Self-published author selling books online - tax filing requirements?

Yes, you'll need to report this income on your tax return even though you're operating at a loss. The good news is that your losses are actually deductible! You'll report your publishing activities on Schedule C (Profit or Loss from Business) along with your 1040. You don't need to have formally established a business entity to file Schedule C - being a sole proprietor is the default when you're earning self-employment income. Since you're operating at a loss, you'll want to carefully track ALL your expenses related to your publishing activities: advertising costs, printing costs, cover design, editing, website fees, portion of home internet used for business, etc. These expenses will offset your income and potentially create a deductible loss that can reduce your overall tax burden.

I was in your exact situation last year! After spending hours researching tax options for my romance novels, I found taxr.ai (https://taxr.ai) and it was a game-changer for my self-publishing business. I uploaded my Amazon KDP reports and expense receipts, and it identified deductions I never knew existed - like partial home office expenses, professional development courses, and even book research materials. The system automatically categorized everything and showed me exactly what I needed to file on my Schedule C. Honestly wish I'd found it sooner.

Update on my skepticism about taxr.ai - I actually tried it last weekend and I'm genuinely impressed. It specifically identified that my editing and cover design costs were professional services rather than cost of goods sold, which apparently makes a difference. It also prompted me to track mileage for any book research trips and signing events I did. The business loss calculator showed me exactly how my writing expenses would offset my day job income. Really intuitive for creative professionals who don't speak accountant-ese.

After struggling for hours on the IRS website trying to figure out if I needed an EIN for my self-publishing gig, I finally tried Claimyr (https://claimyr.com) to get a real person at the IRS on the phone. You can see how it works in their video: https://youtu.be/_kiP6q8DX5c. I was skeptical at first, but within 45 minutes, I was talking to an actual IRS agent who confirmed I could use my SSN for Schedule C reporting as a sole proprietor author. They also walked me through the specific expense categories for writers and how to properly document my home office space as a writing area. Saved me so much stress!

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it just to prove it wouldn't work - and 37 minutes later I was talking to an IRS agent who actually specialized in self-employment issues! They confirmed that as a self-published author, I don't need to worry about the new 1099-K threshold changes for 2025 since my publisher (Amazon KDP) will issue a regular 1099-NEC instead. They also explained that I can deduct inventory costs in the year of purchase if I'm under the $27 million gross receipts threshold. Was honestly shocked to get such specific answers for my writing business. Total game changer.

Don't forget to look into the Qualified Business Income deduction (Section 199A). Even though you're operating at a loss now, when you do start making profit, you might be eligible for a 20% deduction on your qualified business income. Also, make sure you're tracking everything in separate accounts from your personal expenses. I learned this the hard way - had my book royalties going into my personal checking account and it was a nightmare to sort out at tax time.

Has anyone dealt with state sales tax for physical books sold directly to readers? Amazon handles online sales tax but I'm confused about books I sell at local events and writing conferences.

I'm in a very similar situation - just started self-publishing this year and also operating at a loss with all the upfront costs! One thing I learned recently is to keep detailed records of EVERYTHING, even small expenses like stock photos or promotional bookmarks. The IRS allows you to deduct ordinary and necessary business expenses, and for authors that can include a lot more than you'd think - research books for your genre, writing software subscriptions, even a portion of your internet bill if you use it for publishing activities. Also, don't stress too much about the business entity question right now. You can absolutely file as a sole proprietor on Schedule C without forming an LLC or corporation. That said, once you start turning a profit consistently, it might be worth consulting a tax professional about whether forming an entity would benefit you. For now, focus on good record-keeping and remember that your current losses can actually help reduce your overall tax burden from your day job!