With each tax season, it's important to know how your Read Furiously royalties play into what you report each year. It is important to discuss this with your accountant each year, as everyone's tax situation is different. But below are some general information that is important to keep in mind from a reporting perspective.
Before we begin though, to reiterate, we are not accountants and can not speak to an individual's particular financial circumstances. As such, if you have questions about anything here, it's best to raise the questions with whomever will be preparing your taxes.
With that said, please review these points below to help you understand what to anticipate.
If you make under $500 in royalties, you are not required to report the income on your taxes.
If you make over $500 in royalties, you will need to submit a Schedule E form 1040 to report the supplemental income.
While it is not required that you report income under $500, there are benefits to including it, as you are eligible to write off certain expenses associated with your writing
There's a great list of items that writers can write off on their taxes here
With these write offs, it's always important to assess the benefits overall
It's an additional form to file, potentially meaning an accountant may charge more to do your taxes
The more you write off, the more closely your taxes will be reviewed (a rule of thumb we've been told is that the closer you get to your expenses being $5,000 more than your profits, the more your chances of your filing getting flagged to be checked for accuracy)
If you're writing something off, MAKE SURE YOU HAVE THE RECEIPT FOR IT.
This is a very short summary, and as mentioned before - everyone's tax situation is different. We reccomend discussing any questions you may have with your accountant.