I’ve finishing filing my taxes today. This year was particularly painful. Last year I moved jobs, had a second job, and overcontributed to my Health Savings Account (HSA). All this translates to not-simple tax situations, which means additional paperwork (UGH). I would much rather be doing this:
While I was being a Responsible Adult, with much grumbling, I daydreamed about alternatives. You know, having a different life. Anyone who loves writing at least once dreams about being an author. As in, a writer who gets paid writing and sellings books. I certainly day-dreamt about the possibility. Only, I couldn’t just leave it at daydreams. So I girded my loins and went looking.
Here are some things I found out from my bout of Researching Things To Death:
What You Need to Do to be an Author in the US (Besides Writing)
- Treat being a paid writer — an author — the same way you treat running a business. This means,
- Declaring yourself as a business owner. In the US, this means getting a FEIN (Federal Employer Identification Number) and registering your business in your resident state.
- Requirements for businesses differ from state to state. Some may require you to get a license to be an independent writer. If you want to sell books, you may need to get a trader’s license — the license to sell goods — in each and every state you want to sell them (Yikes!). I asked a nice lady lawyer at a small business class about this thing, and this was her answer.
- Pro-tip: when you apply for a FEIN, you’ll be asked to select a Federal Business Code. Pick 711510. It’s for independent artists, writers, and performers. It will reduce the chances of an IRS audit when you file your Schedule C. The IRS uses the business code to evaluate whether your expenses make sense.
- Irrelevant note: having a FEIN with code 711510 will make you LEGALLY a pro-writer! Booyah!
- Once you have all the above squared away, you need to conduct yourself like a business. This means quarterly tax estimates, property taxes (because you will likely use a computer to conduct your author business, and a computer is an asset that a state can tax, I kid you not), income statements, and other bookkeeping and recording as the law requires.
Yikes! As if writing a good book wasn’t challenging enough! Reality has a knack of turning out to be more complicated than our childhood dreams.
Now call me a sissy, but I think the odds of “making it” as an author are low, the stories of successful indie authors who sold a million+ copies through Amazon KDP and/or making six to seven figures a year notwithstanding. I’m all too aware of Survivorship Bias. What are the untold tales of wannabe authors who didn’t do as well as they hoped? Also, is selling the true measure of an author “making it”? I don’t think so.
Regardless, the busywork required to be a paid writer, on top the steep challenge of writing good stories, is enough for work-lovers like yours truly to take a step back. What to do?
Meet the Challenge With F*** You Money
I came across the concept of F*** You Money when I was trying to understand investing years back. F*** You Money is assets that let you live without a paycheck for an extended period of time. Or, more generally, the pile of cash that reduces the downside of loss. Some call it their Independence Fund or Freedom Fund.
The Health Savings Account I mentioned earlier? It’s part of my F*** You Money.
Full-time authors are dependent on readers buying their books for income. That’s a lot of pressure and volatility to stomach, and I’m not sure my delicate constitution can handle that. I’m also too practical to assume my bills will somehow take care of itself. The same practicality and hard-earned wisdom gained from the 2008-2009 Financial Crisis says I will not always have a job. I might be in demand now, but that’s no guarantee I will be so in the future. Hence, F*** You Money.
I’ve accumulated a modest amount. Not enough to live a life of frugal leisure, but enough to buy me several job-free years. You can spend your money on a lot of things, but investing in Financial Freedom is one of the much better options. The freedom to create as you see fit.
I may never make it to the bestseller list, but I’ll never have to depend on book sales to make a living.
Going back to taxes, it looks like filing taxes as an author will suck more than filing taxes as a run-of-the-mill IT Professional. Just saying.