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Posted by John Levine on May 2, 2008, 6:16 pm
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>However, if you wrote your book years ago and no longer work on it
>(but still are a writer), but you just collect royalties then is it
>Schedule C or E? If you are no longer a writer then is it Schedule C
>or E?
Book royalties are reported on Schedule C. It is in the nature of
books that once a book is published, the author doesn't work on that
book any more.
>On Schedule C you have to pay SE tax. If you are not a writer, you
>have no deductions related to writing, so it seems unfair to have to
>pay SE tax on it.
Some people think it's unfair that authors can keep getting royalties
60 years later without lifting a finger to do so. (I know an author
who still gets royalties for a book she published in 1948. I want to
write books like that.)
>If you could put it on Schedule E, would it be able to offset loss
>from other passive activities such as rentals?
Well, hey, if you could put it on Schedule A, you could deduct it.
Dream on.
R's,
John
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Posted by Dick Adams on May 2, 2008, 6:16 pm
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> Can royalties be put on Schedule C or do they HAVE to be
> put on Schedule E?
Of course the answer is "It Depends"!
Usually they go onto Schedule C. If you want to pay the SE
tax, put them on Schedule C and read no further.
The problem is usually to get them off Schedule C and onto
Schedule E. To do so, you need to demonstrate that you are
not in the trade or business of writing for income. (This
is one of the few tax breaks not open to academics who
publish to keep their jobs).
However, there are twists. If you write a book revelent to
your professional credientials and it is the only book you
ever write, you may be SOL.
But if I were to publish one and only one book on Baseball,
Mead, or Women (my three favorite subjects), I would put
the royalties on Schedule E because I am not in the trade
or business of writing.
Discussion my position with a CPA, EA, or Tax attorney who
knows your situation. An IRS auditor will no accept "I
read it on the Internet" as an explanation.
Dick
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Posted by Arthur Kamlet on May 3, 2008, 12:43 am
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>> Can royalties be put on Schedule C or do they HAVE to be
>> put on Schedule E?
>
>Of course the answer is "It Depends"!
>Usually they go onto Schedule C. If you want to pay the SE
>tax, put them on Schedule C and read no further.
>
>The problem is usually to get them off Schedule C and onto
>Schedule E. To do so, you need to demonstrate that you are
>not in the trade or business of writing for income. (This
>is one of the few tax breaks not open to academics who
>publish to keep their jobs).
>
>However, there are twists. If you write a book revelent to
>your professional credientials and it is the only book you
>ever write, you may be SOL.
>
>But if I were to publish one and only one book on Baseball,
>Mead, or Women (my three favorite subjects),
And all along you have been telling us that Sin is your
favorite book subject?
> I would put
>the royalties on Schedule E because I am not in the trade
>or business of writing.
If so, Line 21 is a where Hobby Income goes, but more later.
>Discussion my position with a CPA, EA, or Tax attorney who
>knows your situation. An IRS auditor will no accept "I
>read it on the Internet" as an explanation.
Far be it from me to contradict our distinguished moderator.
But I can expand a bit. And mead tends to make me expand.
Either your work on the book was for profit, even if your goal was
not met, in which case you could be hard pressed to demonstrate
your "All Things Mead" was a mere hobby and not subject to SE.
Or your work on the book was, in cliche language, a Labor of Love
and not for profit, in which case it helps a bunch if indeed there
was no profit. If so, SE tax doesn't come up since there was no
profit, but expenses are now i) limited to income, and ii) moved
two letters over from Schedule C to Schedule A, & subject to the
2% haircut.
So if you really had a not-for-profit hobby activity in mind, even
if you accidentally made a profit, and this was a one-time activity
and "Things Mead: Part III: for Fun & Profit" never does get
written, and you never claimed expenses except perhaps on Schedule A,
and you then start reporting your Royalty payments on Line 21, then
you have a reasonable expectation of success.
Income from work you enter into as a hobby gets shown on Line 21,
though accidentally making a profit might push it into Sch C and
SE land.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
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Posted by Dick Adams on May 3, 2008, 1:32 am
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>> But if I were to publish one and only one book on
>> Baseball, Mead, or Women (my three favorite subjects),
> And all along you have been telling us that Sin is your
> favorite book subject?
My newest disingenuous book title is:
"I was Young and Innocent - Memoirs of a Gigolo."
>> I would put the royalties on Schedule E because
>> I am not in the trade or business of writing.
> If so, Line 21 is a where Hobby Income goes, but more later.
This raises an issue of a would-be writer spends a
few years working on a book and has about $1000/yr
in documentable expenses. Presuming a W-2 income
of $100K +/-, is this a Schedule C expense or does
it become part of the basis to be recovered as
return of capital.
I know there is a case on one-time book writers,
but I do not have the cite.
Dick
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Posted by Harlan Lunsford on May 3, 2008, 12:54 pm
Please log in for more thread options Dick Adams wrote:
>
> This raises an issue of a would-be writer spends a
> few years working on a book and has about $1000/yr
> in documentable expenses. Presuming a W-2 income
> of $100K +/-, is this a Schedule C expense or does
> it become part of the basis to be recovered as
> return of capital.
>
> I know there is a case on one-time book writers,
> but I do not have the cite.
Interesting discussion. I authored a book, published about three years
ago. Title doesn't matter, but it was a special interest genealogy book
on 4,300 descendants of my Great great great grandfather along with
a chapter on 18th century North Carolina.
Arrangements with publishers include: 1. I set the price 2. Each
paperback would be printed on demand as orders via internet came in.
3. Lulu.com would print the book, ship it to purchaser, and send me the
profit I had added onto the cost of each book.
Needless to say I did not add a profit, since it was indeed a labor of
love, but had I tacked on 10$ for myself, would that 1,500$ plus have
been royalties? Or a profit sharing arrangement, i.e. my share of the
profit on sales? I lean to the latter, since this was not a trade or
business, nor profit motivated.
No documented expenses, unless you count postage and subscriptions to
genealogy type services over many (40 plus) years.
ChEAr$,
Harlan Lunsford, EA n LA
and published author
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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