PDA

View Full Version : Co-authors and KDP? [tracking taxes and royalties]



Penguin
09-23-2012, 09:45 AM
Hi, I found myself in a situation and I need help :(

My sister is my co-writer and we write all our books together. We decided to try to self-publish using Kindle Direct Publishing, but recently found out that they don't have an option for paying co-authors. So I'm really disappointed because self-publishing sounds perfect for us and now I don't know how it's going to work, with royalties and taxes. Would I have to pay her a percentage of the royalties? Would she have to pay taxes on what was already withheld?

Does anyone have experience using KDP with a co-author and can help, please? Thanks so much!

merrihiatt
09-23-2012, 10:30 AM
I don't have any experience with co-authoring a self-published e-book. I am interested in what is involved regarding royalties and taxes. It is my assumption that an agreement would be signed by the authors and one would be designated to receive the funds and split it equally with the other author. Each would need to pay half the taxes since they would each receive half the royalties. That sounds like a lot of record keeping/tracking. Then again, I could be completely wrong. This would be a great time to consult a lawyer, IMHO.

M.Macabre
09-23-2012, 10:45 AM
I don't have any experience with co-authoring a self-published e-book. I am interested in what is involved regarding royalties and taxes. It is my assumption that an agreement would be signed by the authors and one would be designated to receive the funds and split it equally with the other author. Each would need to pay half the taxes since they would each receive half the royalties. That sounds like a lot of record keeping/tracking. Then again, I could be completely wrong. This would be a great time to consult a lawyer, IMHO.

This was my understanding as well, unfortunately. I don't believe you're going to find an automated option, and you're going to have to keep a record of everything. Also, if you make above a certain amount, expect to be audited.

JanDarby
09-23-2012, 08:29 PM
You really need to talk to an attorney experienced in small business formation, or a tax preparer with extensive small business experience.

There are a number of ways this could be addressed, but they all come back to having a clear agreement with your co-author, setting out who is responsible for what and who gets what. Then, you may wish to create a formal partnership (or corp. or llc), although that can be a significant investment in legal fees and annual tax return preparation, over and above your personal income tax return. But having some sort of formal agreement is better than being unprepared for a situation where -- best case scenario! -- your book(s) hit the big-time, and there's real money coming in, and you and your co-author have a falling-out, which ties up the money and prevents future books from being published.

JD, not giving individual legal advice, other than recommending that you seek qualified professional advice.

thothguard51
09-23-2012, 09:52 PM
I have had this problem in the past when I used to do piece work.

All checks were made out to me. I paid my partner 50% after taxes. But when it came time to report taxes at the end of the year, I was in a higher tax bracket and had no receipts to show I paid my partner, or that I deducted taxes and SSI from him.

I ended up owing more than I would have if we both had been paid individually, and the IRS didn't go after him. Bastard...

Taxes are very tricky in any venture that includes more than one person being paid out of the same check. I always advise checking with a professional tax consultant.

Penguin
09-23-2012, 10:35 PM
Thanks for all the responses! This is getting a little too complicated :(. Would we have the same issues if we publish through traditional publishers?

Old Hack
09-23-2012, 11:50 PM
You'd still need a contract which spelled out who got which share of the money, but you wouldn't need to do any of the publishing work, as you wouldn't be the publisher. However, getting a trade publishing contract isn't as easy as just demanding one. That's a whole other ball-game.

Diane
09-23-2012, 11:57 PM
I think Penguin's question was more along the lines of "How do traditional publishers handle this?" rather than "Should we simply go with traditional publishing instead?"

Alas, I have no information on that for you. I know that publishers send the checks to agents, who may then be in charge of disbursing the monies appropriately, but I really don't know.

JanDarby
09-24-2012, 01:45 AM
Would we have the same issues if we publish through traditional publishers?

Yes. Co-authors with traditional publishers, if they're serious about their work, create some sort of partnership agreement (or corporation or LLC) for tax purposes, as well as basic partnership issues. Think about it: would you go into any other kind of business without some sort of plan and some sort of arrangement for who was responsible for which duties and who got what monies? If you're a self-publisher, you're a business owner.

There's a book (well, several books actually) by a company called Nolo Press, on small business formation. Nolo specializes in translating legal (and business, tax, etc.) information into lay terms. It's not a substitute for hiring an attorney/CPA/etc., but their books are very good overviews, so you can get a better idea of the big picture, and then will know what questions to ask when you see the professional. You may be able to find their books in libraries (or get them through inter-library loans), and if not, I believe they're relatively inexpensive (compared to running up the billable hours at a law office, or even compared to what legal books for lawyers cost).

For Thothgard -- there's an IRS form for the situation you describe, but I can't for the life of me remember what it's called or what the number is. It's a way to pass on the income reporting to the IRS, much like a 1099. It may even be an option on a 1099-Misc. A tax preparer should know what it is and be able to prepare it for you or advise you on how to do it. It's filed much the same way that a contractor files the 1099 information with the IRS, so the information would be reported as income to the subcontractor in the IRS's computers, and would come off your income in the IRS computers.

JD, not giving individual advice, just general information

Old Hack
09-24-2012, 10:24 AM
If co-authors have an agent who sells their book for them, their agreement with their agent should cover how she distributes the royalties which are paid by the publisher.

shaldna
09-24-2012, 05:41 PM
Hi, I found myself in a situation and I need help :(

My sister is my co-writer and we write all our books together. We decided to try to self-publish using Kindle Direct Publishing, but recently found out that they don't have an option for paying co-authors. So I'm really disappointed because self-publishing sounds perfect for us and now I don't know how it's going to work, with royalties and taxes. Would I have to pay her a percentage of the royalties? Would she have to pay taxes on what was already withheld?

Does anyone have experience using KDP with a co-author and can help, please? Thanks so much!

In this case you would recieve all royalties to one person to be split accordingly between you.

In terms of tax - both of you will have to pay tax on any income earned, this will be based on yopu individual incomes from the sales, and will mean that you will both have to be registered as self employed with HMRC.

If you are outside of the states, you will want to get an ITIN ~(international tax identification number~) which means that Amazon will not hold back tax on your behalf, but rather forward you the whole amount which you will then arrange to pay tax on - note - if you don't have an ITIN, Amazon will hold your tax and you will still be eligible to pay tax on the remaining amount in your home country - which means you could end up paying double tax.

Penguin
09-24-2012, 08:15 PM
Thanks for all your help! :D. Got a lot to think about.

Old Hack
09-24-2012, 08:25 PM
It's all far more complicated than it seems to people who aren't writers or publishers, so there is a lot to learn. You're doing right by asking questions, though.

And now, a public service announcement. It's "trade publishing" and not "traditional publishing", and we do our best to stick to the correct terms at AbsoluteWrite no matter what people call things elsewhere. In other words, if you all keep on using the term "traditional publishing" I will have to get my ruler out and whack you all on the knuckles. Grrrr!

James D. Macdonald
09-24-2012, 11:09 PM
If you're with a trade publisher, while writing up the contract you can specify exactly how the money will be divided. (I write with a co-author all the darned time.) So, in the contract, in the course of negotiations, you can specify "Royalties of 15% of cover price, to be paid as follows: 50% of royalties owed to Betty Bookish and 50% to Arthur Author...."

Remember, with self-publishing, half of the word is "self" but the other half is "publishing" with all the business implications entailed.

Yes, talk to an accountant or lawyer. One who specializes in small business finances. You really don't want to wing it.

A written contract with your coauthor would also be a good idea. Suppose she drops dead and her brother-in-law's cousin, who hates your guts, inherits her estate? What happens with the book and the royalties then?

Talk with a lawyer.

valeriec80
09-25-2012, 07:25 PM
When I did my taxes, I was able to deduct the money I spent on cover art, etc. I would imagine that you'd just put the money you sent to the co-author in that area. The co-author, on the other hand, would have no paper trail unless you issued her a 1099. And I don't know how you go about doing that.

Penguin
09-27-2012, 05:42 AM
Thanks! :)

James D. Macdonald
09-27-2012, 08:42 AM
Dredging into my memory: You get blank 1099 forms. They're triplicate carbon. One you keep; one goes to the person you paid, and one goes to the IRS.

shaldna
09-28-2012, 05:01 PM
Also, when filling out your tax return, make sure you claim for all you are eligible for - I can write off a certain percentage of my rates, heating and electricity usage because I write at home.

Old Hack
09-28-2012, 07:29 PM
Be careful of doing so, though, if you own your own home and the price of it has risen significantly since you bought it. You might end up having to pay business taxes on a portion of that increase. Check with your accountant.

shaldna
09-29-2012, 09:17 PM
Be careful of doing so, though, if you own your own home and the price of it has risen significantly since you bought it. You might end up having to pay business taxes on a portion of that increase. Check with your accountant.

Good advice. As always, you should check with the relevant accountant or lawyers just to keep yourself right - the last thing you want is to realise too late that you owe a lot of money to HMRC etc.