Are you a business?

I file it is miscellaneous income, but then it has never exceeded $10,000 per year for me -- at which level so long as you don't do anything incorrect the IRS really doesn't care what you do. It is more a matter of whether there is a tax advantage one way or the other. e.g. do you want to itemize and claim expenses and will you gain a net benefit from doing so. (Disclaimer: I am totes not a tax expert).

I started a business once but never used it and ended up getting rid of it. Originally I was going to use it to publish technical manuals. I believe they told me I didn't need to do anything about the state taxes unless I exceeded 500 dollars per year. Once a year I'd get a state tax form that I'd just have to mark to verify I made less than 500 dollars and send back.

Never messed with anything in regards to the IRS since I never made any money. It was essentially a non-entity. And like veinglory said, there's an income tax cap. I think (as I recall) that if you make below 10K (or some such amount) then you just claim the money as part of your general income. But I'm no tax guru either. If I'd made any money (a problem I would like to have had) then I probably would have consulted someone in regards to the process.

Someday I may even do it again, but I don't have the time right now.

Filling a schedule C is not difficult and does not require any special status. It can be done within standard tax software. You just give the activity a name (e.g. "author") and type in all your amounts and who paid them. I put book royalties, freelancing income, paid blog etc all as a line under that when it worked to advantage. (Again,I have no actual expertise relating to tax but many authors do a schedule C.)

I've been filing as a business for many years. The pros are that you can take off business expenses, including the portion of my home that I use solely as an office, my equipment and supply purchases and work-related travel. I have an accountant who understands my business and files my taxes for me, but many writers I know do their own. I wouldn't. You can use an EIN or a Social Security number, your choice, and there are advantages, as well as disadvantages to forming a LLC. Once you hit the $10K and up range, I'd definitely file as a business, particularly if you've invested in a new computer or office furniture. The cons? The IRS likes to audit writers.

As I understand it (and I am not an accountant or tax preparer) as long as you've claimed all of your income and paid both income., unemployment and other taxes, you're good. I do a business return because I deduct my business expenses. It really helps keep the income tax level at bay, but you can't deduct anything until after you pay your unemployment and all of the other taxes and deductions an employer would normally take out or pay for you.