all right everybody grab your coffee because today we're talking about taxes and if you're an author with taxable income off of your books then maybe grab some champagne because that's pretty awesome except yeah you got to pay taxes on your royalties [Music] hi I'm MK Williams I'm an author and independent publisher I love sharing my insights about all things self-publishing with you before I get into the details about today's topic don't forget to hit subscribe that way you'll be notified each week as I put out new videos about self-publishing making a career to being an author and now being a mompreneur today we're going to be going over taxes so before I say anything we're gonna have a little bit of fun with disclaimers so the first is that I'm going over discussing this from a U. S point of view I have no knowledge of foreign taxes or processes or well that's like also I'm not an accountant not at all I don't even play one on TV definitely not your accountant I'm going to be sharing my experiences as an author trying to make sure I pay the right amount in taxes and some of the common questions I have had over the years for your specific tax situation consult an accountant familiar with your county state and Country all right with the New Year many authors of us are getting their taxes together either to do ourselves or with an accountant again I'm not an accountant and nothing I am about to say is tax advice in any way shape or form but I've seen a lot of questions from authors come in or just posted online generally so I'm going to be going over some answers now I'm releasing this video on January 25th 2023 because for U. S citizens most of your tax documents are due to you by January 31st whether that's from your day job as a W-2 employee or any of your 1099s from the self-publishing platforms so if you get to next week and you don't have a form from anywhere that you've received income from this year log into your account and see if those forms were distributed to you digitally or if they were mailed to you sometimes when they're sent digitally they're just are uploaded usually you get an email but that might be sent to spam so be sure to just log in and check and if you don't see anything there email their customers support team to determine if a 1099 or another supporting tax document is going to be provided to you as I go through some of the questions I'll be going over the fact that some of these providers do not provide 1099s even if you made money on that platform this year some of them have very high thresholds or some of them are counting on the fact that they are paying you through a third party payment service like PayPal to be providing you with documentation now throughout the year I keep a very thorough track of my income and my qualified expenses I know exactly how much hits my business bank account What expenses are going out that are qualified for my author business but I always double check that against the tax forms that I receive now most of my taxes since I'm a full-time author are reported on a 1099 now that's either going to be a 1099-C a 1099 misc or miscellaneous or a 1099-k so let's dive into the common questions that I see the authors have asked and that I personally experienced now one of the first ones is about which providers provide a 1099 now the first question I had the first year that I worked with ingramspark is like where's my 1099 does ingramspark send a 1099 and the answer is as of this year no they do not provide a 1099 nine so I use the monthly invoices that they send and it's interesting it says an invoice but it's really what they're paying you so I use those monthly invoices that they send to confirm payment as documentation for the payments I've received in that I can provide to my accountant and it obviously also shows in my bank account now another question that's related to this is who is lightning source and why doesn't my bank show any payments from ingramspark so since you don't get a 1099 from ingramspark you need to report what you were paid but none of the payments that you're going to receive from ingramspark show as ingramspark they're going to show as LSI standing for a lightning source so to simplify lightning Source or LSI payments are your ingramspark royalties and your Ingram spark royalty show is lightning Source on your bank account statements so when you're providing documentation to your accountant or entering it into your tax software for doing it yourself um anything that says LSI or lightning Source those are going to be the payments to verify coming from ingramspark okay okay the next question um is one that I had to figure out pretty quickly back in 2016 when I was doing my 2015 taxes after my first book came out so do I count my sales or my earnings for taxes so in my case I use earnings I use what's called Cash accounting so I pay tax on the money that hit my bank account and the 1099s I received are also based on this now many platforms have a 60 to 90 day payment delay so let's say you launched your book in November or December of 2022 that big rush of sales that you saw won't impact the 2022 taxes because you're not going to be paid until February or March so you have not been paid those royalties yet it's not going to show up on the 1099s that the platforms to provide you and the 1099 is what you want to use because that's what they've reported to the government that you earned so I use cash accounting for that reason to kind of align with what I'm receiving from the different platforms all right so the next question that I see often about 10.
99s is why did I get to 10. 99s from Amazon so if you have your books self-published on Amazon KDP for ebook and print and also on ACX for audiobooks you're going to be getting two separate 1099s one for each company yes they are all technically Amazon but they'll send you two separate forms and then a question that started coming up in 2021 is why are my royalties from ACX not matching my 1099 so I discovered this one last year I saw my annual royalties on my own tracking so I can see which payments came from Audible and then I cross reference to 1099 and the 1099 had more not much more but still more it wasn't enough to impact the amount of tax that I owed like it didn't bump me into the next tax bracket for the marginal tax rate but um it really just could have been like a rounding error but it was off and like that hurts my brain and I was like no no this is an official document like I have to has to be right um so what I found out is that in 2021 ACX changed their policies that anybody who has a royalty share deal and one of my books isn't a royalty share deal um even though the full royalty from a sale of that audiobook does not hit my bank account half goes to me half goes to the narrator ACX is still reporting that the full royalty as income to me the author and that the royalties put with a narrator um is going to be included on the 1099 so that I need to keep track of which of the royalties I received just from that deal and count that the 50 that goes to the narrator as it expends on my taxes make it make sense I don't know why they switched this method it's inferiorating because that's a lot of really meticulous things to track and like again that money never hit my account like I never actually received that money I never physically paid it to the narrator like that's the beauty of of when you use um the royalty share deal and like find a narrator through ACX they handle the payments but for some reason they're saying nope as the author you're paying the narrator even though ACX handles it um and so that's why your ACX 1099 is going to be off from what actually hit your bank account so the next question that I see quite a bit and it's kind of a big one um because several platforms will pay through PayPal whether you're working with drafted digital or smashwords um I use payhub they send everything through PayPal PayPal is just a really big payment provider um and I even as I'm working with clients or scheduling through calendly it all pays me through PayPal so in the past few years I've had to self-report a lot of my income now many entrepreneurs end up having to do this there's rules that anyone who pays you over 600 in a calendar year has to provide you with documentation at 1099 but some of those people may be small business owners even just side Hustlers who don't have an accountant to create that paperwork and that costs money um and many of my early clients said oh well I paid you through PayPal and they provide the paperwork and in theory that's good right I don't want to have my income double reported I don't want my client to say oh I paid you x amount for this work and PayPal's like yep and you received XML and then the IRS thinks that I made twice as much that would be bad that would not be good um so I'm glad that for some of this mess but it's also really frustrating to have to self-report your income um but where this all broke down and this assumption that like okay like client's not going to give me a document PayPal is is that they had a very high threshold for both the dollar amount earned it was like twenty thousand dollars and a high number of transactions like 200 transactions or something so even if I hit the limit on one part if I wasn't on the other I didn't get a 1099 from PayPal and I had to self-report now self-reporting just means I tell my account and what I made I keep my documents I meticulously log everything which I'm gonna do anyways and I just hope they don't get audited um in 2022 however PayPal announced that they would start to provide 1099s for any account with income over six hundred dollars yay except now that my payments have come through from smashwords from payhip from calendly for my consults from other Affiliates on all that good stuff um are potential gonna be double counted now the only place where I really see this being an issue is from smashwords smashwords does provide a 1099 yay but then I get paid from smashwords through PayPal so they're going to report it so there is a potential for some double reporting this year it's gonna be a little frustrating but there is going to be reporting and the majority of what I received from Affiliates and consults and things like that does come through PayPal so it'll be nice to finally have documentation so if you get that 1099k from PayPal this year just double check which which payments you received are also going to be providing you with a 1099 so nothing's double reported because why why make it easy okay that was a lot of tax talk from just an average author not an accountant not your accountant um so if you have more questions like this let me know chances are I may have to decline answering if it's clearly a question for an accountant or tax expert which I'm not but maybe I can help at least point you in the right direction if you've found this information helpful please go ahead and give this video a thumbs up don't forget to hit subscribe or maybe hit that thanks button that lets you to know that you got value from this information and then they can get it in front of other authors like us now you can get back to writing your book hey guys thank you so much for watching this video I hope you really found it helpful and informative and before you head on to watch another video on YouTube on this channel another Channel or go back to actually write your book I want to let you know that I answer a lot of other questions on this channel really short to the point to synced you know one question one answer but I've pretty much downloaded my brain into my author your ambition books and you can get these anywhere that you can find books so whether you're just starting out um writing whether you're figuring out your plan for self-publishing you're trying to figure out marketing I pretty much have a book for you so self-publishing For the First Time author book marketing For the First Time author how to write your first novel and going wide are all available like I said anywhere that you can find great books and you can easily find all the links and the different retailers if you go to authoryourambition.
