First Story Sold, How to Handle the Money?

[kittrick]

I apologize if there is already a relevant thread for this, but I didn't see one after a quick search. I've made my first sale. Woo! Not much, but it's technically income as far as the IRS is concerned. I'm certainly still spending more on submission fees alone than I've made. I wouldn't consider what I do a small business, at the moment.

That said, I do have ambitions and I don't want things to get messy later on. Working authors, what do you wish you'd done early on to keep your finances straight? A separate business account, for example? Filing differently? Expense records? Any kind advice for a lil' baby author who's just getting started? I appreciate your wisdom as always!

(p.s. In my case, I'm working in fiction, but I imagine the etiquette for handling finances is not that different for essays/articles.)

 

[CMBright]

Keep records of expenses and income. Talk to a tax professional, you might have deductions coming for expenses as well as needing to pay a percentage of that income. Consider a separate account for what you expect to be charged for taxes.

Not anything I've needed to know (yet?), just common sense considerations I can think of off hand.

And congrats on the sale.

 

[Brigid Barry]

No need for a separate account. The only time you need to worry about co-mingling assets is if you're a corporation, and that's not necessary. Keep receipts and a record of expenses. Whoever is paying you will provide a 1099 for the tax year. If you think you'll be making enough for it to matter, shuffle a percentage of your payments into a savings account or somewhere you won't spend it as easily. I have another job that is 1099 income and I use Excel magic to set aside 25% of each check. I didn't make enough writing for it to be worth bothering.

We have an accountant because Mr. Barry has some very complex taxes, so I don't know much more than that. The writing income (hahahahahahahahahaha ) is lumped in with my other side hustle, and the bottomless pit of writing expenses at least help reduce my tax liability.

Last I knew, the IRS only lets you operate at a loss for five years before it's a hobby, so it wouldn't hurt to have a tax professional (a real CPA, not like H&R Block or whoever) walk you through at least the first year.

 

[CMBright]

No need for a separate account. The only time you need to worry about co-mingling assets is if you're a corporation, and that's not necessary. Keep receipts and a record of expenses. Whoever is paying you will provide a 1099 for the tax year. If you think you'll be making enough for it to matter, shuffle a percentage of your payments into a savings account or somewhere you won't spend it as easily. I have another job that is 1099 income and I use Excel magic to set aside 25% of each check. I didn't make enough writing for it to be worth bothering.

We have an accountant because Mr. Barry has some very complex taxes, so I don't know much more than that. The writing income (hahahahahahahahahaha ) is lumped in with my other side hustle, and the bottomless pit of writing expenses at least help reduce my tax liability.

Last I knew, the IRS only lets you operate at a loss for five years before it's a hobby, so it wouldn't hurt to have a tax professional (a real CPA, not like H&R Block or whoever) walk you through at least the first year.

Unless one tends to spend everything in their main account each month for whatever reason. Then it's good to have enough in a separate, untouched account to pay (if one owes) when the time comes.

I was thinking of the fact that we tend to have a comfortable, but limited, income that evaporates by the end of each month. Either enjoying ourselves or emergencies like a tire blowing and needing to be replaced come up.

For those for whom that is not an issue, I fully agree a separate account is not necessary.

 

[phantom000]

Consider a separate account for what you expect to be charged for taxes.

Is there a threshold you have to cross before the IRS considers it important? I mean if I only earned $25 in an entire year, is that enough to even declare?

 

[CMBright]

Is there a threshold you have to cross before the IRS considers it important? I mean if I only earned $25 in an entire year, is that enough to even declare?

That would be a question for a tax pro. Or books on current taxes. Back in the day, I had to declare a two dollar tip I didn't get back when I was working for a restaraunt for tax reasons. I was a bartender in a service bar and I have no idea whether the policy was from the restaraunt or the IRS. The manager gave me two bucks and I declared my one and only tip. That manager had used my ID code to serve a customer, which generated the need to declare the tip in the first place, so I think it was only fair.

 

[lizmonster]

Is there a threshold you have to cross before the IRS considers it important? I mean if I only earned $25 in an entire year, is that enough to even declare?

This is straying into legal advice, I think; but yeah, I'd declare it.

 

[Maryn]

I would not presume to give advice re taxes, but Mr. Maryn is a volunteer tax preparer who does a couple hundred returns a year. When he does ours, he always asks whether I've had writing income or expenses. I assume this information is necessary.

 

[Sage]

Bookmarking thread. It's been a long time since I made income from writing, and last time, I had an e-pubbed novel along with 2 shorts and a CPA to deal with it. I, too, was wondering what I needed/would be provided.

 

[JJ Litke]

Whoever is paying you will provide a 1099 for the tax year.

A 1099 is only required for payments of $600 or more (currently, that may change in the future).

 

[Brigid Barry]

A 1099 is only required for payments of $600 or more (currently, that may change in the future).

I got a 1099 from my publisher and I absolutely did not get anywhere near $600. lol.

 

[JJ Litke]

I got a 1099 from my publisher and I absolutely did not get anywhere near $600. lol.

Oh that’s really cool, if they’re sending one anyway. It’s so helpful to get forms that verify the amounts.

ETA: to be clear, I was stating the technical rule so no one thinks there’s a problem if they don’t get a 1099, or relies on that for their own tracking.

 

[Brigid Barry]

And (not tax advice, repeating what Mr. Barry said), no 1099? It didn't happen.

For tax advice, definitely contact a CPA. I love that all I have to do is provide income and expenses and all the hard work is done by someone else!