Publishing Erotica Part 15 – Buisness Side

Click here for Publishing Erotica Part 14 – Promotion

Writing is an art. Publishing is a business.

And as a business, you need to treat it as such. Most of this article will be specific to the United States. I can’t speak for other countries and how their tax-laws and publishing royalties work. Please consult with an accountant or a tax lawyer before following any of the advice I layout in this article.

So since publishing is a business, this means you’ll be using a Schedule C Profit and Loss form when filing your taxes from now on. Your royalties from publishing are your profits, but what are your losses?

Simple: anything money you spend on writing.

Did you buy a laptop just for writing on? That’s a loss. Did you buy a book for research? That’s a loss. Did you travel to attend a convenient, conference, or lecture for your writing? Your car mileage is a loss along with any food you bought while there. If you’re writing from home, gather your electric bills, a portion of that can be written off. If you write in a home office, what’s the square footage, because that is a loss. Paper, ink, your internet bill, stock photo licenses, paying for an editor, paying for advertising, paying for a graphic artist. If it cost you money for your writing, it’s a loss.

Even if your losses exceed your profits. That is okay.

So keep a receipt for everything. Do you go to a writers meeting? Record your mileage.

If you have any questions on what you can or cannot write off, talk to an accountant. Which is my next point, get an accountant. And don’t use one of those chain services like H&R Block. You need an accountant who knows Schedule C. You do not want H&R Block messing up your return and causing letters from the IRS to arrive at your house. Most of their employees do not know Schedule C. They’re used to doing basic 1040 filing.

Your accountant will look for ways to save you money. They will asks you questions, get you to think about what you did or did not spend money on. Especially if you are making a significant royalty, this is a great deal of help.

The next thing to keep in mind for the US is your estimated tax penalty aka Quarterly Taxes. For those of you with a job, you see on every paycheck the deductions taken out of your pay for your taxes. For Federal, that’s Income Tax and Payroll Tax (Social Security, Medicare, & Medicaid). When you don’t have an employer deducting taxes from your paycheck, the IRS expects you to pay your taxes quarterly. There are penalties if you don’t, and those can be expensive since there is interest applied on them and since the first quarterly payment is do in April, it might be a year before you file. If you have another source of income (such as your day job), this can make things complicated. The rule of thumb is if you expect to have to owe less than $1000 in income tax (after subtracting what you’ve already paid from your other source) then you do not need to pay quarterly taxes.

Still, consult an accountant if you’re not sure.

The next thing you need to understand is Payroll Taxes. As a self-employed writer, you will be paying both the employer and employee contribution of Social Security, Medicare/Medicaid. So those deductions you see on your paycheck, your employer is paying an equal amount in your name. Now you’re paying both, so it increases your tax burden.

A good rule of thumb is to set aside one-third of what you make in royalties to pay your taxes. This way you can pay your Federal income tax and payroll tax. And for those who live in States, Counties, or Cities with their own income tax, you might need to set aside more to cover those additional taxes.

There is a way you can mitigate your payroll taxes in the United States by forming an LLC with an S-Corp Election. Now LLC laws vary from State to State, they are not a Federal regulation, so you need to consult with an accountant to know if your state will allow this. But an LLC with an S-Corp Election allows you to tell the IRS that while my LLC made as an example $30,000 last year, only $10,000 is my salary. So for payroll taxes, it will calculate with the $10,000 number and not $30,000, saving you money on your payroll taxes. This does mean less paid into Social Security and Medicare for your retirement, but it is an option available.

Note this does not affect your Income tax. That will still be calculated at $30,000, but your losses are already mitigating that amount.

So save all your receipts, you’ll want them on file for five years in case of an audit. Anything that is used for your writing or to improve your craft that cost you money is a write-off. Set aside one-third your royalties for taxes. Pay your quarterly taxes if you’ll owe more than a $1000 in income tax. And please, talk to an accountant who knows Schedule C tax law.

And now you are armed with the knowledge you need to publish short-form erotica. Remember, it is not a get-rich quick scheme. This is hard work and requires building your catalog to see real success. Don’t get stressed out if your early books are not selling well. It is a glutted market and it will take time for you to build up your audience. Until then, keep plugging away and most of all have fun.

Don’t let your writing become a chore. Do it because you are passionate about it, and your readers will notice.

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