"Roundheads and Ramblings"
The Internal Revenue Service has a soft spot for writers. Who
would have guessed! Once you admit that you are an author by claiming that
designation as your profession, the tax laws are on your side. Someone in
Washington actually understands that book production takes a long time, and
that you can work at it for years without making any proﬁt, because you are
still creating the book, not selling it. They will grant you your deductions
for expenses for up to ﬁve years before they start refusing your claims to be a
“real” writer. On your tax return, don’t list yourself as “store clerk” or “plumber’s
assistant” while you are writing. There’s a special designation for writers;
ﬁnd it and use it. Oh, you should keep your day job, but think of yourself as a
writer and regard “fry cook” as your hobby, not the other way around. Then
start collecting your deductions.
Have you set up your home ofﬁce? Then you have a place of
business. Measure the space in square feet, determine the square footage of
your entire house or apartment, and then ﬁgure out the percentage of the
residence that is exclusively used for business. (A 10’ x 12’ ofﬁce in a 1500
square foot house = 8% devoted to business use.) That percentage now applies to
all of your housing expenses that affect the entire space—heating and lighting
bills, rent or mortgage interest, insurance, homeowner association fees,
security system, and termite protection are all common expenses. You can’t
deduct painting the living room if you use the back bedroom as your ofﬁce, but
you can deduct 8% of the cost of a new roof, since that applies to the entire structure.
Next, take a look at your home ofﬁce and its contents. If you are
using an old card table and a folding chair for a desk, you probably can’t
deduct their cost, but if you go out and purchase a new computer desk, using it
only for your writing, its price will be deductible. New or fairly recent
electronics (computer, printer, external backup drive) can be deducted or
depreciated. The ﬁrst phone line into your residence is not deductible, but if
you add a second line for a fax machine or an 800 number for your business,
you’ve found another deduction.
Be sure to keep track of all expenses for ofﬁce supplies—pens,
pencils notepads, printer cartridges, diskettes, scotch tape, paper clips, ﬁle
folders, labels, a calendar, an appointment book, scissors, a rack to hold
current ﬁle folders. You can even deduct the cost of air, if you buy it in
compressed form and use it to clean your keyboard. (I use mine to chase the cat
off the desk, but the principle is the same.)
advertising. Anything you have printed with the name of your company or the
name of your next book can be deducted as an advertising expense. Of course
you’ll have a supply of business cards, but you can also use the same size card
to announce an upcoming book. (I just had some printed with a picture of “The
Second Mouse” on them. I have a second set of half-size business cards with
photographs of Beaufort, SC, on them to advertise my next novel, The Road to
Frogmore.) Both were deductible, as are bookmarks that match your book
covers or brochures telling dealers and bookstores how they can order your
Much of your book budget will go for travel—to research libraries,
book signings or writing conferences. If you travel by car, you can deduct the
exact mileage, so long as you keep a log or record of the odometer. You’ll be
asked for details of the car’s purchase price, its year and model, its VIN, and
its total mileage, so keep them handy. You’ll be able to deduct 50 to 55 cents
a mile if your travel is purely for business. I bought a magnetic company sign
for under $10.00. On business trips, I slap that on the front door of the
family sedan and turn the entire trip into a business expense. You can also
deduct hotel bills, parking fees, and bridge or road tolls if you keep records.
you’ll need to keep careful count of the books you order for resale. With a
print-on-demand contract, you don’t have to keep a huge inventory on hand, but
you’ll need a constant supply of printed books to give away, to send to book
reviewers, to sell to your friends, to take with you to speaking engagements,
or to enter into book contests. You may be asked to report your sales and to
pay sales tax, so you’ll need to account for every copy you purchase. Be sure
to check with your municipal and state laws on sales tax. In my state, you
don’t have to report sales for tax purposes until your sales go over $3000.00,
but that may not be so for where you live. The ones you sell will cost you a
bit, but the ones you give away can be deducted.
For many authors, these expenses can mount up to a tax deduction
of several thousand dollars. Just remember that you are expected to be earning
a proﬁt after ﬁve years of effort. If you are making money, you can only deduct
expenses that exceed your income. If you are not making any money after ﬁve
years, the IRS will tell you that writing is now just your hobby and deny any
deductions. It will be time to declare your real occupation as fry cook or
Establishing your own business has tax advantages. Once you have a
plan and a named business, you can declare it as a “sole proprietorship” on
your income tax and start taking deductions for all those expenses. The biggest
deduction will come from establishing your home ofﬁce as your principle,
regular, and exclusive place of business.
What does that mean? Well, basically,
no more writing at one end of the dining room table and then shoving the papers
out of the way to serve dinner. You must have a clearly deﬁned space in which
you conduct all the activities associated with your business—writing,
researching, editing, advertising, shipping. It does not have to be a large
space. You can ﬁt an ofﬁce into a large closet, a cubbyhole under the stairs,
in the basement or the attic, or into a section of a room that is clearly
separated from all other activities there. It simply must be used for your
business and for nothing else. You’ll need a desk, a ﬁling cabinet, and—most
important—a place to keep everything separate from the other parts of your
I was fortunate to have my own space already designated. When we
moved into our new condo, we had the builders convert what started out as an
open den area into a third “bedroom” with a small closet. My husband had
already claimed a smaller room as his place to work on all his Lions Club
business. This new room was to be mine. It has evolved into a cozy hideaway
that makes a perfect home ofﬁce. My initial requirements were these: a door
that closes, lots of natural light, phone and computer cable connections, and a
few creature comforts. I furnished it ﬁrst with bookcases and a large slab
table to serve as a computer desk. And here’s what it holds at the moment. I’ve
added risers at the back of the desk slab to lift frequently used ofﬁce
supplies, the printer, the cable modem, the backup drive, and other components
off the main desk. Two low ﬁling cabinets ﬂank the desk to hold research ﬁles and
other supplies while providing additional space to stack stuff. The closet is
now full of industrial shelving to hold overﬂows of books, ﬁles, shipping
supplies, and extra computer elements. An upholstered rocking chair and a ﬂoor
lamp positioned between the accordion folding doors of the closet provide a
hidden reading nook. A futon, full of pillows and a fuzzy throw, waits for the
moment when I really need a quick nap.
The atmosphere is welcoming. The walls are painted a bright,
energetic tangerine. A magnetic white board allows me to leave notes or pin up
interesting pictures or publicity clippings. The large picture window opens
onto a grove of cedars and cypress trees. The rocking chair sits on its own
little oriental rug, and a modern lamp gently lights my desk area. On the
walls are a few award plaques, my diplomas, and a huge etching of St. John’s
College, Oxford, where I was lucky enough to teach for three separate summers. Scattered
around the room are a few stuffed animals from special places—a bear from
Gettysburg dressed as a Union soldier, another dressed as one of the palace
guards from Buckingham palace, the ragged little puppy from Poogan’s Porch in
Charleston, and the stately lion from the Biltmore estate.
Finally, there are the reminders of the purpose of this particular
ofﬁce. Sitting on the frame above the entry door is a cutout of a black cat,
looking exactly like the Katzenhaus cat from my business cards. A brass Civil
War cannon acts as a paperweight. The closet door sports a street sign that
says “Frogmore” in honor of my latest book. (And no, I didn’t steal it; I
bought it in a souvenir shop on St. Helena Island.)
The result is eclectic, but deﬁnitely my principle, regular, and
exclusive place of business. When I’m here, I’m working. Even the cats have
learned to respect the boundary of the doorway. They will wander in once in a
while, but only to curl up quietly on the ﬂoor or the futon, thus keeping it
Katzenhaus in fact as well as spirit.
It’s one thing to decide you’ll self-publish your new book. It’s
quite another to take all the steps necessary to become a publisher. Here’s the
point you must understand: publishing a book starts long before the book is
written. Publishing is a business, not an afterthought. So establishing a
business was my ﬁrst step.
A business needs a deﬁnition and a name. I started with the name,
something I could use as a publishing imprint on my books. I didn’t want
anything that would identify me too closely—not my name or a street address,
nothing too cutesy, but something that would lend itself to a neat little logo.
After coming up with several ideas, only to discover by way of a Google search
that the name was already being used, I looked around the room where I was
sitting and realized that all four of my cats were there keeping me company. My
ﬁrst thought was, “This is like living in a cat house.” Then, realizing the
unfortunate connotations of that word, I switched to German, coming up with
Katzenhaus Books and a simple black cat silhouette as a logo.
Next I asked myself what I wanted this business to do. The answer
was fairly straightforward. Katzenhaus Books would produce, publish, promote,
and sell one or more books of original historical ﬁction. It would remain
ﬂexible enough to expand into other book types. Perhaps eventually it would be able
to offer similar services or advice to other writers who were seeking
independent publishing choices.
Any business needs capital and a ﬁnancial plan. During my academic
career, I had relied on research grants to support the writing process, a
publishing contract to pay production costs, and a publisher to bear the
burdens of advertising and distribution. All I had to do was write. Now, all
those expenses came back to me. I started my ﬁnancial analysis by comparing
several years of our living expenses against our income to discover how much
discretionary income I had to play with. After deciding how much I could afford
to risk on this venture, I did some research on self- publishing companies to
estimate the total cost of a typical book. What I discovered was a wide range
of offers, depending on how much help I was going to need.
UPDATE: To get an idea of what the various publishing services cost, check out this chart from Bibliocrunch. You'll see that they can easily run into thousands of dollars, but in terms of the resulting quality of your book, the investment can be extremely important.
The next step involved an honest examination of my own knowledge
and abilities. I had easy access to most of the research materials I would be
using, so I would not need to do a whole lot of initial travel. I’m a
professional historian, a pretty good writer, and an experienced copy editor.
Writing was not going to be a problem. Advertising and distribution remained
question marks, but I had some experience in doing book signings and conference
presentations. I was also an experienced webmaster. When it comes to book
design, on the other hand, I’m pretty much out of my element. While I might
have an idea or two about how I wanted a particular book to look, I was going
to need someone to do the actual cover and interior layout. It appeared that I
could afford to pay for some contracted design services and handle production
costs out of the nest egg I had identiﬁed. Then I worked on establishing a book
price that would make it possible to re-coup my expenditures.
My private resolve was to
produce the book I was eager to write within the next two years. Then I needed
to sell enough copies first to restore the savings account and then to accumulate
enough of a cushion to ﬁnance any future book. I gave myself an estimated
eighteen months to two years to accomplish that. If, at the end of four years,
I had not made a proﬁt, I would retire from the publishing business and take up
knitting or crossword puzzles.
That left only two more things to be taken care of. The first was easy. On my next federal income tax form, I simply declared myself a "Sole Proprietor" business. The form does no require "proof" of any kind beyond a few simple questions about the year you started the business, its name and category, and contact information. That's it. You've become a business owner.
Next I checked with my county clerk's office to see if I needed a business license. I'm not offering legal advice, here, because your state may have different laws. I learned that I did not need a business license in Tennessee so long as I did not have sales that amounted to more than $3000.00. The amount does not not include royalties, because you do not owe a sales tax on books that someone else sells. I did pay a $15.00 fee to register my business, but that was the extent of my responsibility.
Creating a business is really easy. Don't fail to do so.
We're going to be talking about business matters for the next several days. My comments will be addressed primarily to those who are indie writers, but even if you have a traditional publisher, you must start thinking in business terms. Here's why.
- If you think of your writing as a business, you are less likely to find yourself involved in legal technicalities. You'll be dealing with contracts all along the way, whether with a traditional publisher or with separate individuals who offer publishing services for hire. "New Press" seems more trustworthy and more likely to pay its bills than "Susie Newwriter."
- If you use one of the book production firms, they will offer you the option of listing your company as the publisher of record. if you don't have one, they'll add their own imprint, and all too many people see a book published by "CreateSpace" or "Lightning Source" as a mark of inferiority.
- Letting the printer put their own imprint on your book could cause copyright problems and control issues down the road.
- And if your book turns out to be a bestseller, someone may want to turn it into a film. In that case, you may find yourself in need of legal standing in order to negotiate your rights.
- Businesses are able to claim all sorts of deductions for their expenses. If you have not formally declared yourself a business, writing is just your hobby, from which you happen to draw a little income. And hobby expenses are not deductible. We'll look at the details of deductions later in the week.
- Further, if your hobby proves makes a little money, you may be required to pay a self-employment tax on the income, and that tax rate is extremely high. Without legitimate deductions to balance the income, your "hobby" may well cost you much more than it brings in.
- Businesses can also purchase their own ISBN numbers for their books, and business ISBNs are about five times cheaper than the one you get by allowing a book production company to provide one.
- In addition, an ISBN number identifies your publisher to people like bookstore owners, which brings us back again to the issue of legal credibility.
- Advertising a book with a publishing imprint is more acceptable and more successful than just pleading with your friends to buy your book.
- If you allow yourself and those around you to think of your writing as just "something you do in your spare time," it's going to take a back seat to everything else in your life. If it's your business, you are much more likely to devote regular hours to doing it.
- Keeping careful business records of your income and expenses provides you with daily motivation to keep the bottom line in the black.
- The very idea that you have a real business will encourage you to do other business-like things, such as creating a logo and branding yourself on social media sites.
- Almost by definition, a publisher puts out more than one book. If you think of yourself as a publishing company, you are much more likely to continue to write and put out other books.
Just this past weekend I ran into a couple of writers who seem to be destined to become one-book authors because they have failed to make this transition to a business model. One kept denying that he ever intended to make any money with his book; he just wanted someone to read it. Without any other goal, he's not headed anywhere. The other protested that she had no time to write because she was promoting her first book. That's rather like a factory owner locking the door to the factory in order to concentrate on selling the first production run. What happens down the road? Nothing!
Now let's take a
look at all the publishing options and see how they compare.
1. Traditional Big-6 Publisher (Hachette, HarperCollins, Macmillan, Penguin, Random House, Simon&Schuster):
they will lend great prestige to your book, and they will do the heavy
lifting of editing, design, promotion, and distribution.
- But, you
will lose most of your control over the book, and their royalties tend
to be very low in order to support all their services. In addition, you
first need to have an agent, and you can expect them to be extremely
selective in what books they publish. They will always support an
already-contracted author before someone whose work is untested.
2. Small Publisher:
there are thousands of them in competition, and most will be willing to
read your manuscript without an agent. They also tend to be quite
supportive of their authors.
- But, they have only limited funds,
and sometimes limited knowledge of the publishing business. Quality can
be "iffy." You will have to do most of your own promotion and selling.
they may offer help with editing and layout, and they probably will not
turn you down, no matter how bad the book really is.
- But their
pricing is often out of line, and they will require you to buy the whole
print run and then distribute and sell the books on your own. How big
is your garage? Can you sell 5000 copies to your friends? You do NOT
want to do this!
4. Print-on-Demand (POD):
they, too, will not reject you, and their books are usually of fairly
high quality. Plus, you do not have to buy any books before they are
- But they, too, carry a high price tag, and book stores will
not take a chance on their books because unsold copies cannot be
returned. Authors who go with some POD companies fail to sell a single
- Yes, this method gives you total control over your book because you are solely responsible for EVERYTHING! You also get to keep all of the profits..
how much do you know about editing, cover design, page layout,
bookbinding, marketing, and distribution channels? Poor-quality books do
not sell, no matter how good the content may be.
Independent Book Producers (CreateSpace or LightningSource):
these two companies are reliable, fast, accurate, and helpful. They
succeed because CreateSpace works with Amazon, while LightningSource is a
subsidiary of Ingram, the largest book distribution company. If you can
do the preparatory work yourself, they will print, bind, and distribute
your book at no cost to you. They also offer complete publishing
services, from editing to advertising if you need help, although these
services come at high cost.
- But while their royalty rates are
quite high, up to 75-80% if they sell your book out of their own online
store or as an ebook, their sales at regular brick-and-mortar bookstores
are dismal because books are not returnable (the old POD curse). And if a
store does manage to sell one of your books, you'll need a magnifying
glass to find the royalty. CreateSpace just sold a copy of my $17.95
"The Road to Frogmore" through a bookstore order, and my share came to
$0.18 -- yep, that's 1%!
7. Ebook Publishing:
there are a lot of advantages to this style. Ebooks sell well these
days, and although their prices are low, they make up for that in
volume. By selling only ebooks, you completely avoid the costs and headaches of production
and distribution. It's also easy. Amazon will walk you through the
Kindle conversion and Smashwords.com provides complete instructions on
how to format your computer file to suit all the other ebook channels
(Apple, B&N Nook, Sony, Kob, etc.) Even if you need formatting help,
you can hire it for well under $100 a book.
- But, there are people
out there, still, who want to hold a book in their hands. You may be
one of them; authors often need the satisfaction of holding their books
in their own hands. And bookstores are not dead yet. Can you hold a
book-signing or a launch party for something that only exists in the
ether? Putting your book out only as an ebook keeps many people, including reviewers, from fully appreciating it.
There you have the choices. My choice was a combination of #6 and #7. I have used CreateSpace to produce my last four books and have been entirely satisfied with the results. They have also handled my ebooks on Kindle. For the other sales channels, I turned to Smashwords, and as a result, Barnes and Noble now sells almost as many of my ebooks as Amazon does. Of course, as an indie writer, i still had a lot of work that only I could do. So next week we'll talk about how and why independent authors need to think of themselves as a business.
ADDENDUM: Today I ran across a publishing column by Penny C. Sansevieri in which she took up the fight to make independent publishing a norm rather than an afterthought. She ended with this challenge:
Welcome to the revolution. If you're just showing up to the battle we
welcome you, if you've been here for a while we're grateful that you're
still here and for those of you still uncertain, still thinking that
you'll wait it out and see if you can get a big name interested I wish
you all the best. Just remember, while patience is a virtue there's
nothing in the world like seeing your work in print, your words on a
page bound and ready to find readers. And ask yourself: are you waiting
because you really want a big name behind your book? Or are you waiting
because you're not sure your book is good enough? There's only one way
to find out.