Taxes, the Writer, and Imprints

While I was unaware of the issue, there is a moral question about independent authors creating an imprint for their books. Specifically, the question is: Is it deceptive to make the reader think that you are a small press? Many people seem to not care, but many also declare that to do so is dishonest.

When I was setting up my book, I decided I wanted to do my own imprint as a doing business as (DBA), mostly to keep my financial records straight. Publishing is a business, and to me, the most crucial part of being a business is to have something that someone can call you by.  Years ago, I had a small cattle business. Though I did not own buildings, pasture, or much equipment, I sold a quality product, and so I went by the name Silver Nickel Cattle. This kept my business income and expenses separate from my personal income. Yes, there is quite the difference! On personal income, your employer is required to take out such taxes as social security, state income, and federal income. Therefore, most of your taxes on the money you earned is already paid for (with some adjustments over tax season). On your business, however, these taxes are not automatically removed from your paycheck. You receive 100% of what you sold, minus the cut that your distributor (or auctioneer, in the cattle world) takes. Think that you don’t have to pay higher rates on that income? Think again. Naturally, it depends on your state laws, how much your business has earned, what category it falls under, and a smattering of local legal items.

If you make more than $300 on anything–including hobbies–you should report it on your taxes.

How much do you need to set aside from your earnings so you won’t be stripped and left gasping at tax season?

Set aside 25% and you should be pretty close.

Can you use supplies as tax write-offs?

If you don’t already, you should be keeping track of your expenses. In the cattle world, it was everything from pasture rent to semen. In the writing world, it can include paper, pens, software, ISBN numbers, and printing costs. Do pay for these items with a card  or check, and either receive paper bank statements or print them off. Highlight the items off your statement, and keep these statements in a manilla envelope with the receipts (and photo copies of receipts) stapled to them. You can use file folders, but I find they lose loose receipts too easily. Store the envelope (label it with “Expenses for xxxx from Jan-Dec 2012”) in a safe place. I personally have a file box with a combination code. Do this every month for every item. If you don’t have expenses that month, take a sheet of paper and make a note. That way, you won’t be wondering if you’re missing documents. Keep these for at least 5 years.

Why should you do this?

For starters, in case you get audited, you have proof that you aren’t committing tax fraud. For your own records, it’s an organizational no-brainer.

Why do photo copies of receipts? Aren’t the receipts good enough?

No. No, they’re not, because even tucked away from sunlight, the “ink” fades. And no, most receipts aren’t printed with ink. It is heat-activated paper. The longest I’ve seen a receipt last is 3 years, and it was pretty darned faded. Think  a file folder filled with blank receipts will impress an IRS man? Not a chance. But if you have bank statements with purchases highlighted, a series of blank receipts, and copies of what used to be on them, then you will be A-OK.

If you used checks (not a card), then you should be using your check register and ordering checks with the carbon layer. If you aren’t doing either, start doing it now. Highlight relevant purchases in your register and, once you’ve used up your pack of checks, toss the carbon layer into the Expenses manilla envelope. Also, your bank statements will show a copy of the checks cashed. Put those copies into your envelope.

Does your book or imprint receive bills?

If it does, label another manilla envelope with something to the effect of “Bills for xxxx from Jan-Dec 2012”. Include the bill, a copy of the check used to pay it, and a document confirming that the billing party received your payment. This could be a certified mail stub (if you send anything at all  to any government agency, use certified mail, the idiots lose paperwork like mad and will blame you), a copy of a bank statement showing the payment was processed, or a statement from the billing party showing that a payment was made. You can include bills in the Expenses envelope, but I find it is easier to have two envelopes.

What about recording income?

For the sake of anything you consider sacred, do not forget to record even a single sale. Label a large envelope with something like “Income for xxxx from Jan-Dec 2012”, and make a copy of your bank statements with a highlight for the income. Keep a list of companies or people who carry your products, and make sure that you have recorded all income you received from them. When February comes around, make sure you get relevant tax forms from them–and that their numbers match your records. Contact those companies ASAP if you know your records are right, and yet there are discrepancies. Do not allow the IRS to find these issues for you.

Are tax preparers worth the money?

I strongly recommend them unless you have a thorough and extensive knowledge of the taxes for federal and state laws, know about new laws passed that influence your situation, and are comfortable holding your own should you be audited. Do not go to a tax person (or company) who will not stand between you and the IRS should you get audited. Even Turbo-Tax will represent you in case of an audit. Tax preparers can save you thousands or tens of thousands. That is worth the several hours at $100/hour that they spend dancing with the IRS for you. Do I think that a typical household who are employees will save big by using a tax preparer? Not really. Is it a very good idea for self-employed people? Yes.

So what does this have to do with an imprint?

Unless you are a professional, self-employed writer who already has to keep track of income, expenses, bills, and receipts, you may find that keeping your business as a separate entity is downright vital. This is particularly true if you wish to write multiple genres, or have multiple pen names, and you wish to keep them all under the same business. It is easier (or flat-out legally necessary) to have one account for places such as Amazon, Barnes and Noble, and CreateSpace. If you have multiple names (or even multiple people, supposing you and your spouse both write books), then making an imprint is a viable option. You can look into either being a DBA or an LLC. Research it if it appeals to you. And believe me when I say that is it easier to do taxes for one entity rather than three.

But is it ethical for a self-published author to have an imprint?

Did I not hear the term self-PUBLISHED? Independent authors are publishers! If they choose to link their works together via the “Publisher” option, then that is an instant way for readers to know “Yes, I like this person or publisher” or  “Eww, no, I can’t believe they are still wasting paper with their crap”. A common objection by readers is that when the imprint is filled out, they “know that it was hand-picked from a pile of slush”. This is only one person’s perception. Christopher Pauloni self-published until his book was read by the right person. JK Rowling had to fight tooth and claw to be accepted into a small publisher’s imprint. This is to speak nothing of Dr. Suess, who had an incredibly difficult time finding someone to take a risk on his outlandish prose. Being accepted by a traditional publisher means pretty little. They accept books they think will sell, not books that they think are fantastic.

How dare you, Nicolette Jinks, for “tricking” your readers by claiming to be Standal Publications!

Oh! I double-tricked you! My real name isn’t Nicolette! Take that.

No, seriously.

My pen name and  my imprint names both belong to me. I use or did use them on legal documents.  I didn’t pull them out of a name generator. I’m being selective, not secretive. I’m sure you can divine who I really am based on this blog and the copyright page of my book.

If a reader takes issue with independent publishing, it only take a quick google to decide to avoid my books.

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