The Finance Department: Federal Income Taxes (Part 2)

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Federal Income Taxes: Schedule C and Quarterly Payments
The Finance Department (Part 2)

In the US Federal Income Tax system, there are two paths of taxation: personal and business. Most indie publishers operate as sole proprietorships, which fall under personal income taxes (not business or corporate as one might think). Essentially, indie publishers are self employed, and there is no distinction between personal finances and business finances.

You file one tax return: the 1040 (the US Individual Income Tax Return).

In order to account for your book business on the 1040, you must also complete a Schedule C, which is for figuring your profit or loss from a sole-proprietorship business.

The final figure on the Schedule C becomes a line item on the 1040 form.

It’s all part of your personal income taxes.

If all your sources of income combined earned $400 or more, you must file an income tax return. See for more info.

To fill you the form Schedule C, you’ll need a record of the payments you’ve received throughout the year. These may come as 1099 Misc forms from publishing platforms such as Amazon Kindle, Barnes and Noble, iTunes, Kobo, and Smashwords. The deadline for filing 1099s is January 31. They may come in the mail or email, but you will also be able to access them at each publishing platform’s website.

It’s important to note that just like the 1099s you may have sent to your editors and designers, publishing platforms send one copy to you and one copy to the government. So the government already knows that the money has changed hands. If you do not report your income accurately, you can be fined.

Also important: 1099s are only required for yearly earnings of $600 or more. If you earned $599 from one platform, you may not receive a 1099; however, you must still report it as income. So keep good records!

Quarterly vs. Yearly Payments.

If publishing is your only form of income, you must make quarterly income tax payments. 


If you worked a “regular job,” federal taxes would be removed from every paycheck and sent to the government. Because you are self-employed and do not receive such paychecks with tax money already withheld, you must do it yourself. Instead of sending one lump sum of money on April 15, you must send quarterly payments in order to avoid paying late payment penalties. See Form PUBL 17 for all the details.

However, if you or your spouse is an employee of another business, you have the option of adjusting your yearly withholdings from the “regular job’s” paycheck to cover the taxes your both incomes. Essentially, your monthly withholdings from the “regular job” would take into account the quarterly payments needed for your book business.

For more information on quarterly tax payments, go here.

Next week, we’ll delve into business deductions. If you have any questions about quarterly payments or deductions, leave them in the comments below.

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The Finance Department: Federal Income Taxes

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Federal Income Taxes
The Finance Department

Taxes are a fact of life. As an indie author, you need to take them seriously, but there’s no need to panic when tax time arrives. If even Einstein thought the income tax was difficult to understand, then obviously the US federal tax code—and the accompanying load of regulations—is complicated.

Because the ultimate responsibility for filing your income taxes lands only on you—not your accountant or tax preparer—you need to have a good understanding of the basics of both federal and state income taxes. You should understand the forms well enough to be able to explain your choices to an auditor if it comes to that.

In this blog series, I’m going to give you an overview of the basics. I won’t simplify quite as much as Oscar when he tries to explain a budget surplus to Michael Scott in The Office, but you get the idea. Please note that I’m not a tax expert, so always verify anything you read here at

The Office – LI5 Surplus from Ryan Faucett on Vimeo.

As with many of an indie author’s tasks, you can choose to hire a tax preparer or accountant to help with your income taxes, or you can prepare and file them yourself. If you are not comfortable handling your taxes alone, don’t hesitate to get professional help. However, even if you hire a professional, you are ultimately responsible for ensuring the correctness of the tax documents that you send to the government.

  • You collect 1099s from vendors.
  • You gather other income data that did not require 1099s.
  • You maintain records of your business expenses, such as mileage.
  • You keep receipts for business expenses.
  • You must sign and submit the tax forms.
  • You must store all records for seven years and be prepared to defend them in the event that you are audited.

Due to the limitations of space and time, this series will cover the basics of personal, federal income taxes in the United States. State taxes vary, so you’ll have to research the details yourself.

If you have any questions, please ask them in the comments, and I’ll do my best to answer or point you in the right direction. In the meantime, here are some resources to get you started:

Tax Preparation Software
H&R Block

Tax Preparation Books
K. Lasser’s Your Income Tax 2018:For Preparing Your 2017 Tax Return

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The Design Department (Part 4)

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Cover Design
The Design Department (Part 4)

A book’s cover introduces the reader to the content even before they peruse the first sentence. A good cover will convey the subject, tone, and genre of the work upon first glance. Plus, it’s got to stand out among thousands of other books that are also trying to catch a reader’s eye. That’s a lot of work for one image!

When you begin to plan your cover, consider:

  • Genre. Look at other books in your genre, especially those that are similar to yours in style and tone. The answers to these questions will provide you with a good starting point.
    • What do their covers look like?
    • What type of fonts do they use? Serif? Sans serif? Script? Block?
    • What type of images?
  • Mood. Within a broad genre, there are several different moods a book can strike. Select images that reflect the mood of the book will help readers know what to expect. Think about your book’s overall mood. Is it:
    • Dark?
    • Playful?
    • Business related?
  • Thumbnails. The vast majority of book sales today are made online. Thumbnails will likely provide the first exposure to your book as potential buyers scan genre lists or search results. So think small as you plan your design.
    • Use large fonts. The title and author name should be readable in thumbnail size.
    • Use legible fonts. Limit use of fancy and fine fonts. Again, as a thumbnail, these loopy or skinny fonts are difficult to read.
    • Use a clear image. View art options in full size and thumbnail size. Ensure that you can easily tell what it is in both sizes. Very busy images or those without much contrast sometimes are difficult to see when small.
  • Background. Most booksellers’ websites have plain white backgrounds, so take that into consideration in your design.
  • Branding. You can spot a book by J. K. Rowling, Stephanie Meyer, or Janet Evanovich from across the biggest bookstore on earth. Why? Because you know what their covers look like. You know the color palette, the type of art, and the fonts. You don’t have to see details to know their work even from a distance. They have branded their series, and you should consider branding books in the same genre even if they aren’t technically a series. The goal is for readers to be able to pick your books out even if the title and name have been removed.

Options for Cover Design

If you are serious about the book business, your cover should reflect it by looking professional too. There are three main choices for cover creation:

  • Premade Covers. Premade covers are available from many designers. Most sell each cover only once, and they offer options for creating a series theme. As part of your purchase, the designer adds your title and author name to the cover. This can be a good choice if budget is a concern.
  • Custom Cover Design. Many designers who create premade covers also offer custom designs. You choose the design direction, fonts, images, etc, but the designer does the work. They may also offer custom art or illustrations. This is a more expensive option, but it offers more customization.
  • DIY. This can be the most cost effective choice depending on your choice of art and font and the cost of design software. If you are already acquainted with graphic design software or you are willing to learn, go for it. You will need to purchase commercially licensed art and fonts.


Because you intend to use photographs or illustrations on a product that you will then sell,  you must use art that is licensed for commercial use or that is already in the public domain. Just downloading an image from the internet without compensating the artist can leave you open to lawsuits.

  • Custom Art. Genres that require extensive world-building, like fantasy and sci-fi, can beg for original art. Check out sources like Deviant Art, which provide places for writers and artists to meet and do business. Make sure you get a signed contract in writing when you commission a piece.
  • Free for Commercial Use/Public Domain Images. If you’d like to use completely free art, it’s got to be licensed as free for commercial use or in the public domain. Be certain to research the piece before you use it to be sure it is, in fact, in the public domain. Trust, but verify. You don’t want to get sued later.
  • Royalty-free Art for Sale. There are various online resources for royalty-free art. There are several sites that have millions of images to choose from all all categories, but some sites have a smaller, curated selection of a specific type of image (such as romance or fantasy images). Once you purchase and download the image, you can alter it to suit your cover. It’s also possible to purchase exclusive images, which means no other book will have the same image, but they tend to be more expensive. Be sure you fully understand the terms of use before purchase.

Sources for Art


Think of fonts as little works of art. They’ve got licensing terms of use too. Be sure the fonts you choose are licensed for commercial use. Some fonts are licensed for personal use only. Just because a font is free to download does not mean it is licensed for commercial use. 

Sources for Fonts

Remember: you only have once chance to make a first impression. In the bookselling world, it’s not your writing that makes the first impression. It’s the cover. Do not skimp on it. Do it right.

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The Design Department (Part 3)

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Typesetting Paperbacks
The Design Department (Part 3)

The main difference between formatting an ebook and typesetting a print book is the ability of the text to reflow. A printed book is static. Once you place an item, it never moves. You have ultimate design control from the title page to every single word break. You may choose to hire a designer or save money by doing the work yourself. Because most books can be formatted in your existing word processing program, this is a great place to save money!

As with ebook formatting, consistency is key in typesetting physical books. But with paperbacks and hardcovers, you have more control of the overall look of your product. In addition to making sure every type of item is formatted the same way every time, you can increase the professional appearance of your book by following some standard typesetting guidelines. Look at your favorite physical book. There are certain standard items: front matter, back matter, page number placement, font style, text justification, etc.

Here is an overview of the general process and some tips for making your book professional:

  1. Save a copy of your final manuscript and label it as your print version.
  2. Choose a trim size for your book.
  3. Change size of your manuscript’s pages to match trim size.
  4. Mirror your margins.
  5. Adjust to two-page view for ease of viewing page breaks and getting a better sense of the full layout.
  6. Add front matter
    • For a comprehensive list of front matter order, see the Chicago Manual of Style.
    • Or consider using the layout of a paperback in your collection as a template.
    • Title pages are great places to use interesting, commercially licensed fonts.
  7. Choose your main font and type size.
    • Body font
      • Don’t get creative here. The object is to choose the most easily readable font and size.
      • Choose a serif font to help lead the eye across the page.
      • Good choices include but are not limited to Garamond and Palatino.
      • Most paperbacks use font size from 10-12. Large print begins around size 14.
    • Commercial fonts
      • Be sure the fonts you choose are available for commercial use!
    • Fonts for chapter heads and subheads
      • Get as fancy as you’d like, but make sure they are consistent in font style and size.
  8. Fine tune the text.
    • Indents
      • Make sure each indent is consistent.
    • Full justify
      • The text should be in a straight line down each side of the a page.
    • Line spacing: widows and orphans
      • Widows (a short, paragraph ending line appearing at the top of a new page) (CMOS, Key Terms)
      • Orphans (a short line appearing at the bottom of a page or a word or part of word appearing on a line by itself at the end of a paragraph) (CMOS, Key Terms)
      • In a dialogue-heavy novel, sometimes there is no choice but to leave some widows and orphans. But in general, when it comes to the end of an old page or the beginning of a new page, a line must have at least two words, and a paragraph must have at least two lines. 
      • Use spacing to adjust any obnoxious widows and orphans.
      • If formatting in Microsoft Word, turn on widow an orphan control.  This will not eliminate the problem, but it will make your job easier.
  9. Add page numbers and headings.
    • Front matter, back matter, and other blank pages should not have headings or page numbers.
  10. Review each page to check for consistency.
  11. Save as PDF.
  12. Upload to print venue.
  13. Review the proof, digital or physical
    • To save money, use the online reviewer.
    • To ensure quality of your product, order a physical proof.

Typesetting Resources

This is not a complete instruction list. It’s just a compilation of advice for intrepid paperback DIYers. If you have any questions, please feel free to ask them in the comments below.

*Because Createspace is the most widely used print-on-demand source for paperbacks, this post will link to resources from that site. However, the same general concepts will apply at other printing venues. Check your preferred printer for specifics.

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The Design Department (Part 2)

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Formatting Ebooks
The Design Department (Part 2)

The Design Department posts will present an overview of basic book design for indie publishers, but it is by no means an in-depth how-to. This series will offer options for making your vision come to life, and as we go along, I’ll suggest some resources that will tackle each subject in more detail.

Once you have written, edited, and proofed your book, the next step is getting it into the hands of readers. To do this, you’ll need to format it so that it can be converted into a paperback and/or ebook.

Again, you have two main choices:

  1. Go Pro
  2. DIY

Money Saver: In most cases, ebook formatting is relatively simple, so you can save money by doing the formatting yourself.

Formatting ebooks can range from simple to complex, and there are steps you can to help ensure your success. When in doubt, the simpler the formatting, the better. Once you make your main formatting choices, you can add fancy items as time and money allow.

Because of the personalized nature of ereaders, there is only so much you can do to make your book’s format stand out from other ebooks. No matter what font you choose for the body of your work, it will be converted into a standard font upon upload. You can add special fonts for chapter headings, title pages, and even drop caps for chapter openings, but that can be more complicated and may require special software and/or some knowledge of coding.

Remember: ereading devices allow people to change the main font to one of their preference and to adjust the size of the text to suit their needs. So you don’t have to spend time pondering the exact right font or size for the main body of your ebook. Formatting for a digital device isn’t really about typesetting a pretty, static book. Because text reflows and moves around on an ereader, ebook formatting is more focused on creating a road map for the text to follow.

Instead of getting caught up in word breaks and line breaks, ebook formatting concentrates on the relative size, placement, and consistency of the following items:

  • Headings (chapter and subheads). Are they bold and centered? Right justified? How far are they down the virtual page?
  • Indents. Are you using indents or line spacing to denote paragraph breaks? If indents, what size?
  • Section breaks. How much space occurs between sections?
  • Page breaks. Do they fall in the right places (at the end of chapters)?
  • Use of bold and italics. Bold and italics sometimes vanish, especially if you must use the nuclear option. Make sure the bold and italics stay where you want them.
  • Images. Are they centered? How does the text flow around them? How do you set off photo captions from body text?
  • Spacing. How much space is between paragraphs?

Consistency is key. There are lots of guidelines for manuscript formatting. You don’t really have to observe them all as long as you make sure each of the above items are formatted the same way. Ensure that each chapter heading uses the same font size and spacing. Space section breaks the same every time. It doesn’t matter so much if you use the perfect size indent, but make sure they are all the same size. Readers may never know if you used a .25, .33 or .5 inch indent, but they will definitely notice if the indents change sizes or disappear as they are reading.

Basic Steps to Prepare a Document for Ebook Conversion:

  1. Save file as Microsoft Word document. (There are other programs available that do fancier formatting, but again, we’re keeping it simple here.)
  2. Format Text Manually, being sure to keep each item consistent throughout
  3. Optional: Convert to .mobi and .epub
  4. Upload to Publishing Venue
  5. Proof

Unless you decide to go exclusive with a particular retailer, you’ll need to make your book available in as many different formats as possible: .mobi, .epub, .pdf, etc. Each one starts with the same Word document, which you should only need to format once. Once you have completed the main document, save it. Then save copies specifically for each publishing venue. That way you always have your original unformatted manuscript, your generic formatted version, and your retailer specific versions. If anything goes wrong, you have 3 levels of protection.

Kindle Direct Publishing, Barnes and Noble Press, Kobo Writing Life, Smashwords, Apple, and other distributors all have their own sets of instructions and recommendations for how to format for their venue. Some are more complicated than others. Some offer free downloadable programs to do the work for you. Others offer paid services, like Kindle Create.

Pro Tip: Because Smashwords distributes to all vendors, their directions for formatting a Word file for conversion are the most generally applicable. They can be found in the Smashwords Style Guide, which is available free.

There are overwhelming amounts of info out there, and you can drive yourself crazy trying to read all the directions for each venue. Worse, you could convince yourself that formatting is too difficult to be done on your own. But it’s not true! You can save your sanity–and your money–by keeping your formatting simple. Skip the fancy fonts and drop caps, and consider these tips for making your formatting experience easier.

  • The more automated options you use, the more potential you have for trouble. If possible, stay away from using templates to format for you. Just use the normal template. Set it up with your preferred indent size and line spacing options. Don’t fool with anything else. Don’t have it add bold or center certain portions of text. These template settings do not always translate. Besides, how hard is it to hit “center” for each chapter head as you go along?
  • Turn on hidden text. You need to see every space, hard return, and hidden character.
  • Don’t use multiple hard returns to build space into a page. Adjust the before and after spacing in the paragraph formatting menu instead.
  • Use paragraph formatting to indent the first line of each paragraph by about .25 inches, not the traditional .5 inches. A half-inch indent too big in an ebook. Also, don’t use tabs for indents. They don’t translate.
  • Do not double space after a period.
  • Rather than using page breaks, use “section break (next).” For some reason, it works best for keeping page breaks between chapters correct.
  • Sometimes files get corrupted, so never work from the original. (Seriously. always work from a copy.) The more complicated your document, the more likely you are to have hidden issues in the file. If you find you have a corrupted file, use the nuclear option described on Smashwords.

This simple formatting method starts with your Microsoft Word document. Everything is based off the formatting of one file. Once you have your Word document prepared, you can upload copies to each publishing platform, where the file will be converted into the appropriate ebook type. However, you also have the option of converting the Word file to .mobi or .epub yourself, using a free program such as Calibre.

  • If using Calibre, save your Word file as an html file, which is easy, but be sure you use the web page (filtered) option.

Once your file is formatted (and maybe converted), upload it to each publishing venue. It will take a few minutes to be converted and then you can either use an online proofer or download the shiny new ebook file to proof later. Make sure everything looks the way you wanted it to, but realize that ebooks are fluid. Your page breaks, chapter heads, and section breaks should be intact, but not all lines of body text will break at the same point. If you kept it simple and created a good road map, the text should flow generally the same way as it did in the Word document.

This is by no means a complete instruction list. It’s just a compilation of tips and tricks. Again, the general rule is this: Simpler is better. So if something isn’t covered here, ask yourself: what is the simplest and least automated method and do that.

If you have any questions, please feel free to ask them in the comments below.

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