So you signed with an agent! How does the money flow in that relationship?
You signed a book deal! How do payments work, and how do you pay taxes on that?
It’s tax season! What can you write off?
I’m getting steady enough work people say I need an LLC! Do you need an LLC?
People often ask me for advice on how to handle the financial end of being an author. I want to preface this by saying two things: First, I am not a financial professional; my degree is in journalism. Second, I’m fortunate enough to write full-time so I am coming from a place of privilege here. Not everything I say might be useful, or even pertinent, but hopefully, some of it is.
That said, onward:
Understand how the agent-author relationship works. That’s if you want an agent. If you don’t, and you want to self-publish your work, good luck. I don't know that world as well. If you don’t want an agent, but you do want a traditional publishing deal, good luck because it is highly unlikely. Anyway, your agent takes a cut off anything they sell for you—typically 15 percent for domestic deals, 20 percent for film/TV. They will sometimes take out fees—like foreign bank transactions—but those are generally negligible. If an agent wants you to pay them, or insists you work with a particular editor you have to pay as a condition of taking you on, or places you with a publisher that charges you to put your book out… they are not a good agent. Money flows in one direction: agent to author.
Take 30 percent of everything you make and set is aside. Welcome to the world of being self-employed and paying quarterly taxes! Previously (more on that below) I had a separate savings account, and I took 30 percent from every check and stuck it in there. That way when tax time arrived, I was ready, and didn’t have to worry about finding the money. If it’s an interest-bearing account and you can make a couple of extra bucks, even better.
Put the dates for estimated payments in your calendar. This tax year they are: June 17, September 16, and January 15. You will forget. I have forgotten. When you put those dates in your calendar, set reminders, for at least a week prior.
Get a separate credit card for business charges. You get to deduct all your writing stuff as business expenses! I once worked with an accountant who said if you can explain to someone why you need it, and they don’t laugh, it’s a business expense. Some of the things I write off: hotel and airfare for conferences, books and streaming services, my cell phone, my internet, the square footage of my apartment I use as an office, computer equipment and software... The great thing about having a separate credit card for these expenses is that at the end of the year, when you have to tabulate everything, you don’t need to go looking for it. It’s right there, in one end-of-year statement.
Hire an accountant. This is one of the best things I ever did. My current accountant is the best. She set me up in Quickbooks, so all my stuff is logged automatically. She handles my taxes and helps me figure out estimated payments (this can get really hard when you know you have money coming in, but you’re not sure when). And she became especially important when I set up an S-Corp.
Look into S-Corps and LLCs. I’m not going to tell you that you need to do this, and frankly they can be a pain in the ass—I had to hire a lawyer to set one up, and then go set up a business checking account. I have to pay myself a salary, and there is always paperwork, and the tax system in New York is hell to figure out. But it’s a viable option and worth exploring, because in the long term I’ll save money on my taxes. Just know, too, that it’s going to create some headaches with previous work (I own the copyright for The Warehouse, not my S-corp, so when it was re-optioned we had to figure out who to pay, and how…). An accountant will be able to tell you whether this is worth it, based on what you’re making and where you live.
Maybe don’t quit your day job? There are still days where I yearn for the financial stability of a steady paycheck. It’s great when the checks are big, but when you only get a few of them a year, you have to learn how to stretch them out. Something else you don’t get from the writing life: health insurance! I pay $800 a month for a policy that doesn’t seem to cover anything. I know writers who make a livable income just from their books and still keep the day job for that security. If an opportunity came along that fit my schedule and conferred those benefits, I’d consider it. And in the meantime I will keep priming the pump by offering editorial services.
«Shameless plug: I offer editorial services like manuscript edits, query package reviews, and consult calls—more info here!!!»
Set up a retirement account. Also a thing you don’t get. This is something an accountant (or a financial advisor) can set you up with. The amount of money you make will determine what kind of account you have: a Roth IRA, a SEP IRA… there are a bunch of different kinds and I don’t entirely understand how they work but I also know one day I will be old and it will have been worth the investment.
Understand how payment structures for book deals work. You might think a $100,000 advance sounds incredible. And it is! Nothing to sneeze at! But that will be split into, usually, four payments: 25 percent on signing the contract, 25 percent on D/A (delivery and acceptance of the edited and finalized manuscript), 25 percent on publication of the hardcover, and 25 percent on publication of the paperback. This can and does vary! This is a broad example. But, that first payment is going to be $25,000, less your agent’s 15 percent, so, now it’s $21,250. Then you’re going to need to take out 30 percent to cover your tax burden, and you’re at $14,875. Signing and D/A can happen quickly, but it’s not uncommon for your book to be scheduled out by another nine months to a year. And then the paperback comes out a year after that. So you’re looking at a net of $59,500 stretched over at least two years. Best case scenario you’re making $29,750 a year. I can’t think of any place you could live on that. Again, maybe don’t quit your day job.
Know what you and your time are worth. A lot of people are going to want you to send them stuff and provide free labor. My policy has always been to judge it on a case-by-case basis. I’ll almost always do anything for a pal, or if it involves visiting or providing something to a school, or a fundraiser that’s for a good cause. If someone seems to be using my generosity to underwrite their good time, then typically, I’m out. The only thing I continue to do even though it annoys me are the conferences, where I have to book flight and hotel and entry fee and banquet ticket, and then hope really hard I get put on a good panel. The system seems a little whack to me, but that’s a whole other topic…
Don’t waste your money on bells and whistles. Sure, you can write it off. But you don’t need swag. Swag isn’t going to get you readers. Ever go to a conference and see all those tables full of the bookmarks and postcards no one ever takes home? Yeah. I made up bookmarks for my first book. You know who uses them? Me. It’s wasted money. I’ll accept stuff that my publisher makes and pays for, but, look, I once had an author ask me if it was worth investing several thousand dollars into a book trailer, and I told him he’d likely sell more books by taking the money, putting it in a pile, and lighting it on the fire. More people would notice that. And you don’t need to spend thousands on a website! I maintain mine on WordPress. The costs come to maybe a hundred bucks a year? I’m also a little more tech-savvy, which helps. But there are plenty of cheap options and anyone who tells you that you need to spend thousands of dollars on a website is probably just in the website business themselves.
If you make some bonkers money, pay off your debts before you do anything else. It’s just a smart move.
But then enjoy yourself, at least a little, because that’s the point of life. Years ago, back when I was in publishing, I re-issued a book called They Don’t Dance Much by James Ross. It’s a fantastic little country noir and mostly forgotten. It was the only book Ross ever wrote. One of the things I treated myself to when I got my first big Warehouse check was a signed first edition. It was not cheap. I do not need it. And one day this may all come crashing down and I will have to sell it for rent money. But until then, it’s a beautiful little artifact, and I love having it.
And that’s it. Do you have a question that wasn’t answered here, or do you need a little clarity on something? Feel free to ask down in the comments!
I was very excited to see Barnes & Noble select Assassins Anonymous as one of their most anticipated books of June. I also made the summer reading guide over at MomAdvice! Have you pre-ordered yet?!
Don’t forget, I’ll be going on tour for this one!
June 10, The Strand, NYC. Tickets here.
June 11, Murder by the Book, Houston, TX. More info here.
June 12, Katy’s Budget Books, Houston, TX. More info here.
June 13, Poisoned Pen, Phoenix, AZ. More info here.
June 14, BookPeople, Austin, TX. Tickets here.
June 15, McIntyre’s, Pittsboro, NC. More info here.
I hope to see you out there!