While we all became story tellers because we had something in our hearts we want to share, there are a lot of us writers who also want to turn this into a career. There are likely lots of you dreaming of massive advances and comfortable (if not James Patterson-levels) of wealth, so let’s break down where that money is actually going to be coming from.
Buying and Selling
Firstly, some clarification about what happens to your intellectual property (hereafter “IP”) when you exchange money for the right to print it.
At no point – unless you specifically sign a contract stating so explicitly – do you lose ownership of your IP. While we use terms like “buying” and “selling”, it’s more appropriate to call it “leasing” your story. In Canada, you own the copyright to your IP the moment you put pen to paper. In the USA, you have to register copyright to the IP with the National Library. I’m not sure about other countries, but take a look at what your local copyright laws are, and if your national writing guild or union offers discounted registry services.
A publisher pays you for the right to publish your IP (usually presented to the publisher as a completed manuscript), in specific format(s), on the understanding that you are contractually bound and may not give another publisher the right to do the same. This includes self-publishing it after the publisher has printed it, or posting it yourself on your website, or posting it on story sharing platforms like Wattpad.
In return for this right, the publisher uses all of their own money to create the product they intend to sell (i.e. a “book”, an “ebook”, or an “audiobook”), and gives you, the author, some money in return for this lease. This money will come in the form of an outright payout, or in the form of a reoccurring royalty – more on royalties later.
If you or the publisher elect to do so, you may terminate your relationship:
- prior to the product being created (in which case you’ll likely have to give them back some or all of the money they gave you, if you received an advance);
- after the publication of the product but while it’s still making money (in which case, you may have to pay them for the right to take your IP back and possibly more if you intend to let another publisher use it, depending on what’s in the sunset clause in your contract);
- after the publication of the product but after the book drops to zero recorded sales for a specific length of time (which means you get to keep all your money and get back the right to lease your IP elsewhere);
- or when you reach the natural end date in the contract (which means you get to keep all your money and get back the right to lease your IP elsewhere), if one was negotiated into the contract at the outset. This is very, very rare because, of course, publishers want to continue to make money on the products they sell indefinitely.
- It’s very common for short stories to have a One Year From Publication end date: you the author get the right to take your short story and publish it elsewhere after one year from the first publication of the story has elapsed.
- Sometimes novel contracts have this too – there was a four-year end date on my fantasy novel series. #1 and #2 have actually expired, so I can take them elsewhere at this point if I like without owing my publisher any money. But novels #3 and #4 haven’t expired yet, so I’m allowing the publisher to keep publishing (and making money) from #1 and #2 at this time. And of course, I still get royalties from those sales.
Some contracts don’t have expiry dates, and instead have sunset clauses by which the author may request their rights back if the publisher breaks another clause, or if there are no reported sales of the book for a specific time frame, or just if both parties choose to part ways. But in all likelihood, if you’ve signed with a professional publisher – and especially if they’re one of the Big Five – then you’ll have no expiration date and no reason to invoke the sunset clause, and so your book will continue to be available ad infinitum, and you’ll keep getting paid for as long as copies sell.
Show Me the Money
The #1 rule of publishing is this: Money should always flow toward the author, never away.
Publishers pay, Authors earn. (Which is true, even if you’re self-publishing–your publisher persona pays for it, and your author persona earns for it, even if it’s coming out of the same bank account).
As an author, you will get paid…
Per Word
In the world of short stories, you get paid for your story in one of two ways – per word, or per story as a whole. At the time of writing this article, the Science Fiction Writer’s Association has set the current market rate for short stories at eight cents per word. That doesn’t seem like a lot, but that means a 5k story would be worth $400. Professional Markets must pay at minimum eight cents per word to be considered so by SFWA.
Each different market (romance, fantasy, literary fiction) will have different associations and expectations. But the SFWA rate tends to be the best litmus test of what a per word rate should be.
Per Story
Not every market can afford to pay professional rates or prefers not to go by-word, so they’ll offer a lump amount per story, no matter the length.
I sold my first tale for $10 USD flat. There are low/no pay publishers out there, and unless they’re actually predatory and listed on Writer Beware, they’re not selfish, they’re just unable or unwilling to pay at market rate. It’s up to you, at that point, to decide if the publication of one of your stories, in that particular publication, at this particular point in your career, is worth it to you.
At the start of my career, I took a few low/no pays, knowing that I could sell the stories again as reprints, or publish them in my own short story collection a few years down the road. At that point, the publication credit itself was more important to me than the money.
Now I’m a member of the Writer’s Union of Canada and always ask for professional rates, unless there is some amazing reason why I should lower or waive my fees (like the book being a charity work, or because it’s a market or will attract attention that I might not be able to access otherwise, or if my story will be beside a Big Name Author who will boost sales of the book and thus reader awareness of my existence).
Again, it’s up to you to decide whether that amount, in that publication, in this time of your career, is worth it to you.
Short stories may also be re-printed in other anthologies or magazines. If you’re asked to contribute a new story to a publication but don’t have one (or have time to write a new one), sometimes the publication will take a story that’s already been published once, and is outside of the exclusivity period. The amount of money offered for a reprint will often be less than that offered for a new story (say, $200 where a new story is worth $400).
Per Page
This form of compensation is more usual to comics than short stories and novels, especially if you’re also the artist. Generally if you’re contributing a comic script to an anthology, they’ll pay you per scripted page. I’ve gotten around $11 per page, or $150 CAD total for a 14 page script.
But rates will vary depending on who you’re writing for, and why. Check with your local creators networks and unions/guilds for appropriate rates to request in this medium and for your role.
Per Draft
There’s really only two times you’ll be paid per draft, and that will be if you’re writing for television and film, or when you’re ghostwriting (that is, writing a novel for someone else who will put either their own name or a pseudonym on the cover, like many celebrity autobiographies or long-run middle grade series like The Babysitter’s Club and Goosebumps).
You’ll generally get a bundle deal for an Outline, First Draft, and Second Draft / Polish. If further drafts are requested beyond that, you or your agent will be able to negotiate for a supplemental payment, appropriate to what your original payment was.
Money for this sort of work is generally split into two or three payments – one on delivery of the outline or on the signing of the deal, one on delivery of the outline or the delivery of the first draft, and one (if there are three) on publication or when the script is greenlit (that is, when the production team begins work on shooting the script), or when the book is published.
The fee that you can command for this work depends on how popular a writer you are, how many novels or scripts you’ve written before and how well they did, how quickly it’s needed, and how much research will go into it.
Your local writers and screenwriter’s guilds/unions will have payment breakdowns in their member handbooks, which professional producers are beholden to adhere to if you’re a member. These rates are based on the length of the script, the number of drafts that will be expected of you, if you need to spend time in the Writer’s Room, the format of the show (Multi-cam One Hour, Children’s Animation, Feature Film, Digital Marketing, Video Game, etc.)
Even if you’re not a member of these guilds, familiarize yourself with their suggested rates. While you may not be able to command those rates at the start of your career, know your worth and work your way steadily towards the market fees.
For example, in 2010 Independent Production Agreement for the Writer’s Guild of Canada (they cover anyone who writes scripts no matter the medium), to deliver a Feature Film with a budget of over $60,000 CAD, a WGC member in good standing must be paid at minimum $50,185 for the full script, broken down to an original treatment (the film version of a pitch document) and two drafts. This fee amount lowers if the treatment is provided by the producer, or is an adaptation of pre-existing source material (like a novel).
As I’m a member of the Canadian Writer’s Union (they cover anyone who writes anything that isn’t scripts, no matter the medium), my union suggests a starting payment of $40,000 CAD for ghostwriting a book. That might seem like a lot of money, but don’t forget that as a ghostwriter your name isn’t going to be on the book. You don’t get the press, you don’t get the marketing push, and you likely won’t get any of the royalties from the sale of the book, unless that’s explicitly written into your contract. If it is, it will absolutely be a lesser percentage than if you were listed as the author.
And don’t forget that there’s more to writing than just writing when you’re creating a book for someone else. I was once asked to ghostwrite a true crime/courtroom thriller memoir for an American lawyer – besides the hundreds of hours of work it would take to write the book itself, I explained that I would also need to charge for the time it would take for me to read all of the courtroom notes, interview the lawyer, and teach myself American Environmental Law, and learn the American justice system.
The offer was withdrawn when I pointed out that it made no sense to hire a cozy SF/F writer to write courtroom thriller, and suggested they reach out to someone who actually writes in the genre they need already, and who is familiar with the system.
(Though I wasn’t going to take it anyway – they offered me a measly $5,000 USD, which is significantly below the hourly minimum wage if I was to break that down into outline, first draft, and polish. And someone else would get the credit as the writer? No thanks.)
Per Idea
Look, I’m going to be blunt – you will never sell a book on the idea alone. Get that dream out of your head right now.
There are millions of writers out there with millions of ideas each. Ideas are worthless. Ideas can’t be published. Manuscripts can be published. So you gotta write it before you can sell it.
The only exceptions to this are:
- You’ve got a proven track record of finishing manuscripts, and you present a publisher with a partially-finished manuscript plus a pitch package, and the publisher gives you a conditional contract for publication on the understanding that you will finish the manuscript, allow them to meddle in it as you’re writing it so when it’s done it’s a saleable product for them, and the option to walk away if they don’t like what you created in the end. Sometimes this comes with some money along with the conditional promise, but not very often. And even then, you still have to write it before you can officially sell it. No one will pay for the idea alone.
- You’re super-duper famous and publishers are already falling all over themselves to get their hot little hands on whatever gold next spills from your pen or mouth, and they will pay a ghostwriter to write your idea. I’m talking bigger than an A-List movie star big.
Royalties
Ah, and now we come to the heart of it!
Remember how I said that you’re not really selling your book so much as ‘leasing’ it, and that a publisher pays you for that privilege? That’s what a ‘royalty’ is: it’s your lease payment.
The publisher pays out of pocket to have your manuscript substantively edited (with your editor at the house, whose salary they pay), and then copyedited and/or proofread (by someone salaried in house), and then a typesetter/graphic designer who makes the manuscript book-shaped (salaried in house), and then pays for the art/stock images and fees for a cover artist and designer (salaried in house), pays for the review copies out of pocket and for them to be mailed out, pays for the books to be printed and shipped to bookstores, and pays for all the marketing ad placement and design (salaried in house).
You, author, don’t need to pay a single cent of that. As such, the publisher keeps the lion’s share of the profit they make from selling your book, in order to recoup the cost of paying for literally everything it takes to make your manuscript book-shaped.
For your contribution to the completed project and the continued use of your IP, you’ll likely be given 15% of the profit, though I’ve had royalty rates as low as 10% and as high as 35% before. eBook royalty rates tend to be higher, (around 20%-45%). The royalty rate for audiobooks depends on if your publisher produces it, or if you go out of house to somewhere like ACX/Audible, and what sort of payment arrangement you or your agent makes with the narrator and audio editors. This royalty is usually between 10%-50% per sale of an audiobook.
Royalty cheques are sent to your agent either yearly, half-yearly, or quarterly. (I get all of mine via PayPal as all of my publishers are American and a lot of Canadian banks won’t take an American cheque. Also, the rates are better that way.) Your agent will review your Royalty Report (the breakdown of how many copies of which books sold, in which formats), make sure there are no mistakes. Then they’ll take their cut (usually 15% of your 15%), and forward on your portion of your payment to you.
If you sold the book without an agent, the Royalty Report and payment will go directly to you.
On average, you’ll be making $3 for every $20 paperback that is sold, and roughly $2-$10 for every ebook and audiobook, depending on how the percentages break out. If you have an agent contracted at 15%, then $0.45 of that $3 you earned for leasing your IP to the publisher belongs to the agent, and $2.55 is yours. I’ll speak more about agents below.
Advances
The big money!
Or so folks think.
Here’s the thing – an Advance is not a gift from the publisher. It is an advance on your royalties. Like a payday loan, the publisher is giving you the money they think you’ll earn in royalties in advance of your actual sales and royalty cheque. You don’t get an advance and royalties right away.
If a manuscript is very in demand (especially if it went through an auction where several publishing houses bid on the right to be the ones to publish it), and/or the publisher thinks they can make a significant amount on the book, they’ll give you the advance on your royalties on the understanding that you’ll be able to use the money to focus on finishing the book and working with the publisher to do the best job possible for everyone.
Obviously they’re not saying that they expect you to quit your dayjob, but you know, a good chunk of money would mean a lot of peace of mind for a lot of writers (paying off debts, paying off a mortgage, etc.), which will free them up to focus more on the book.
However, you’re not actually going to see that money all at once.
Advances are delivered to you in thirds, generally – one third on signing, one third on delivery of the novel, and one third on publication. Let’s say you get an advance for $100,000. That’s $33,000 for each stage. And depending on how long it takes you to write/edit/rewrite the novel to the editor’s satisfaction, and how long it takes the publishing house to turn that manuscript into a book, then you might only be getting one of those payments per year.
And remember, that money is an advance. Until you earn out that advance, you won’t be seeing another nickel from the publisher. It may take months. It may take years. I have authorfriends who have never earned out an advance, not once.
If you don’t earn our your advance, that may affect the publisher’s decision to ask of another book from you, or their decision to continue a series; they don’t want you to be a moneypit and you don’t want to look like a losing proposition. So as much as we all want the mega-bucks advance, sometimes it’s actually better to get a smaller one, or none at all. That way you can meet their targets and start receiving royalties sooner, and you look like a winning author to sign a second book with because you earned out quickly.
Speaking Engagements
There are other streams of income available to authors beyond just writing and selling your books. Believe it or not, people will pay you to hear you talk about your books. Weird, huh?
Your Speaking Fee will be based on your popularity, if you have to travel to get there, and what stage you are at in your career. For example, I hear that a specific huge name commands a fee somewhere around $5,000 USD for an hour appearance – it seems like a lot, but he was an extremely busy guy last year, with two TV shows to run and a young kid at home, so a fee that high weeds out the not-serious requests. (I also hear that he usually donates a percentage of that back to the municipality’s local library).
Your local guilds and unions will know what a good amount to request is, and may also offer discounts and grants to schools, charities, and community groups to be able to afford authors. That way you get paid your full amount, and the community/library/school/charity doesn’t have to cough up all of it.
I charge about $100/hour, plus travel if it’s far. That sounds like a lot, but I once took a two hour bus ride up to a museum to give an hour and a half workshop, then another two hour bus ride home. All told I made about $180; $30 went to cover the bus tickets, $25 was for a meal, and I was left with $125. That’s only $22.72/hour for my time.
If your books are appropriate for children, lots of schools provide opportunities to come in and talk to their students for a fee. You can also teach workshops and seminars at community centres, charities, libraries, colleges, and universities. I’ve been asked to consider teaching an eight-week course on worldbuilding at a local comic book/animation school, and if I do so, I’ll keep all the fees I collect from the students outside of paying rent on the space.
And if you’re a SF/F/Horror or romance author, conventions may invite you to do panels and signings. If you’re a Guest of Honor, that means they’ll usually cover your travel, hotel room, and give you a daily honorarium (usually between $25-$100) to cover meals. If you’re a regular guest or panelist, they’ll likely comp your badge fee and/or vendor table (if you want one; I generally donate mine to the local indie book store so they can come in for free and sell more than just my own books), and you’ll have to pay for the rest yourself.
Literary festivals will often provide an honorarium in the realm of $100-$400. Your appearance there will be just one day usually, they’ll likely give you lunch and coffee/tea/snacks, and they’ll ask you to read and do a Q&A panel, and will generally have someone there to sell your books for you.
A residence is basically when an author is given somewhere to live – usually of historic or literary value, like a Heritage Trust house, or at a college/university – for a few months, along with an honorarium to cover other daily expenses. In return, you promise to mentor a group or writers, do some free appearances/workshops/lectures at the local library/community centres, and of course write your manuscript (ideally directly inspired by where you’re living).
Authors can also apply for support from your local arts council in the form of grants. Like a bursary for higher education, this money is basically a conditional gift (you get the money on the understanding that when the book is done, you thank the council and/or put their logo in the book, and give back to the community as much as possible the form of free appearances, etc.) These can be anywhere from $100 to $100, 000.
Do some research into what’s available through your local guild/union, library associations, author associations, and arts councils. And of course, keep in mind that the earlier in your career or the more unknown you are, the lower a fee you’ll be able to command. That’s okay, you can work your way up. Also, there are way more contests, awards, grants, and purses for early-career writers than mid-career or established ones.
Foreign Translations
Like getting reprint fees for short stories that have already been published once, getting paid for someone else to take a book you’ve already written and do all the work to translate it into another language, and sell it in their country, is pretty sweet.
This will be just like signing with a publisher all over again – you may or may not get an advance, but you will definitely get royalties, and sometimes you get a little “thank you” money as a gift.
The difference here is that the foreign publisher may have to pay some of their profits to the original publisher, as the original publisher is the one who put in all the money and work editing your manuscript and creating the cover. (This is why you sometimes see foreign editions with different covers – they chose to make their own rather than pay to use the pre-existing one.)
And that’s only if the publisher doesn’t also own the foreign publishing house, like some of the Big Five do.
Signing the rights to allow foreign translations to be printed isn’t a violation of your original contract with your first publisher, because (unless, as I said, the foreign house is an imprint of your larger publisher as a whole), your first publisher is only taking worldwide rights for the language that the book is originally written in.
Generally speaking, these publishers approach you, your agent, or your original publisher, not the other way around. Your agency will likely have someone on staff whose job it is to court these kinds of deals, and any agency and publisher worth their salt will be at international book fairs with a catalogue of their client’s available titles.
Dramatic Adaptations
I’ll go into this topic in more detail in a future post, but it may happen that someone approaches you/your agent to make a dramatic adaptation of your book – a film, a TV series, an audiodrama, a podcast, etc. This is basically when anyone who isn’t you or your publisher uses your IP as the basis to create a product that is not a book, ebook, or audiobook.
Generally speaking, these people approach you or your agent, and your agency will likely have someone on staff whose job it is to court these kinds of deals.
The payment range for something like this will depend on how popular you are, how popular your work is, how many people are vying for it, what kind of production they want to make, and how big the production house is. Disney, obviously, is going to pay you more than Big Cheese Studios down the block. And they’re going to pay more for a New York Times Best Seller than for an indie that’s only sold a few hundred copies. Major feature film franchises take more money to make and earn more money than an indie podcast, so amount of money offered is dependent on what their budget is to create the product, too.
When an agreement is made – that is, you’re happy to lease your IP to these people to make the production, which doesn’t violate your deal with your publisher because they’re making a different product, i.e. not a “book” – your publisher may get a cut of it, depending on what kind of a contract you initially signed with them.
These deals are called “Options”. The producer/production house that wants to make your IP into a dramatic thing will pay you for the right to do so. Like an advance, the payments are usually split up – you get some when you sign the deal, some when the production is greenlit, and some when it’s released. This could be as low as $1,000, or millions of dollars, based on a variety of reasons.
Because it costs so much to make films and TV, and takes so much time to pull a project of this scale together, it usually takes years. For every year that they the production house holds on to the exclusive rights to make your IP but doesn’t actually make it, you’ll likely get another chunk of money. I’ve heard of payments being as low as $1,000 and as high as being in the millions. And of course, many of the most popular IPs have limit dates on them – like they can only be renewed ten times before either the production has to happen, or the house has to give up the option and let someone else try to make it.
You may also be asked to sign a Shopping Agreement, which basically means the producer/director/ screenwriter has no executive director/studio/money/distribution yet, and pays you a token amount (like $1), to validate your contract stating that you promise not to snatch the rights out from under them until they have the rest of their ducks in a row and can assemble a full production team and announce that their production house is making the project. At that point, you’d sign an Optioning Agreement.
It would be up to you and your agent to negotiate if you get a cut of the box office profits, or DVD/BluRay/Streaming sales, if you get any of the money from the merchandising like character tote bags or plushies, or indeed if you get any backend money at all.
Merchandising
If the publisher wants to make any swag or stuff that they’ll be selling (not giving away for free) based specifically on your IP, you’ll need to negotiate for a cut of that, too.
Like a royalty, this will likely operate on a percentage basis based on your own clout and the popularity of your books.
Self-publishing
It’s true that when you self-publish a book, you get to keep 100% of what you earn. But it’s also true that you also have to pay 100% of the cost to create that book.
And the market is saturated with half-thought-out, poor-quality self-published fiction that if you want your book to stand out and make you money, you have to not only do it well, you also have to do it professionally.
Paying for editors? That’s from your pocket. So is buying stock images or commissioning art for a cover, and paying for someone to design the cover. And the interiors, if you want it professionally typeset; you either have to pay someone to do that, or buy some software like Vellum or Atticus to do it yourself. And while it’s free to list a title on Amazon/Kindle, Kobo, Draft2Digital, some other printing services like require a listing fee. You’ll get copies of your books to sell at a discounted rate as the printer, but you still have to buy them, and pay for them to be shipped from the printer’s to you, and pay again for them to be shipped from you to whomever buys the book from you.
If you sell them in person, you’ll need to pay to buy a card reading terminal and lose a percentage of your sales to point-of-sales company usage fees (I use Square. I paid $60 CAD for my card reader block, and 2.6% + 15¢ for in-person, card-present transactions). So the book I just hand-sold a reader at a festival for $22 is actually only earning me about $21.27. But then it also cost $7 per book to buy that book from the printer, and maybe $3 per book to ship it to me, so now my profit is only $11.27.
Sure, that’s still more profit than I would have earned publishing the book with an agent and a publisher, but that $11.27 doesn’t take into account what I spent on professional editing, typesetting software, cover design, and marketing. If I distribute the cost of all the front-end publisher stuff I had to pay for, suddenly I’m back to making about $2-$3 per book, until those financial investments are paid off.
Bookstores will generally only take and shelve self-published books on consignment, which means they get a bigger bite of the cover price.
You’ll have to pay for marketing – ad design and placements on websites and in print, fees to get a table at trade shows and conventions, paying to send copies of the book to review outlets or awards for consideration, and sometimes paying to get your book listed or reviewed on big name websites.
Literally everything costs money to do, and you may not see a return on it if your book doesn’t take off. So be prepared to have to build and stick to a budget if you elect to self-publish.
On the upside – all the profit is yours to keep, or to reinvest in your marketing and/or making your next self-published title.
What will you need to pay for?
Your publishing house will have a specific per-book marketing budget for your work. It might be as low as $200 bucks per title if you’re a debut author at an indie publisher, or it might might be hundreds of thousands if you got a mega-deal with one of the Big 5.
Publishers will generally pay for advertisements in print/online, to send review copies to specific outlets (like the Library Journal, Publishers Weekly, Quill & Quire, etc.), to buy space on ARC distribution sites like NetGalley or Edelweiss, to buy a blog tour, to submit the book to awards, maybe to buy ads on transit, and to send ARCs to book bloggers and social media influencers. If the publisher has lots of budget, they might arrange and pay travel costs for a book tour, or they might pay for part of your book launch, and they’ll likely pay extra fees to bookstores to get your book placed on shelf endcaps, shelved face-out, or piled on spotlight tables.
Things like postcards, bookmarks, pins, posters, and anything else you may want to give away for free as swag will likely be on you – you may even have to design it yourself if the publisher can’t lend you their designer. You’ll likely have to pay for your own book launch, including venue fees, licensing, snacks and booze, and if you don’t have a bookstore coming to do the selling for you, actually buying a box of books from your publisher to resell to attendees. Publishers will not fund your book tour if they don’t offer it for you, or fund a book trailer, or basically anything else that doesn’t directly result in sales of the actual book for them.
A good way to think of it is this: publishers will generally pay to sell the book to the industry (review outlets, library journals, festivals, awards, Amazon/Goodreads ads, bookstores etc.) while you the author will generally pay to sell the book to the readers (pins, bookmarks, social media tours or influencer spotlights, social media graphics design, parties, swag, festival table fees, etc.)
Agency Fees
I’ve addressed this in earlier articles, but if you have an agent, their agency is entitled to 15% of all the money they make for you. And to be clear, that’s only on what they actively bring in for you and actively negotiate or notarize – if your agent doesn’t help you sell a short story, you get to keep all of that money you just made.
That 15% (or whatever percentage you negotiated with them) comes out of your 15% (or whatever percentage of royalties your agent negotiated with the publisher). So that $3 per $20 book is actually $2.55 by the time it makes it to your pocket. That $100, 000 advance? The agency gets $15, 000 of it.
On the other hand, 15% of $0 is $0, so it’s in your agent’s best interest to make sure you make money, and lots of it, in all the ways they can.
Taxes
Don’t forget that being a writer is akin to owning a small business. You will be taxed on your income. Agencies will send you a document which will detail your annual income through royalties. One-time payments like for short stories don’t often come with tax documents, though I always declare that income as well, as publishers will be declaring it on their end.
In Canada, if you consistently make more than $30k annually on writing, you will need to get an Harmonized Sales Tax number and create a formal business in the eyes of the government. I assume there’s a similar requirement for other countries – research your local laws. Less than that, and it’s kind of a tax grey area. You can incorporate as a business, or you can manage your profits as if you are running just a very expensive hobby. Talk to a professional tax advisor, be honest about what you actually make, and they’ll give you the best advice for how to report income.
I also am paid via my agency, and via Amazon, in USD rather than CAD, so I need to declare my American income as such in my tax documents.
All grants will likely be taxed (I won a $10k grant and had to give the government $2k of it), and advances will definitely be taxed, so make sure you keep enough back in a high interest savings account to cover what you anticipate you’re going to to have to pay come next tax season. Grants and government money, like from the Public Lending Rights pool, will be declared to the government. In Canada, that’s a T4A or T5 slip (regular dayjobs are T4 slips); when I do my taxes, I generally have multiple T4A/T5 slips in my government portal to account for.
On the upside, you can claim a lot more than you probably think for your expenses. I claim new office equipment (computers, printers, furniture), software (FinalDraft, Scivener, Microsoft Office, GoogleDrive Storage, Atticus,), utilities (about 10% of my hydro, internet, and phone bills as I write from a home office), office supplies (paper, ink cartridges), mailing and shipping (sending out books for review, mailing bookmarks to schools), transportation to events (transit and cab receipts), meals (with my agent, with authorfriends, with editors), charitable donations (donating books to raffles, libraries, and prisons; attending mentorship events), etc.
Take a look at what’s claimable in your country.
Bottom Line
There’s lots of ways to make money – and lots of ways to spend it – in this career. Make sure you seek out financial advice if you need it (that’s on you, it’s not your agent or publisher’s job to be your financial advisor), and hire a tax accountant who specializes in arts workers if you find the task of doing your own taxes challenging.
I keep an excel spreadsheet of each dollar coming in and going out, and have a small file folder prepared to file my receipts in so they’re always sorted by date and by which line on the tax form they align to. This way I always know exactly how much money I’ve earned, and how much I’ve spent (or have left to spend).
Figure out a system that works for you and makes tax time easy, and you won’t regret it.
Happy writing, and I wish you a lucrative career!
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