So why are you not doing that?
I am not a CPA. I don't even play one on TV. But here is what I know: As a published author, you can file a Schedule C and itemize your deductions as a dba (doing business as). You don't need to set up a corporation, or LLC, or anything beyond using your own SSN.
Now, before you do anything, it is imperative that you speak with your tax adviser first. (I am not giving you any financial or legal opinion here upon which you should rely, because every situation is different.)
However . . .
As a published author, long ago I spoke to my CPA about how to make that aspect of my life a business and write off my expenses. It was simple, and essentially free.
What it means is that I can write off the cost of the computers I use to work on, research, ink, paper, toner, folders, some gas and food, some utilities, some of the cost of research trips, photocopy charges, marketing and promotion efforts, business cards, stationary, and . . . the books I purchase to sell. Those books are my "inventory," if you will.
How many of authors do this?
I took a very rough survey once a few years ago and discovered it was fewer than . . . three in ten. When I explained to one author at a trade show just how much money he could write off each year (and he had several books and a lot of years behind him), he did his best imitation of Fred Sanford by grabbing his chest like he was having a heart attack, staggering around threatening to join Elizabeth.
Then he and I discussed self-employment tax. When you get a 1099 for royalties, you get to pay double taxes on that amount (that's right, and your CPA can explain it to you). And most do, without really realizing all the deductions waiting at their fingertips.
Just pencil out how much you spend to produce the manuscript that will become your book. What about your after-publication costs? Your ongoing costs. Do you drive to events? Write off the gas. Do you eat away from home? Sleep away from home? Postage? Phone costs? Even wear and tear on your car might be a tax write-off. Home office? Don't be a afraid of triggering an audit. If your deduction is legitimate, it is yours to take. It is, after all, your money.
Books as inventory: When you purchase X numbers of books and pay your publisher at your 50% author discount before the end of the tax year, you can take that expense and write it off that year's taxes. As noted earlier, situations differ, so I am offering a general layman's opinion and you should speak to your tax person.
But I know of what I speak, and I keep meticulous records for every penny spent on my own writing career. (This is separate, of course, from Savas Beatie, which is a corporate publisher.)
Here is the bottom line: As a published author you are a business. Treat yourself like one. Keep track of your legitimate expenses, work with your CPA, file a Schedule C, and save money. A lot of money.
We are now in tax season. Click HERE to see some of your write-offs.
DO IT NOW.