Pinterest Sarah Lee In fiction, character is almost everything. Each of us is, in any given moment, the sum total of our temperament and experiences up to that point.
These days, many services and resources are available to help an aspiring self-publisher.
In Part One of this seriesI discussed the tax considerations relevant to authors who intend to self-publish. As publication approaches, however, these considerations will inevitably begin to shift. As you move from manuscript development to seriously preparing your book for distribution, your principal business activity changes from writing to publishing.
Once you have completed necessary pre-publication tasks, including layout, cover design, illustration and copyediting, you will need to determine how you plan to distribute your book. A variety of options are available to you, depending on your preferences and your budget. For example, you could hire a full-service self-publishing company, which can offer editing and design functions as well as distribution and marketing.
On the other hand, you could focus on online retail distribution with an e-publishing service or work with a print-on-demand service to produce physical copies as demand dictates.
The pros and cons of these options are beyond the scope of this article, but each choice can create different tax consequences. If you choose to hold a physical inventory of books rather than stick to digital or print-on-demand, you will need to allocate production costs, such as materials, labor or anything else related to preparing physical books for distribution, to cost of goods sold COGS.
This allocation is an application of the matching principle that attempts to align the costs of producing inventory to the income that inventory will generate.
There is little to no COGS for e-books, because the costs to produce an individual copy are negligible. This is because certain costs, such as utilities or depreciation on machinery, indirectly contribute to the production of inventory and should be added to the cost of that inventory, rather than deducted immediately.
The steps to this calculation are too complex to discuss here in detail, but the simplified production method found in the Internal Revenue Service regulations is recommended.
Those who do find themselves subject to UNICAP are better served leaving its complex application to a qualified professional. This should exempt the majority of self-employed, self-published authors from the UNICAP headache, since most expenses will be directly related to producing the book itself versus indirect activities.
You will also need to determine how you will handle sales if you do not select a service that will handle them for you. If you do not use a service already affiliated with an online retailer such as Amazon, you will probably want to create a website that is equipped to deal with sales transactions.
There are many credit card processing services available; PayPal is very popular, but is not the only choice. At a minimum, if you are processing credit card payments, you will want a Secure Sockets Layer SSL certificate to ensure that customer data is properly encrypted.
Here, as with editing and design, you may also choose to hire a contractor to build, maintain or promote your website.
If you do, you will likely need to collect a Form W-9 from the freelancer, as discussed in Part One. If you sell your book directly, you will also need to pay attention to sales tax. Even if you do not choose to sell your book through your own website, you may hand-sell copies at speaking engagements or trade shows.
While sales tax is paid by the purchaser, it is up to the seller to collect the tax, and rules vary from state to state. This is different from a business license, and you can often obtain it online through the state agency in question.
Providing the certificate to your print-on-demand service will allow you to obtain the copies tax-free; you will, however, still be responsible for collecting sales tax from the customers to whom you eventually sell the books.
Similarly, if bookstores or other retailers buy books from you for resale, you do not need to collect sales tax because the store itself will do that when the books are sold.
You do, however, need to keep records of such tax-exempt purchases. Nonprofit organizations that can buy copies without sales tax will also have a permit or form to prove their status. The state may require you to produce your copies of such documentation to prove you legitimately did not need to collect sales tax in such instances.
If this sounds like a lot of work, it is. But given the increasing popularity of self-publishing, many print-on-demand or e-book services now take a lot of this burden away from the author. Many can handle processing payments and collecting sales tax, and typically take their fees more or less automatically as books are bought and sold.
This can simplify taxes a great deal for authors, because it means authors themselves maintain no inventory. Whether you use a service or go it alone, eventually your release day will arrive and your book will be up for sale.
Once the book begins to generate income, you will need to begin paying self-employment taxes on your net income from its proceeds.
Depending on the service you used and your distribution channels, you may receive royalty income; such income must be entered on Schedule C with your business, rather than on Schedule E as passive income.
If you have not worked for yourself before, it is crucial to remember that you are responsible for estimated tax. As a typical employee, this means taxes are withheld from your paycheck.Nov 7, A collection of resources and articles for the online entrepreneur interested in staying on top of the trends and future of Digital Publishing.
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The number of contributors to this tome is huge and, for some, that diversity is a detriment.4/5(94). Local authors Jody Casella, writer of Thin Space, made an appearance in October, while Edith Pattou, whose latest book is Ghosting, is visiting in January.
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