If you're a first-time author, how would you know whether your agent is dispersing funds to you promptly? Does the publisher alert you when the check goes out?
A pal of mine who is also a publisher once told me about an agent that would call him up and say "where's my fucking money?" the exact day any kind of payment was due.
It became a joke between us such that *I* would call him and utter the phrase.
Of course, it cracked me up so much I barely got two words out before guffawing.
That said, if a publisher or agent is late paying you, it's no laughing matter.
When your money is due is spelled out in the publishing contract. If you are offered a contract to publish anything and it doesn't include a clause about when you will be paid, and when any royalty statements will be issued, get it added to the contract, or don't sign.
Payments made for on-signing, and on-publication are both date specific.
On signing is when both parties have signed the contract.
Unless specified it means the check for that amount should be remitted within about ten days. Often we get the check with the counter-signed contracts (counter-signed means the publisher and the writer have both signed.)
On publication payment is when the first edition of the book hardcover or paperback is published. Again ten days.
On delivery and acceptance is different. The manuscript can go through many edits. It might take months. A LOT of non-fiction takes years.
Royalty statements are made up (prepared) independently of the advance payments. They are calculated for a time period (generally six months in trade publishing) and issued to the writer some months later.
Example:
Royalty period January1-June 30 is sent to the author in October (all of the same year)
Royalty Period July 1-Dec 31 is sent to the author in April of the following year.
A competent agent knows when royalty statements are due.
I keep a spread sheet because I want to make sure that even if BigWheeze Publisher has sent royalty statements this week, I want to make sure we got them for all 12 clients published there, not just 10.
And thus, if you are a writer, and your contract says you should get statements in October, and you don't get them by 10/31, you email your agent and ask.
If the agent says "yup, just got 'em" or "yup, got 'em and they're being processed" you're good.
If the agent says "uh...I thought we got those" or "gee I guess I better call BigWheeze" you know you've got a problem.
You do NOT fuck around with a client's money or royalty statement. Never.
If your agent has received your money, the only reason it should not be on its way to you is that the check from the publisher has not cleared the bank.
If you have serious doubts about whether your agent is behaving ethically about money, you can get in touch with the AAR if the agent is a member, or the Authors Guild if you are a member. And of course, you can ask the publisher to pay you directly.
When I say serious doubts I do not mean that on 10/1/year you have not received a statement or a remittance.
I mean you haven't gotten one AFTER it's due, and AFTER you've asked the agent about the status.
And just a word of advice: never plan to use that money when it's due. Planning to pay your tax bill on 4/15 from money you expect to receive on 4/10 is asking for a snafu.
We've had publishers send checks to wrong addresses.
We've gotten paid for books that aren't ours.
Publishers have paid the wrong amount.
Publishers checks have bounced.
In other words, we all operate in the real world here, and leaving room for that will make you much much happier.
53 comments:
I'm changing genres (not that I ever picked one in the first place) because I want you for my agent.
Okay, so I'm going to sound really, really stupid but are authors handled as independent contractors, in other words do they receive a 1099.
May you request taxes withheld or does your accounting firm, Dewee, Cheatem and Howe, do that for you?
Ha, I should have such money dilemmas.
Now I've got the old folk song "Pay Me My Money Down" in my head.
Since taxes are still on my mind, how are taxes handled through the payments? Is anything withheld or is it up to the writer to keep track of all payments? Or is that something the agent also helps with?
THANK YOU Janet!
I love how just a few minutes on your blog leaves me SO much more knowledgable (dare I say 'wiser'?)
This is why you're the QOTKU.
This.
Thank you!!!
I can't be the only one who thought "Where's the money, Lebowski?"
Hopefully, my hypothetical future agent also enjoys that fine film. Because it is so, so quotable.
2NN's, my understanding is no witholdings or anything is done for writers, they must file as self employed. My understanding could be flawed, and believe me, I want somebody to tell me I'm wrong!
2Ns,, from what I know it's a 1099 no withholding. I think writers are expected to pay quarterly estimates (this is what the IRS expects everyone from anyone who gets paid with no withholding, because they assess a small penalty if you owe more than $1k come tax day). I've always wondered how you know what amount of estimates to pay for each quarter. I imagine once you start making money from writing a good CPA is your BFF.
I had the question about taxes too. I imagine that Lucie is right. It's going to be a 1099 situation. Getting paid to write- ah, such a lovely dream.
Great post, as usual Janet. And good questions from 2Ns and SiSi about taxes. I was going to wait until I had an agent to ask their advice on taxes, but I'd be interested to hear Janet's words of wisdom.
One rather important take-away from this: DON'T QUIT YOUR DAY JOB. Even if you get a big-dollar advance. You won't see all the money at once, and taxes may not be taken from it. Knowing how much my family lives by our family budget, I don't think we'll be ready to live off of advances and book royalties for a while. If ever! :)
Diane: funny. I completely missed that.
At my non-writing, paying job, I am considered self-employed although I do receive a regular monthly check for my work. I pay quarterly tax estimates as per my accountant, to the state and to the Feds. Since I've been doing this for 20 years now, it's no big deal. Each month I set aside a certain portion of my income to make the tax payments.
However, an advance would be irregular and royalties would vary. I'd be in touch with my accountant so we could estimate what would need to be set aside. Especially the lump sum of an advance. Because even a $10,000 advance would bump up your income for the year. And royalties? That would be a gradually accruing payment that would start small. (Unless you're like our up and coming NYTBA here at the Reef!)
I'll be interested to hear how our published authors respond to these questions.
Lisa, I was thinking about estimates and advances versus royalties, too. Since Janet said dates are fixed in contacts, a CPA should be able to look at the quarter you receive an advance in and adjust your estimate payments accordingly. I can't imagine how you factor is royalties, though, since they vary. I'm guessing writers use "safe harbor" (if you pay what you owed the year prior, no penalties if you end up owing more). I hope some of our published folks chime in!
A very helpful post that I aspire some day to need! One line cracked me up: "Royalty statements are made up (prepared) independently of the advance payments." Thanks for that parenthetical clarification. Otherwise, I'd be wondering about those made-up royalty statements and how close they are to reality!
Long ago, when the textbook I wrote was in print and selling, I got quarterly payment checks. There was no tax withheld, and I had a few years of adding a section to my taxes describing additional income from my profession as "author." It was great while it lasted! The checks never added up to more than a few bucks per hour that I spent on the book, but I dream of being able to do that again some day.
On a separate and loosely related note - our very own E.M. Goldsmith is doing the A to Z Blogging Challenge this month and has an absolutely delightful post today for the letter Q. It's chock full of inside jokes about the Reef and our beloved Queen. Check out the Query Pit!
EMG: love! Celia, thank you for the pointer. (I've been hiding from all the A to Z blogs, it's such a huge volume I am unable to keep up with all those I usually like to follow, so April's been kind of an opt-out for me for everyone doing A to Z.)
>>You do NOT fuck around with a client's money or royalty statement. Never.
One of the most common reasons the State Bar disciplines attorneys is misuse and misappropriation of client trust funds. My firm's managing partner reconciles his client trust account every month. It always gives him a headache, but he never misses a month. Glad to know that good literary agents treat their clients' money with similar, high-enough respect to warrant an f-bomb.
>>Publishers checks have bounced.
Ouch! Not a good sign.
I was self-employed for about 10 years. I remember my accounting sheet with “reserve for self-employment taxes”. Quarterly tax payments. And the much more complicated annual preparation of my tax forms. The good news is you can deduct quite a lot as a business expense. The bad news is the bottom line looks REALLY small as an annual income, but REALLY big when computing your actual tax liability.
Thank you for all of your continued wealth of information! I have been following you here and over on Queryshark for awhile now, and have learned quite a bit over the years. I wanted to let you know that I've included your site here, as well as a link to Query Shark, in my blog post for the A to Z Challenge: Q is for Query Writing (Part One). Here is the link if you want to take a look: http://blog.jhwinter.com/a-to-z-challenge-q-is-for-query-writing-part-one/
Julianne
Ink & Stitches - http://blog.jhwinter.com
Thank you for the mention, Celia. I loved writing that post. I am so in awe of our queen and all of you that hang about the Reef. Even on migraine day (working on a doozy today),this virtual place is such a comfort. And that there might one day be checks associated with my writing- oh to dream the impossible dream...This blog keeps me focused on my goals and demystifies the process.
I actually receive royalties for my co-authored treatise.
Lucie Witt is correct, at least in my experience.
I receive royalty checks in April and October with support saying what the publisher says is my book’s sales experience. (I always wonder about them since my publisher says we had modest sales while Amazon.com consistently ranks the book in the top 10,000 (it’s ranked number 6608 this very moment).
The checks are in the amount of the gross royalty amount (Well, gross royalty less returns). No withholding for income taxes, social security, etc. I put “0” exemptions on my W-4 at work , so I don’t have to worry about making those quarterly payments (My royalty payments haven’t come close to outweighing my employment income so I still get tax refunds).
I am responsible for self-employment tax when I fill out the Form 1040 each year. There‘s a form and the amount I owe gets added to my federal income tax liability on the Form 1040. Other than worrying how much money it will be, it’s not hard to complete the form.
Adding to Janet Reid’s comments:
If your royalty checks are large enough, I’d recommend stashing 20% of the money in a savings account so you will have the money available come tax time (Quarterly payments or annual return). I.e., don’t spend it all now and have to struggle to find money later for taxes.
Another reason not to commit spending your royalty money before you have it in hand is you don’t know how much you will receive. Your check may be three times what it was the same month last year; or, sob, it may be only one-third (or less) of what it was the same month last year.
Julianne's link: http://blog.jhwinter.com/a-to-z-challenge-q-is-for-query-writing-part-one/
E.M.: Unfortunately, your site is blocked here at work (I can't imagine what they object to with Alleysiande, but their filtering is rather broad and unpredictable) so I'll have to wait until I get home to read it. :)
"The rat looked in better shape than the writer, and the rat was three days dead."
One of the best first lines EVER!
It's on E.M. Goldsmith's blog post on Q today. See Celia Reaves comment above for the link.
I've only traveled part way down this road.
Yes, I got a 1099 from my agent. Yes, it would be SMART to do quarterly statements. I file jointly with my husband, who is also self-employed. He doesn't do quarterly payments, never has. Our tax person advises him to do this, but his rationale - he has no idea what he will make for the year. If he bases quarterly payments on his estimated income, it can fluctuate tens of tens of thousands of dollars - each year. Still, I've said, "yeah, but at least if you have to pay as much as we had to pay this year, it would take some of the sting out."
This year I was able to use Start Up expenses against the $ I made in 2015. These expenses (from five years) covered what I made and allowed for amortization of the rest.
I won't see royalties this year with the book coming out so late and payments being dispersed twice a year. I won't see them until we do taxes in 2018 for 2017. Like Joe said, I planned on putting aside XX % to cover taxes.
DAMN. I meant, I won't have to deal with taxes related to royalties as I won't see them until 2018 tax period. Something like that. This kind of stuff - although important - makes me want to drink heavily.
Burst out laughing when I saw the headline this morning. Thanks for answering my question (and making my morning), Janet.
Thanks, Janet, another post to be filed away for the future. My JRWWW folder is getting to be pretty fat with no plans for a diet any time soon.
When someone pays you at least $600 in a tax year (assuming you are not an employee), they must also send you a 1099.
I can't speak to what book publishers do, but I just made a short story sale to a market (my first pro-level sale) who specifies in their contract that they do not withhold any taxes, you're responsible for figuring that out on your own. I expected that, but it's interesting that they make a point of including it in the contract.
I did my taxes for the first time ever this year, and that was pretty terrifying. Any extra complications make me shiver. I guess that's a silver lining to not being published yet - my taxes are still pretty easy!
Side note - E.M.'s blog post is pure gold!
Colin, Treasure Chest for this one?
Oh yes, Colin, please treasure chest this.
And wow, your majesty, thank you so much for your kind words. I feel a bit like the writer in my story, just shy of giving up with a touch of envy for the dead rat. If not for this blog...
it states in my contract that we (the agency/agent and I) are independent contractors, thus no withholding and no taxes paid until I paid them. No different from how I get money from my galleries.
A gallery I used to show with quit paying their artists when the economy crashed. Fortunately I was not one of the ones to whom they owed tens of thousands of dollars. Several artists I know who also USED to show there, had to walk away from it. I don't know if legal action was ever taken. Mr Badger, my contractor friend says, "you have to remember that all that money that comes flowing your way, it's not all yours."
"Where's the money, Lebowski" Ha! My favorite movie of all times. I quote from it many times daily.
Carolynn, I went to a talk earlier this year about the lessons an author learned after 10 years in the business. One of her comments was to not go crazy with your advance because you're going to need it for taxes, including some you might not expect, e.g. it won't just be income tax. For example, I know local writers (really any independent contractors) are responsible for paying a tax to the transit district.
I'm only speaking for myself, but I think it pertains to many folks here. Writing is way way way harder than figuring out your quarterly estimated tax payment. Don't steal any of your writing energy worrying about your future quarterlies.
Now if you'll excuse me, I have to dispose of an empty rat poison box before dinner guests arrive. (I'm jus' channelin' Julie Weathers over here, my rat poison should concern you less than quarterly tax estimates.)
"And just a word of advice: never plan to use that money when it's due. Planning to pay your tax bill on 4/15 from money you expect to receive on 4/10 is asking for a snafu."
My dad died two years ago with everything already put in a trust so everything would be easy to settle. It's 6 months past the deadline stipulated to settle and the trustee has done nothing. There's a reason I haven't made grand plans. Life happens or doesn't. It usually doesn't when you need it to.
This is why people make me so nervous when they say they're going to quit their job and become a writer. It's their life, but I immediately do this.
When I worked for the magazine, we got paid every two weeks. Well, everyone in the office did. The editor and I lived in Texas and the owner refused to do direct deposit because it cost money. So, for twenty-three years we usually got our checks every two weeks.
Sometimes D. would call, "Did you get your check?"
"Nope."
"Me neither. Let me call."
"Where's our damned money?"
There were a variety of excuses. Usually, the bookkeeper had just been so darned busy, whereupon D would ask if she had also been too busy to write herself a check. If not she better sit down, write those checks right that damned minute and get them in the mail.
Checks would go out on time great for months then it was, "Where's our damned money? Did Fluff eat them?" (Fluff was the rabbit someone found injured and the office nursed back to health. It roamed the elegant offices freely.)
"No, of course not."
"Did East eat them?" (East was a champion race horse that had been rescued and lived at the facilities.)
"Of course not!"
"Then send those damned checks."
Trust me, you don't want to make plans for your check until you have it in your hot little hand and it's cleared your bank.
As Janet said, although horses didn't eat checks, they got sent to wrong address and returned even though we worked for them for years, paid the wrong amount and got calls telling us not to cash them, checks just magically poofed and never arrived. Poof the Magic Dragon ate my check!
IOW crap happens.
Julie, that's awful. My area is trusts and estates and I know how hard it is working with a difficult trustee. I hope it gets worked out soon. Two years is generally plenty for all but the most complicated of estates, even if estate tax is owed. I'm so sorry you've had to deal with that on top of losing your dad.
I swan, John. Why on earth would you think I would poison anyone's dinner? Good grief. Well, I guess there was that one time I had proper Miss Janet talk about poisoning her Pinkerton agent nephew's dinner, but that was justifiable. He's just so rude.
Regarding taxes, in my experience, yes, you get a 1099. No, they don't do withholding. You have to put on your big girl panties and plan for the future.
Some days I can't even compliment correctly. Julie, didn't mean to imply that you would poison someone's dinner. Except maybe the man eeling through your window, he seems maybe to have earned it. I was only trying to emulate you and start my scene over here ... and then continue it in chapter 32 over there.
But if I can get you swanning, I'm okay with my mistake. If I learned from half my mistakes, I'd be a genius by now.
I've done my own taxes when I had to. If there is anything beyond the basic 1040s and normal deductions, I would far rather pay a few hundred dollars[1] to an accountant to handle things. It's well worth the time saved and peace of mind. More often than not they find something I missed. This past year, I paid to have an author web site, social media, logo, and other brand-related things developed. It turns out you can choose to amortize that if you spend enough. I'd never have guessed that was an option.
[1] It's been anywhere from 200 to 600, depending on how complex things were that year.
It seems today's topic has become generally about money. So, let me ask... So far, I've not made a single penny from my writing, so I've not really felt justified in trying to claim anything tax-wise for it. Not even for pens and paper. Am I missing out? Or is it really not worth the trouble until I sell a story, or start paying for an agent's bar tab?
As Jennifer Donohue and Panda-in-Chief suggested, I would recommend tossing a ferret into the bathtub with anyone who is in any way slow to remit your money.
John,
No, no, it's not you. It's me. I was still operating sans coffee. Sorry. Now I have to wonder who you're poisoning and I'm sure everyone got it but me.
This is me doing my Frain dance here to hurry up the Frain novel.
Where you have to be most careful is if you live in a city and/or state with their own income tax. Some of them want a payment every quarter. Compared to that the IRS is easy( unless you have arrears with them).
The IRS usually only wants a quarterly statement. You can send them money quarterly but I would rather use that money to make more. The IRS does not pay interest if you pay them in advance.
It is always a good idea to hire an accountant if you are self employed or an independent contractor. It might also be a good idea to incorporate yourself if yor work goes wild.
Colin, I'd suggest talking to an accountant ASAP. You also might want to talk to an intellectual property attorney to assess whether you should not only claim your writing as a business, but whether to incorporate, as Craig suggested above, or create an LLC. Speaking to folks who know the ins and outs of these things can give you a good idea of when would be a good time to do all of that.
It can be pricey, so you might want to check out http://vlaa.org/get-help/other-vlas/. Chicago's Lawyers for the Creative Arts is is on the list and it's definitely legit (I've used them twice), so it looks like it's a good site to peruse.
Sorry - meant to say that the above link is a site for organizations that pair creatives with volunteer lawyers and accountants. Somehow that didn't make it into my comment (bad editor grrrrr).
Colin,
I found this link pretty interesting:
https://ttlc.intuit.com/questions/2314087-i-am-writing-a-book-to-be-published-in-2014-can-i-claim-expenses-for-travel-and-background-research
I'm no CPA but deductions are generally intended to offset tax you pay on money you earn, and if you don't earn anything from your writing there's no income to tax. I'm pretty sure until you get paid the IRS doesn't consider you a writer who can take deductions. Being a self published writer might be different.
Just to muddy the waters a little more, don't forget the joys of living in one country and earning money in another.
Lucie: Wow, that is an incredibly useful and informative site. Here it is linkified:
https://ttlc.intuit.com/questions/2314087-i-am-writing-a-book-to-be-published-in-2014-can-i-claim-expenses-for-travel-and-background-research
What you say makes sense. Though that article does make me wonder if there might come a point, even pre-published, when my writing activities and expenses elevate it to a tax-deductible status...
Another great information-filled post. Thanks, Janet!
Colin: I don't know exactly how it works in the US, but in Canada, you can claim expenses for a few years without making money. If, however, you don't make money after that, they figure you're a 'hobbyist' and thus they won't pay. I've been through that, and now I'm waiting to make money before I claim anything writing-related again.
On deducting expenses, the rule is this. You can deduct ordinary and necessary trade or business expenses. Alternatively you can deduct expenses up to your income from an activity that is not engaged in for profit (i.e., a hobby).
The question then is are you in the trade or business of being a writer or is writing a hobby. There is a presumption that you are in a trade or business if you make a net profit in 3 of 5 consecutive years from the activity. But you can be in the trade or business even if you lose money in the activity every year. The IRS gives the example of an oil wildcatter who keeps drilling dry wells. He can still be in a trade or business.
Here’s a summary of the IRS‘ view: https://www.irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor%3F
Joseph's link: https://www.irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor%3F. Though I believe this is covered in Lucie's article above.
Colin and Lucie
First the article you 'linkified" is excellent. Print it.
Second: Lucie, Deductions don't reduce your taxes directly (Those are called Credits). Deductions reduce the income on which taxes are calculated.
Third: Colin, The benefit of deductions that cause a loss in your writing activity is the loss can offset (reduce) your other taxable income. For example if you make money from dividends or wages or a boutique, a business loss from writing can offset your wage or dividend income. (and if you are married and you file a joint return, you can offset your loss against his or her income)
All this presumes your writing is a trade or business and not a hobby. (Discussed elsewhere)
Wow! Coming late to the game. I guess a major takeaway is that the more successful you are, the more complicated everything gets. Thanks for the info, Janet!
My small press publisher sends me a 1099 (or whatever tax form it is) to me at the end of the year. It's up to me to file my taxes. My publisher pays quarterly.
I'm a dual citizen, so I have to file 1040s for the US (because the US taxes its citizens, no matter where you live) and file Aussie taxes because that's where I live. (If I was an Aussie living abroad, I don't have to file if I'm not resident in Australia. How cool is that?)
Aussie taxes are easy to file. US taxes are a nightmare. Honestly, the US does everything the hard way, compared to the rest of the world.
While dual paperwork sucks, at least there's a tax treaty between the two nations so I only have to pay one set of taxes. I get foreign tax credits for the other set.
As for dealing with taxes as a self-employed author... Dunno what it's like in the US (as I have a stateside accountant do mine), but in Australia, I have an Australian Business Number (ABN) and when I make over a threshold amount, it's up to me to pay quarterly taxes during the year. Any time money comes in, I put the maximum tax aside in an (interest-bearing) account, then come next tax due date, pay that in taxes. Then when I file at the end of the financial year (30 June), I let my tax return reconcile the specific amounts.
Also, in Aus, artists and others of variable income can do something called 'income averaging' over the course of several years.
Still, I'm considering getting an Aussie tax accountant once my royalties start getting significant, especially as I plan on quitting the day job within the next fifty years.
I appreciate this question and Janet's answer - there are always so many when it comes to dealing with $$$.
We are self-employed, and pay taxes quarterly. We also have an accountant for the tougher questions.
But I want to add another factor that hasn't been brought up about hiring an accountant.
From experience, you want to make sure that you have the "right" type of accountant. Some will abide by every law to the "t" and will know new legislation, both federal and state, to save you money and keep you out of jail. Others fly by the seat of their pants and like to dangle in grey areas to see exactly how much they can get away with/save you money.
We always lean towards the "t" type. ;s
Joseph, thank you for the info, I **always** get deductions and credits mixed up. Thank god for CPAs and turbotax.
Seems like the takeaway is you can potentially take deductions before you're making income from writing, particularly if you have a day job, but that if you show losses for years it might trigger an audit. And if you are audited, you would want good records showing more than a hobby (maybe a record of queries and rejections, that kind of thing).
Please start repping middle grade. Please with sugar and sharks and chum and murder!
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