Welcome to Writing Tip Wednesday! I’ll be discussing career topics for the next several months. For writing craft topics, see the Labels list in the left sidebar as you scroll down the page or check out my handbook in e-book or print.
Because writers often lean more toward creative thought, the mention of expenses, receipts, and mileage records makes many authors cringe. However, Recordkeeping is a necessary task. Not only does it aid in preparing tax returns, it helps writers budget for conferences, conventions, and other promotional opportunities.
Choosing a method is often the hardest decision. An envelope or a shoebox full of receipts to tally at year’s end? An Excel spreadsheet with weekly or monthly entries and columns for every category of expense? A notebook with a listing of dates and their accompanying expenditures and mileage? And what about recording royalties?
The shoebox/envelope choice doesn’t really lend itself to budgeting, but that’s the method some authors prefer. To aid in tallying for tax time, consider writing a short explanation on each receipt (dinner meeting with editor; toll fees for RT trip; research books). Whether using self or professional preparation for tax returns, expenses should be categorized.
Spreadsheets and notebooks with timely entries both offer better opportunities to budget for future expenses. Expenses are recorded as they occur, leaving little chance of forgetting the reason for each receipt. Receipts can be scanned and stored in a recordkeeping folder in case the originals are misplaced or destroyed. Expense categories can be broad (Advertising & Promotion) or specific (Booksignings; Blog Giveaways; Website Expense; BookBub Ads). Adjustments can be made to the recordkeeping system as needed by adding additional categories/columns. Meals should be totaled separately from other expenses since they have a different rate at which they’re tax deductible. Auto expenses and mileage should also be recorded in their own categories for the same reason.
Detailed records can often mean the difference between a quick, uneventful audit and a long, painful one. Inadequate records may result in some expenses being disallowed, changing the end result of a tax return. Choose a method and start now!
Royalty statements record income from the sale of books. All publishers, including KDP, Nook Press, and other self-publishing platforms, should issue royalty statements with payments or make them available to download. How often—monthly, quarterly, biannually, annually—depends on the company and the contract. While the statements may contain a breakdown of which books sold how many copies, they may or may not list the sources of those sales. For example, one publisher’s quarterly royalty statements might itemize the number of copies sold and royalty amounts for each retail outlet (the publisher website, Amazon, B&N, etc.). Other publishers may only list book titles and each title’s total royalty amounts from all outlets. Some monthly statements list each country where the book is available for sale, the number sold and returned, royalty amounts, and conversion to the author’s chosen currency. Information included on royalty statements is by no means universal.
Authors may elect to hand sell their books as well. These sales should also be recorded and reported, depending on the source of the books. The royalties from hand-sold books equals the amount the author paid for the book plus any shipping/handling fees minus the selling price. If the author purchased ten copies of her self-published print book from Createspace at $3.00 each and paid an additional $8.00 for shipping, her total cost would be $38.00. Her cost per book is $3.80. If she hand sells those copies for $5.00, her profit (royalty amount) is $1.20 per book or $12.00 for all ten books. Some publishers offer their authors discounted copies on which no royalties are paid. If the author hand sells the books at cover price, her royalties are figured the same as above—[(total book cost plus shipping) divided by number of books purchased] equals cost per book—and should be reported as such. When an author buys copies to sell from a retailer without an author discount, royalties have already been paid to the author on the book, so reselling under these circumstances doesn’t require recording and reporting of additional royalties. Free ARCs from the publisher that are sold by the author should usually include the full sale price as royalties since royalties often haven’t been paid on those books and the books were provided at no cost to the author. Books purchased by the author and given away are considered a promotional expense.
To aid in recordkeeping of hand sales, I created a receipt record to email to purchasers, in addition to recording hand sales on a spreadsheet. Many authors claim book purchases as business expenses, so this method allows for a printable or email-able receipt for buyers’ tax returns—a must in case of an audit. For emailed receipts, Microsoft Word has several receipt templates that can be customized to meet the needs of authors hand-selling books. To provide a paper receipt, check with local office supply stores for two-part receipt books—one copy for the buyer and one copy for the seller. The purchase of receipts books is an expense!
Keep a record of all writing-related expenses and their paper or online receipts. Check with a tax professional when unsure if an expense is allowable. Keep a record of all sales, whether from royalty statements or hand sales. Whether an author completes her own tax return or hires a professional tax preparer, good records are a must.
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