, up to $57,000
According to Lee, the key benefit of SEP IRAs is that you contribute “from your business, so this can reduce your business income and potentially your self-employment tax as well.”
Another bonus? You can keep making contributions “up to date you file your return, including extensions.” That means potentially getting to contribute till October, when taxes are due for people you filed extensions.
Contribution limit: $19,500, or $26,000 if you’re over 50 (including if you 50 at some point during the year)
This is basically the same as a company-provided 401(K), except it only applies to you (and, potentially, your spouse). “If you have other employees,” Lee notes, “this is not the account for you.” But since most writers don’t, there’s no reason not to take advantage!
Deduct your Qualified Business Income
The QBI deduction allows sole proprietors to take off up to 20% of their business income up to certain income limits.
“As a freelance writer,” Lee notes, “all or most of your income should be considered viable under this deduction.” Cha-ching!
Use your self-employment taxes to lower your income taxes
As writers, we’re on the hook for both these types of taxes. Luckily, we get to deduct half of the amount we pay in self-employment tax on our income taxes.
“This doesn’t reduce the overall amount of your self-employment tax,” Lee says. “But it can be a helpful deduction for your income tax purposes.”
Should you create a separate company for your writing for tax purposes?
For a lot of writers, the answer is “no.” Contrary to a common misconception, you don’t need an LLC to claim write-offs (or any other business entity, either). With that being the case, a business name — whether for your freelance writing, or to create a publishing imprint — is often more headache than it’s worth.
However, if you become really successful, it might be something to consider. When your business income gets high enough, Lee recommends considering a switch to S corporation taxation, because “you may be able to save a portion of your self-employment taxes.”
Freelance writers who take on copywriting work or contribute to high-paying outlets are a lot more likely to reach this milestone than authors who rely on book sales. But at least it gives us all something to strive for!
How do freelance writers pay taxes?
By “freelance writers,” I mean anyone who earns income by taking on clients, contributing to print or digital publications, or both. This is broad category, and it might include:
- Content writers
- Curriculum writers
- Technical writers
- Grant writers
- Social media managers
- Short story writers
The work these writers do might look different, but when it comes to taxes, all of them have one thing in common: having to deal with 1099 forms from multiple clients and payment processors.
Understanding 1099 forms
It used to be that freelance writers collected piles of 1099-NEC forms — one from every client who paid them over $600 in a year.
While some freelance writers will still deal with this, more and more are getting paid electronically. That’s changed the form some writers can expect at tax time.
Getting 1099-Ks for freelance assignments
As Lee explains, “If you were paid using electronic payment systems, such as PayPal, those who hired you do not need to submit 1099 to you or the government.”
Instead, the company handling your payment — whether it’s PayPal, Venmo, or a credit card like Visa — will issue a form 1099-K as long as you received at least $600 through them. (Before 2022, the threshold for getting a 1099-K was $20,000.)
What to do if you don’t get a 1099 form
Sometimes, you might not get a 1099 — for example, if you wrote an article for a publication that pays less than $600 per piece. In that case, you’ll want to keep careful track of all your payments and report them yourself.
Lee recommends compiling “every single 1099” you do receive, so you can “report them on your tax return in the following year.” She warns that “underreported income will cause a serious problem with the IRS, whether intentional or not.”
We’ll cover exactly how to deal with all those collected forms in a moment. For now, let’s see how authors — whose earnings come from book sales — report their income.
How do authors pay taxes?
Unlike freelance writers, authors don’t get paid a set amount for turning in a project. Instead, they collect royalties, or a percentage of the price from each book they sell.
If you make a living from writing books, your tax situation will depend on how those books get published: by a mainstream publisher, or by yourself.
On traditionally published books
This applies when you’ve signed a contract with a publisher. They’ll design and distribute your book in exchange for a percentage of royalties.
Often, you’re first paid an advance on those royalties, which you’ll need to “earn out” before they pay you again.
Like freelancer writers, traditionally published authors get a 1099 form — but just one, because you only have one “client,” i.e. your publisher!
In addition to a 1099 from a publisher, you should receive a royalty statement from your agent.
While not technically required for taxes, royalty statements outline both your total profits — including appearance fees, book sales, and foreign rights — as well as the percentage that your agent withheld in exchange for their service.
Keep an eye on this last number, because guess what? Agent fees are tax-deductible!
On self-published books
Self-publishers are writers who format and publish their books themselves — hence the name! We also pay taxes on those books, or at least the income from their sales!
Because self-published writers handle more of our own business, we get a lot more forms come tax time than our traditionally published counterparts. On the other hand, we have a lot more business expenses we can use to lower our taxes, so hey, it all works out!
Like other writers, us indie authors receive 1099 forms. They’ll come from the companies who distribute our books, such as Amazon KDP, Google Books, or Barnes and Noble, or even Etsy if you open a shop to sell signed paperbacks!
Businesses have until January 31st to send out their 1099s, and trust me, they take advantage of that — I usually don’t receive all mine until almost March. (Pro tip: Keep a spreadsheet of everyone you expect to get a 1099 from, so you know when they’ve all arrived.)
Taxes from other writer-related income
Often, writers will broaden their income by adding side hustles that aren’t technically writing, but fit with a writer’s lifestyle. Gotta earn that bread where you can, right?
Some examples of these include:
- Selling merchandise based on your books (tote bags, notebooks, etc.)
- Speaking and appearance fees
- Hand-selling books at conventions, fairs, or directly through your website
- Getting paid by social media platforms
- Creating courses on writing, book marketing, etc.
- Offering editing, cover design, or other book-related services
If you’re assuming by now that you’ll get even more 1099s for these sources of income, you’re catching on!
Like all self-employment income, revenue from these activities will need to be reported to the IRS, and you’ll get a 1099 from each company when you’ve been paid more than $600.
How to file taxes as a writer
Once you’ve gathered all your 1099 forms (and often, it will feel like you have 1,099 of them), it’s time to file.
What if you don’t get a 1099 form?
Sometimes, you don’t get a 1099 form from one of your sources of income. Maybe you didn’t earn over $600 from that client, or maybe you’re working with someone outside of the US.
For example, I self-publish books through Kobo Writing Life, and they don’t send a 1099 for my royalties since they’re based in Canada. The same is true for the freelance writing I’ve done for clients in the UK.
Unfortunately, this doesn’t absolve me from reporting that income. All self-employment income needs to be included when filing, on the forms we discuss below — even if you earned less than $600 on that work.
And don’t forget to report any cash income you’ve earned from hand-selling your books! The IRS takes a very stern view on people who hide income that seems “easy” to leave off your taxes.
How to fill out your schedule C
A Schedule C is where you break down your business expenses to determine how much of your self-employment income is taxable. Here’s how it breaks down:
- Define what type of business you’re operating
- List your earnings — the combined total of all your 1099s, plus any other income you’ve earned from writing.
- Deduct any returns you gave to customers and the cost of goods sold. For most writers, this doesn’t apply, and they can skip it — but if you sell books or other book-related merchandise directly (at conventions, fairs, etc.), you can deduct that expense here!
- Break down the rest of your business expenses. These are separated by category, so for example you’ll list all your advertising costs together, then your office supplies, and so on
Don’t want to go through all this tedium yourself? Keeper will fill out and submit the forms for you!
Once you’ve done that, the final step is adding all the numbers together to determine your taxable income.
If you want, go ahead and compare the results with and without all your business expenses — you’ll never doubt the value of write-offs again!
Filling out Schedule Cs for multiple income sources
If you earn money from things other than writing, you’ll need to fill out a separate Schedule C for each “type” of business you operate.
- One for writing
- One for editing books for other writers
- One for selling character-themed merchandise.
How to fill out your Schedule SE
Once you’ve determined your taxable income on your Schedule C, it’s time to take that total over to your Schedule SE.
This form determines how much self-employment tax you owe.
You only need to file one Schedule SE, regardless of how many types of businesses you run. Here’s how to fill it out:
- Enter the combined totals from all your Schedule Cs together
- Run through a few calculations by following the form’s instructions. (It wouldn’t be the IRS if it made things too easy). In the end, you’ll have the total amount of self-employment tax you owe for that year.
- Take that number back to your 1040, and continue as you normally would!
And you’re done! Send that return in with confidence, and then congratulate yourself with a big glass of wine. Or buy yourself a new book — after all, books are tax-deductible for writers!
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At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email firstname.lastname@example.org with your questions.