I promised I would do this, and I'm FINALLY doing it. Again, I'm pressed for time, so I'm going to give the short version of self publishing (behind the scenes.)
Taxes are a hot topic lately, so I'm going to start there.
First off, let me just put this out there:
I am NOT an accountant. This is just a quick overview of what to expect. Contact a CPA to keep things legal.
Let's skip over the actual writing. You've wrote your book, you have it edited, and your cover is ready to go.
You hit the publish button.
And then you pee yourself a little while taking straight shots of Vodka.
What comes next is entirely up to fate. Your book might hit the Top 100 on Amazon or it might hang out in the high thousands. You can push it until you're blue in the face, but you can NEVER know what will happen for sure.
Let's say you do well. You sell.... 5,000 copies your first month. At $3.99 a book, you earn just under $20,000. Holy shit! That's awesome!
You forgot that Amazon and Nook take a %. To keep it simple, I'm going to stick with making 70%. Each distributor AND country are different. Just FYI - You can earn anywhere between 35% - 70%.
So let's take that 30% off of $20,000.
Okay, we're still good. That leaves you with $14,000! Let's go on a vacation.
You need to put money back for taxes. Darn. Let's deduct again.
The SAFEST way to save for taxes is to put back 40%. Yes, I said 40%. You have to pay state AND federal.
With 40% off of $14,000, that leaves you with $8,400.
Wow. That $20,000 just disappeared in the blink of an eye. You just paid out $11,600. OVER 50% of what the book made.
Yes, $8,400 is an AMAZING amount to make in a month. Especially if you're someone like me who is used to earning $9.50 an hour.
So, you've set that money back to pay your taxes with. What do you do with it? When do you pay?
You MUST pay quarterly taxes if you are in most tax brackets. Must. Or you'll be fined. It's not cool to get fined. Nope. No way. (Again, contact your CPA to know for sure.) You can NOT do this on your own, so you need to find someone who can. You need an accountant, preferably a CPA. And yes, you have to pay them. It stinks. I know.
Now you've found an awesome CPA to help you. S(he) will figure out exactly what you need to pay. Once they do, you send the checks in to your state tax department and the IRS.
PLEASE remember to do this quarterly. No one wants to get fined.
You do not need to pay taxes until you start turning a profit. We all know how Amazon holds the payment for 60 days, so you need to keep that in mind. You don't have to pay on that until it is received.
Also, you need to keep receipts for ALL expenses! (Covers, editing, signings (table fee, hotel, plane tickets, gas) giveaways you run, and anything else.)
If you are successful enough, you might want to consider setting yourself up as a small business. You need to talk to your accountant. There are A LOT of things I didn't cover here, but this is something to think about to get you started.
I hope this helped! <3