Tax season is rapidly approaching, and for many authors, April 15 feels less like “Spring is coming!” and more like a deadline of doom. Author income rarely looks like a normal W-2 paycheck. You might have Amazon deposits, Ingram payments, audiobook royalties, Kickstarter funds, affiliate income, speaking honorariums, coaching fees, Shopify sales, and more.
That does not even count your expenses, which may or may not be deductible. Your receipts may be scattered across email, PayPal, bank statements, and other platforms. If you are not careful, “I’ll deal with it later” turns into “It’s April, and I don’t know where to start.”
Many authors are so afraid of doing their taxes wrong that they end up paying the maximum in taxes just to cover their bases. That approach puts those authors at a huge disadvantage.
Paying more than your fair share means less money for advertising and marketing, which means fewer book sales and even less money.
How do you manage tax season without having a panic attack or ending up in jail for tax fraud?
I asked Seth Norris. He is a certified public accountant who works specifically with authors.
How should authors handle bookkeeping?
Thomas: Tax time doesn’t have to be stressful. Taxes are not fun, but if you are well prepared, they are not a surprise. Let’s talk about bookkeeping. How do you track the money coming in and going out so tax prep is not a panicky mess?
Seth: It really matters what you want to use your bookkeeping for. Some people are not trying to analyze numbers or read the tea leaves. They just need income and expenses organized so they can file a tax return.
That kind of bookkeeping is different from what someone needs if they want ratios, KPIs, projections, and forecasts. If all you want to do is track income and expenses for taxes, you can use something like QuickBooks. It is probably overkill because it includes invoicing, inventory, accounts receivable, and accounts payable, which you may not need.
But it is like McDonald’s. It is not the best, but everyone uses it. Because everyone uses it, it integrates with the most banks and the most software. Sometimes that makes it the easiest option.
At a bare minimum, if someone says, “It’s already January and I haven’t done anything,” you can go to your online banking, download an Excel spreadsheet of all your business transactions, and start there.
Add a column and start categorizing. If it is a deposit that is income, label it income. If it is money you personally put into the business, label it that way. Do the same for expenses. You can give that to your tax preparer or use pivot tables or simple formulas to create your own profit and loss statement.
What bookkeeping software works best for authors?
Thomas: If you need help with Excel, I will say that ChatGPT and Grok are very good at handling that complexity. The tool I really like is Xero. If I were starting over as an author, that’s the one I would choose. It costs around $2.50 per month for the basic plan, and the most expensive plan is about $9.00 per month.
Compare that to QuickBooks Online at around $40 per month. Xero is much easier to use. You can take pictures of receipts. Much of the extra complexity in QuickBooks is not useful for authors. Paying for inventory tracking and other features you will never use is not worth it.
Every accountant I know likes QuickBooks.
I hate it with the passion of a thousand suns. All the CPAs in my life—my dad, sister, and brother-in-law—like QuickBooks.
Seth: I hate Intuit, the company that makes QuickBooks. I think they are evil, and I do not like using it. But because most people are familiar with it, we default to it.
I have used Xero, and I agree that it’s cheaper and more straightforward. But for someone used to QuickBooks, Xero can feel like a big paradigm shift.
Right now, we are excited because more mid-market software is coming out to compete with both QuickBooks and Xero. One of them is called Kick. One advantage of Kick is that it supports authors who have multiple entities or income streams. It brings everything into a single interface while keeping each business separate, which makes transfers between entities or personal and business accounts easier to track. It also uses AI to simplify the process.
I was not blown away when I tried it, but they are making improvements. Give it a year or two, and QuickBooks and Xero will not be the only players.
How often should authors update their bookkeeping?
Thomas: I log into QuickBooks weekly to make sure everything is categorized. I used to check two or three times a year, and I could never remember what a $23.14 transaction was for.
When I do it weekly, it takes almost no time. I remember everything. If I do not remember a transaction, that is a red flag for fraud or an illegitimate charge. Checking in weekly means that if there are problems, you’ll only have to look for mistakes you made during that week. If you only check in every six months and end up finding a fraudulent charge, you may have trouble getting a refund for a fraudulent charge that happened six months ago.
Working it into a routine really helps. I like to do it on Mondays because it motivates me to work hard. I see the numbers and think, “I need to work to provide for my family.”
Another tip is to connect your bookkeeping software to your business bank account and credit card so transactions pull in automatically. Most banks will give you an additional bank account at no extra cost.
That separate account usually comes with its own debit card, which shows that money in and money out is clearly business related. You simply choose one card for business and one for personal expenses.
A lot of tax trouble comes from mixing those up. When the IRS questions whether something was personal or business, and you realize you used the wrong card, that is what gets people into trouble.
Do I need a separate business account?
Seth: If you are an LLC (I am not an attorney so this is not legal advice) the LLC can provide liability protection for your personal assets. If you mix business and personal income and expenses in the same account, it all starts to look like business income and could be subject to claims.
Thomas: I took a business law class a long time ago, and my professor put the fear of God in us about two things. One was never forming a general partnership. The other was never piercing the corporate veil.
A lot of what we are talking about assumes you are running a business. Bookkeeping is something every author should do, and really every human should do. You should know the state of your finances. People who do not track their money tend to lose it. That is ancient wisdom.
But for many of the other tax topics we will discuss, the IRS has to see you as a business, not a hobby. Writing can be either. It may start as a hobby and then become more serious.
How does the IRS decide if writing is a business or a hobby?
Thomas: There is a point when you see yourself as a business, and a point when the IRS does. Let’s talk about that. What factors does the IRS use to decide whether you are a business and can take deductions?
Seth: If you are seen as a hobbyist, you cannot deduct many expenses. After the Tax Cuts and Jobs Act, you generally cannot deduct any expenses for a hobby, even though the income is still taxable.
The key factor the IRS uses to determine whether they view your writing as a business or hobby is whether you had intent to make a profit. You do not have to be profitable yet, but you must intend to be. If you operate at a loss for several years in a row, especially in a field like writing, the IRS may question whether it is a hobby.
They may ask you to prove your intent to make a profit. Having a separate business bank account, business filings like an LLC, and good record keeping, like keeping receipts and maintaining clean bookkeeping is strong evidence of profit intent.
One automatic indicator that you are a business is having a profit in two out of the last five years. That is where the idea comes from that you cannot show losses for more than three years. That “rule” is not strictly true. You can show losses, but you need to be ready to prove your intent to make a profit during those years.
How can I prove I’m a business?
Thomas: Another way to prove your intent to profit is by having a written business plan.
One famous example, I like to use is Amazon. They were founded in the mid-1990s and did not show consistent profits until many years later. They even had a profitable week early on, and Jeff Bezos apologized to shareholders because the plan was to grow faster.
They traded profits for market share according to a clear business plan. When they eventually became profitable, they used those prior losses to offset taxes.
An author can do something similar. A business plan might say, “I am a professional author investing in research and development on my skills. For the first several years, I do not expect to make a profit.” In an audit, you can show that the plan never expected profit until a certain point.
Seth: That is true, but one thing to remember is that Amazon paid payroll taxes during that growth phase. If an author says, “I do not plan to make a profit for five years because I am attending every conference I can,” the IRS may still question how much of that was personal.
Research and development is a highly contested area. There is a lot of opportunity to get it wrong. I have a tax court case that illustrates this, but it is not family friendly.
Thomas: I think I know the case you mean. We will link to it for those who want to learn more.
Learn more about creating a business plan in my course The Tax & Business Guide for Authors.
What research expenses are actually deductible?
Seth: Imagine you are writing a book where the main character goes skydiving, and you decide you need to go skydiving to capture the experience.
That may be good writing advice, but the IRS would argue that you received personal benefit from that experience. Because you got that personal benefit, the expense would likely not be deductible.
On the other hand, if you paid a well-known skydiving instructor for an interview, bought them lunch, took detailed notes, and used that information to write your book, you did not receive personal enjoyment as a benefit; you only received information.
In that case, the expense would likely be deductible. The key principle is that anything that provides inherent personal benefit is generally not deductible, even if it otherwise looks like a business expense.
Is a business lunch still deductible?
Thomas: Let’s say I take that skydiving instructor out for lunch. I pay for lunch and say, “Tell me what it’s like to go skydiving.” I eat too, of course. That’s a business lunch. It should still be tax deductible, even if I enjoy the food. I don’t love “enjoyment” as the criteria for deciding whether something is a personal benefit.
Seth: That’s why meals are only 50% deductible. There’s an assumption you ate and enjoyed it, so only half the expense counts. If you enter $500 in meals, you automatically deduct $250. That’s already built into how meal expenses work.
Thomas: Could you apply the same logic to something like skydiving? “I enjoyed half of it.” Or what if you hated it? Do you have to be miserable to deduct it? Could you say, “I hated skydiving, but I did it for the book. I was terrified the whole time, but it informed what I wrote.”
Seth: That’s an interesting take, but how do you document that? If that were the rule, I could say, “I hate working out, I never enjoy it, but my character goes to a gym, so I hired a personal trainer.” Even if I hated every minute, I still received a personal benefit from the training.
Thomas: So being miserable isn’t a criterion. If you’re getting personal benefit, it’s probably not deductible as research and development.
Seth: Correct.
Does the IRS care whether writing is art or business?
Thomas: When the IRS looks at whether you’re a business, it’s looking at your overall approach to determine whether you are operating like a businessperson?
This is where authors can get in their own way. Some authors say, “This isn’t business, this is art. If I treat readers like customers, I’m diluting the purity of my work.” If that’s your approach, you should get used to paying lots of taxes.
Seth: That’s a good point. We’ve romanticized the starving artist to the point that some authors have a mental block, thinking that if their books become successful, they must have abandoned the art of writing.
But books can sell and still be artful and well-written. They don’t have to be Shakespeare, but if this is going to be a business, they do need to sell.
Thomas: Western civilization has gotten accustomed to ugly art, ugly buildings, and music people don’t want to keep listening to after its moment in the sun.
It’s okay to create beautiful things people actually like, and it is okay for people to pay for them. Popularity doesn’t automatically mean something is valuable, but it does make it more likely. From a business perspective, it’s literally valuable because people are exchanging money for it.
The IRS doesn’t usually care, although I have seen a court case involving an artist who lost money 39 out of 40 years and still won. Part of the judge’s determination seemed tied to the quality of the art. That one profitable year involved a legitimate gallery show and sales, and the artist argued the 39 years were about developing craft. The judge may not have wanted to be remembered as the one who told a famous artist, “You’re not a real artist.”
In some situations, quality plays a role.
Seth: I can see that, especially with visual art. You could have someone scribbling on paper, calling it a business, listing it on eBay, and claiming a trip as an expense. There has to be some distinction in how seriously you’re taking the work.
What signals “professional business” to the IRS?
Thomas: That goes back to pursuing quality seriously in a workmanlike manner.
Another signal that you’re a business is paying for feedback. Paying for professional critique or hiring an editor are both strong indicators that you’re approaching this like a business.
Hobbyists are less likely to want critical feedback. Hobbyists want flattery. They love ChatGPT telling them they wrote a heartbreaking work of breathtaking genius. A professional wants hard feedback that makes the work better.
Seth: That’s a great distinction. Don’t simply ask, “What would a business do?” Ask, “What would a hobbyist do?” and then don’t do that. A hobbyist probably won’t hire a cover designer, editor, beta readers, or pursue reviews. They write a story, put it on Amazon, and might sell a few copies or none. But don’t copy that approach if you’re trying to run a business.
Why isn’t there a simple checklist for being a “real business”?
Thomas: As you implement advice from the Novel Marketing Podcast, you’ll be more likely to be viewed as a business in the eyes of the IRS.
What’s frustrating is that we can’t give a black-and-white checklist. The IRS has a list of factors, and it considers them together. Some factors don’t apply to authors at all.
This is where hiring a CPA can be helpful. They can look at what you’re doing and help you assess whether you’re eligible for deductions.
And business deductions really matter.
If you’ve only ever filed W-2 income and maybe tracked charitable deductions, it’s easy to assume business deductions work like charitable deductions. Most peoples’ charitable giving is less than the standard deduction, so itemizing them doesn’t change much.
Business deductions are different. They go on a different part of the tax return. They can legitimately reduce your overall tax liability once you’re considered a business.
And to be clear, a deduction is not a credit. If you spend $2,000 on a business computer, you don’t get $2,000 off your taxes. That misunderstanding trips up a lot of authors.
How do business deductions reduce your taxes?
Seth: Remember that all your income from all sources is taxable unless the IRS gives you a way to reduce it. On the personal side, that might be the standard deduction, charitable donations, and sometimes vehicle interest.
For a business, deductions are expenses that are “ordinary and necessary in the course of business.” If you have $100,000 of business income, assume you’ll be taxed on $100,000. If you have $25,000 of deductions, you’re taxed on $25,000 less.
Unless you’re operating as an S corp or C corp, you’re also paying self-employment tax. That’s about an extra 15% on top of your regular tax rate.
That means, if you’re in the 20% bracket, you pay 20% income tax plus about 15% self-employment tax, which is roughly 35%. Add state tax, maybe another 5%, and you could be taxed around 40%.
That means every $1,000 you deduct might save you around $400 in taxes. Like you said, it’s not the full amount, but it reduces the income you’re taxed on.
What author expenses are usually “ordinary and necessary?”
Thomas: That “ordinary and necessary” standard matters. Let’s talk about some expenses authors are very likely able to deduct.
A classic expense is a laptop. Once you’re a business in the eyes of the IRS, a laptop is one of the safest purchases. You need your equipment to work. If your laptop fails during a critical interview or deadline, that’s a problem. It’s reasonable to spend more for something faster and more reliable.
I’d also include writer conferences, learning conferences, and events like the Novel Marketing Conference. Conferences are ordinary, most professional authors attend them, and they’re often necessary because so much networking happens in person. Writers are scattered everywhere. There isn’t a single geographic hub for writers as there is in some industries.
Software is another category. Tools like Vellum, bookkeeping tools, and software subscriptions or training that help you write or run your business are often deductible.
Advertising is another deductible expense. Paying for ads on Amazon or Facebook is often “ordinary and necessary.” I interviewed an author who spent a million dollars on ads to generate $10 to $13 million in sales. Those ad costs were deductible, which is key, because most authors aren’t that profitable with ads.
Seth: “Ordinary and necessary” also implies reasonable. With a laptop, yes, you need something reliable. Spending $2,000 to $4,000, maybe more, could be reasonable.
But if you go buy a $15,000 gaming laptop, the IRS could question whether it was reasonable to go that far beyond what you needed.
Would the IRS look at your return and say, “That laptop was too expensive, so we’re disallowing it”? Usually, no. The IRS isn’t seeing “$15,000 gaming laptop” on your return. It’s likely entered under supplies or equipment.
These questions tend to come up in an audit, or because something else on the return triggers scrutiny. The point isn’t “you’ll get audited and go to jail.” The point is that you need to be prepared to defend your positions.
Documentation is the most important thing. Document where you went, what you did, what you learned, and why the expense was for business. For research and development, document your purpose and how you used the information.
As silly as it sounds, in an audit, an expense that’s borderline but well documented can be easier to defend than a totally legitimate expense with no documentation. Audits are often about checking boxes. If the IRS asks for a receipt and you have nothing, they can’t check the box, even if it was business-related. If you can produce documentation, they can check the box, and they’re usually satisfied.
Thomas: Xero lets you take a picture of a receipt, attach it to the expense, and add a note right then about what the receipt was for.
Hopefully you never need to revisit it because you categorized everything correctly. But if the IRS audits you, it is never immediate. It’s often a year later, two years later, three years later, and you have no memory of the transaction in question. You can pull it up in Xero and say, “Oh yeah, here’s the receipt image, and here’s the note about what we discussed at that restaurant.” Now you can remember, “Right, that was a meeting with so-and-so. I was hoping it would lead to business, and it didn’t.”
That’s okay. The IRS doesn’t require you to be successful in every endeavor. If you were networking and hoping an agent would sign you, and they didn’t, that doesn’t retroactively make the meal non-deductible. A salesperson who could only write off successful meals would never go out to eat.
Seth: What you’re describing in Xero is built around Hubdoc. Hubdoc used to exist outside of Xero, and it works just like you said. You take pictures of receipts, or you forward emails, like an Adobe renewal notice, to a specific email address and it adds it to your account.
Xero bought Hubdoc, so it’s really well integrated now. QuickBooks has a receipt feature, and I use it when I can, but it’s not as sleek as Hubdoc. Hubdoc can route documents into QuickBooks too, if you’re entrenched there, but it’s tricky.
Thomas: Everything about QuickBooks is like that. Technically you can do it, but it’s extra steps, more complicated than it needs to be, and twice as expensive. That’s why I don’t like Intuit.
Seth: And Intuit is constantly trying to compete with accountants using their own software, which is a crazy dynamic. There are other options out there.
Even if you’re not using Xero or QuickBooks, look into tools like Hubdoc. Another is Expensify. There are many document retention and document management tools that capture receipts, use OCR to read them, and categorize them. Then you have everything ready if the IRS asks.
Should authors pay for bookkeeping software?
Thomas: Some authors don’t want to spend money on bookkeeping software. But I encourage you not to think of it as spending money. Think of it as buying more time to write.
You can do your bookkeeping manually, maintaining an Excel spreadsheet by entering every transaction in by hand, just so you don’t have to pay $10 per month.
But how much time are you spending entering every transaction? The IRS will take a spreadsheet. Your CPA will take a spreadsheet. But you will never get those hours back.
The computer software can do this automatically, and it’s only charging you a few dollars a month. Outsource that work. The computer is also less likely to make an error. Manual spreadsheets are error-prone. One wrong decimal, one missed digit, and now you’re chasing a mystery later because the numbers don’t add up.
Let the computers do the math. They’re really good at it.
Seth: One of the best ways to sell more books is to write more books. If you can buy back an hour each week by using software, or by hiring someone to do this for you, how many more books could you write in a year? That can more than cover what you spend on bookkeeping software.
What do I need to do when it’s time to file taxes?
Thomas: All right, we’ve been doing our bookkeeping, or we finally started, and this is the first year we’re doing it right. We’re categorizing things correctly and building good habits. Now it’s time to file taxes. What’s the next step?
Seth: It depends. If you’re doing it yourself, you pick your software. The most popular is TurboTax, which is also owned by Intuit. TurboTax is fine if all you have is a W-2.
The big issue is that it’s question-and-answer based. You can answer every question correctly and still end up with an incorrect tax return. I saw an example just last year.
If you’re using a CPA or tax preparer, you contact them and ask what they need. They’ll typically have an intake process. A more traditional preparer might send a big packet, an organizer, that you fill out and mail back.
A more modern firm, like ours, uses an online questionnaire. It can feel a little like TurboTax because it adapts based on your answers, but the difference is that a human reviews the information and prepares the return. The next step depends on how you’re getting your taxes prepared.
Can you do most of it yourself and still use a CPA?
Thomas: You can also do the work, then hire the CPA to review it.
It’s not as good as having a CPA handle everything, but if money is tight, another set of eyes can catch problems, like something that could flag an audit.
If you’re doing it yourself, you’re gathering the materials. For most authors, business activity is going on Schedule C. If you have an LLC, it often still goes on Schedule C. If you haven’t formed an entity, it goes on Schedule C.
If your business income isn’t going on Schedule C, you probably need a CPA. If you have a C corp, you’re past the “do it yourself” stage.
Most authors use an LLC because it’s flexible. I’m not giving legal advice, but it’s common. Most people keep it simple by reporting on Schedule C so they only file one return, personal income plus business income.
What does Schedule C include?
Seth: Schedule C is where you report business income and expenses. At the top, it asks for the business name (if it’s different from your personal name) and your tax ID number, along with other basic details.
Halfway down, it asks for income. If you made $100,000 in royalties or book sales, you enter that number.
There’s also a section for cost of goods sold, which is the cost of what you sold. If you’re dealing with inventory, you enter the inventory you purchased to reduce your gross income.
Thomas: For authors, inventory usually means books. There are other types of inventory, but for most authors your inventory is your printed books. Accountants call it inventory, but it’s books.
Seth: If you sell merch, like mugs or shirts that you store and ship yourself, the cost of those items is inventory too.
Below that is a list of expenses, generally organized by category like advertising, commissions, travel, meals, supplies, office expenses, and so on.
Look at your spreadsheet or your bookkeeping software and generate a profit and loss statement. It totals your income and expenses by category. Then you enter those totals into Schedule C.
If you spent $1 million on advertising, you enter that number under your advertising expense. Then you enter supplies, meals, travel, and the rest of your expenses.
There’s also a line for home office expenses, and I have a lot of opinions about home office deductions if we want to go there.
Thomas: My dad is big on the home office, not just for the deduction itself, but for what it enables with business travel.
Seth: Home offices are powerful, and they’re easy to get wrong. But yes, there’s a section for home office.
At the bottom, Schedule C subtracts expenses from income. If you had $100,000 of income and $25,000 of expenses, you end up with $75,000 of net business income.
That $75,000 flows from Schedule C to other parts of the return. Since the Tax Cuts and Jobs Act, it typically goes from Schedule C to Schedule 1, then from Schedule 1 to the front page of your Form 1040, where it’s added to W-2 and other personal income.
Thomas: You should be using software for this. The reason the tax code is so complicated is because companies like Intuit have an army of lawyers defending and complicating it. Every time a flat tax or simplified system gets proposed, those lawyers kill it because complexity makes them money.
Seth: The tax code doesn’t exist just to collect revenue. It’s also social engineering. Look at the incentives. You can’t deduct rent as a renter, but you can deduct mortgage interest. Businesses can deduct interest, but not dividends. Lobbying shapes incentives. The bank lobbyists are huge. They want those deductions because they encourage debt and impact the financial system and monetary policy. The tax code is not meant to reward people or be fair. It’s meant to pick winners and losers. It encourages certain behaviors and discourages others.
I heard someone say that before the mid-1980s, if you printed the tax code, the spine of the book was about the length of your forearm. Now, if you could print it all, the spine would be around 11 feet long.
I remember older paper returns. My mom used to get the packet in the mail, do the math, handwrite everything, and mail it in. That’s basically impossible now.
When is travel clearly deductible, and when is it clearly personal?
Thomas: My dad has an approach I like. He talks about the extremes where something is obviously deductible and obviously not, then works toward the middle.
On one extreme, travel that’s clearly deductible would be going to the Novel Marketing Conference. You get a workbook, you fill it out, and you end up with documentation in your own handwriting about what you learned. The travel, hotel, and conference costs are clearly business related.
On the other extreme is a family vacation to Disneyland for fun. Obviously not deductible.
Then there’s the gray area. Let’s say your book takes place in Scotland, and you want to see Scotland so you can write it accurately and talk to Scottish people. Authors can make famous mistakes that reveal they’ve never been to a place, and those mistakes can ruin the verisimilitude and create a PR problem.
Seth: I wish this were black and white, like there was a specific number or a clear threshold. Can you credibly argue you could not have accomplished the same thing without the travel? That’s the key question.
There was a court case, where a company sent executives overseas to do business in a place that was also a very vacation-friendly destination. The IRS challenged the deduction and essentially said, “You could have done this from the U.S. You could have used Zoom. You could have researched it remotely. This could have been an email. There’s no need to send your entire executive team to Thailand for a month.”
The same principle applies here. You need strong documentation that says, “Yes, I could have gotten some of this from Wikipedia or a subreddit, but it was imperative that I see this specific place, understand how it works in real life, and talk to locals. This is what I gathered, and this is how it shows up in the book.”
That can include notes like, “I went to this street corner, took this photo, and this description appears on page 426 in chapter three.” Those specific connections are what help the IRS see that this was not just something you could have copied from the Scotland Wikipedia page.
If that sounds like a lot of work for a deduction, that’s kind of the point. If it doesn’t feel like work, if it was mostly fun and personal, it reinforces the IRS’s argument that it was a personal expense and not a business expense.
What does defensible author research look like in real life?
Thomas: I read a post-apocalyptic novel set in a real city, and a key location was the police station for a small town. In the author’s notes afterward, he thanked that police station for giving him a tour and allowing him to see things firsthand.
You can see the front lobby in photos, but you can’t see the back rooms.
For that author, the travel to that town would be pretty defensible because it’s hard to argue he could have gotten that tour any other way. You can’t exactly call up a police station and ask, “Can you describe the jail cells for me?”
Seth: You can’t exactly say over FaceTime, “Walk me through your security apparatus. Where is the panel? It’s for a book, I swear. Also, go ahead and type in the code for me.”
Thomas: You’d be surprised how many doors open when you say, “I’m an author writing about your town.” Suddenly someone says, “Sure, we’ll show you the kitchen,” or “We’ll take you behind the scenes.” You’ll get details you can’t get anywhere else.
Seth: Not all travel is all or nothing. If you flew to a city for a police tour, stayed two nights for business, and then added personal days at Disney World, the trip can be split. The flight, business hotel nights, and your meals during the business portion may be deductible. The extra days and family expenses are personal. You just need to separate business travel from personal travel.
What is a per diem, and why does it matter?
Seth: For travel expenses, the IRS allows a per diem rate for certain expenses. Some locations are considered high-cost areas, so the per diem is higher than the standard rate.
Sometimes the per diem rate ends up higher than your actual expenses, and you can still deduct the per diem. You don’t have to keep receipts for those specific expenses, but you do need documentation that you were there for business.
Thomas: When I traveled and spoke at writers conferences, per diems were huge for me. I was single, didn’t party, and spent very little on food. I’d speak on websites, then go back to my room and sleep. Food was often provided by the conference.
My on-site costs were low, but the trip was totally legitimate business travel. Depending on the location, the per diem could be generous, and it became a meaningful deduction. I don’t travel as much now because I have small kids, but back then it was a great benefit.
Seth: Exactly. Per diem assumes you’re traveling solo and paying for your own hotel and meals. If it’s a high-cost city like Vegas or New York, hotel rooms can be expensive. But if you’re attending a conference with a group rate, or if some meals are covered, your actual costs can be lower than the per diem.
What mistakes get authors into trouble with the IRS?
Thomas: Many people only hire a CPA after they’re already in trouble. But a stitch in time saves nine. It’s better to avoid problems than to fix them later. What are the biggest mistakes you see authors make that get them into trouble with the IRS?
Seth: The biggest mistake authors make is reporting royalty income as royalty income. It sounds silly, but it matters.
There’s a specific place on the tax return for what the IRS calls “royalties.” Think of royalties like owning land where oil is extracted, and you get paid from a lease. Or perhaps you wrote a song decades ago and you still get paid, but you’re not actively operating as a musician.
The IRS is rarely clear, but there’s a sentence on the IRS website that is unusually direct. It says something like, “If you are in business as a self-employed writer, then royalties you receive are reported as business income, not royalty income.” That’s unambiguous.
But TurboTax will ask, “Did you receive a 1099 for royalties?” As an author, you will probably answer yes, enter the number, and the software categorizes it as royalty income, which is not subject to self-employment tax.
But book royalties should be business income, and that mistake can mean you underpay taxes because you avoided self-employment tax.
Even worse, I’ve seen authors enter royalties in both places. They enter the 1099 as royalties, then they also enter a profit and loss statement where the income includes those same royalties. Now they’ve paid tax on the same income twice.
We had a case like that last year. We amended the return and got back thousands of dollars because the author answered TurboTax questions the way most people would, and it still produced a bad result.
The number one mistake is treating book royalties as royalty income for tax purposes instead of treating it as business income.
What’s the biggest mistake that costs authors money?
Thomas: If you wrote a book 50 years ago, you’re not actively writing anymore, and a traditional publisher is still sending checks, that’s closer to what “royalty” means in the everyday sense.
But if you’re actively publishing, actively marketing, and especially if you’re indie, that’s business income. Amazon may call it a royalty, but that’s their terminology, not the IRS’s.
The biggest mistake I see is authors not tracking expenses because they assume they’re not a business and nothing is deductible. They think, “I don’t want to mess with this. It’s just a hobby.” But then they’re going to conferences, traveling to network, buying equipment, building websites, and making money.
That’s a lot of deductible activity. They end up paying thousands of dollars more in taxes than they need to. That’s trouble too.
Paying extra taxes for no reason is finding yourself in trouble without doing anything wrong. It’s no good.
Seth: It goes back to mindset. You’re a business owner. It’s okay if you’re also an artist. “Artist you” writes the book. “Business owner you” runs the business.
How can authors work with Seth Norris?
Thomas: A bookkeeper tracks transactions and keeps everything categorized. An accountant takes those numbers and applies the tax code to file correctly and reduce taxes legally. Some accountants offer bookkeeping, and some bookkeepers help with taxes, but they’re different skill sets.
What do you offer, and where can people find you?
Seth: We do bookkeeping, taxes, and business advisory.
Bookkeeping is organizing the numbers. Tax includes preparing the return, tax planning, and advising on tax strategy. Business advisory is broader support. I was a CFO of a bank for a few years, so if you want to grow, scale, and focus on cash flow, we can advise on that too.
The best place to find everything is AuthorCPA.com. It’s our hub. You can find our newsletter with weekly tips on taxes, bookkeeping, cash flow, and profit first. You can find our YouTube channel, Author CPA. There’s a contact form and a community.
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