4 Tips to Documenting Your Book Advance
One of the best moments for a writer is to get a manuscript accepted. The second best moment is getting an advance.
On average, a book advance runs between $5000 - $20,000, which is broken out across several payments.
You want to make sure you keep stellar records of your advance payments for tax purposes. How should you document your book advance? Keep reading to find out.
On average, a book advance runs between $5000 - $20,000, which is broken out across several payments.
You want to make sure you keep stellar records of your advance payments for tax purposes. How should you document your book advance? Keep reading to find out.
1. Know What Publishers Will Do
Do you know how an advance works? A book advance is a way for publishers to pay you for royalties before your book is published. This is based on what the publisher thinks how many copies will be sold.
Your book may do better than previous estimates. In that case, when your book sells above your advance, you’ll receive royalty checks.
Publishers will treat writers like an independent contractor. You’ll receive a check for the advance, which will probably be sent via check or direct deposit.
If it’s sent by direct deposit, you’ll have no record of this income until the end of the tax year. In January before you pay taxes, you’ll get a 1099-MISC form from the publisher. That will detail the total amount of payments made to you.
Your book may do better than previous estimates. In that case, when your book sells above your advance, you’ll receive royalty checks.
Publishers will treat writers like an independent contractor. You’ll receive a check for the advance, which will probably be sent via check or direct deposit.
If it’s sent by direct deposit, you’ll have no record of this income until the end of the tax year. In January before you pay taxes, you’ll get a 1099-MISC form from the publisher. That will detail the total amount of payments made to you.
2. Understand Tax Obligations
The first thing to note is that if an employer gave you a 1099-MISC, you can bet that they reported your income to the IRS. You have to pay taxes on income above $600.
In a 9-5 job, your employer withholds money for state taxes, federal taxes, social security, and Medicare payments.
Your publisher is unlikely to do that because you’re technically an independent contractor. You’ll be responsible for the taxes yourself. You’re going to have to pay 15.3% for social security and Medicare, plus your state, local, and federal income taxes.
In a 9-5 job, your employer withholds money for state taxes, federal taxes, social security, and Medicare payments.
Your publisher is unlikely to do that because you’re technically an independent contractor. You’ll be responsible for the taxes yourself. You’re going to have to pay 15.3% for social security and Medicare, plus your state, local, and federal income taxes.
3. Prove Income Without 1099-MISc
When you are applying for a loan, credit card, or an apartment, people want to see proof of income. How can you do without a 1099-MISC?
You can create paystubs using PayStubCreator to do that. With this type of tool, you’ll also be able to estimate how much you should withhold for your taxes.
You can create paystubs using PayStubCreator to do that. With this type of tool, you’ll also be able to estimate how much you should withhold for your taxes.
4. Set Aside Funds for Taxes
The best way to prepare for tax season is to document your book advance and set aside funds for taxes. You don’t want to spend that money and think you can make it up later. Set up a separate savings account and put that money aside as soon as you get paid.
Documenting a Book Advance is Easy
You finally made it as an author. You got a book deal and an advance on royalties. You’re excited, but before you go on a spending spree, you need to take a couple of things into account.
You will have to pay taxes on your book advance, which makes it all the more important to document your payments. You can create paystubs for yourself until you get a 1099-MISC from your publisher. That will enable you to estimate your taxes and prove your income.
Do you want more lifestyle tips? Check out this site again for more helpful articles.
You will have to pay taxes on your book advance, which makes it all the more important to document your payments. You can create paystubs for yourself until you get a 1099-MISC from your publisher. That will enable you to estimate your taxes and prove your income.
Do you want more lifestyle tips? Check out this site again for more helpful articles.
