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I received a Form 1099-MISC from Medium showing income received from them as Box 2 Royalties. I looked this up on the IRS website and it states this amount must be reported on Schedule E. My amount was under $200. After reading the instructions for Schedule E, which looks long and complicated to me, and it looks like it leads to filling out other forms.

I'm sorry if I sound like a nitwit, but, this is my first encounter with royalty income and I don't know what to do. I'm nervous and sick to my stomach as to how to report this properly. I would greatly appreciate any advice anyone has to offer here or in a message. Thank you. Hugs

It looks complicated, but for someone in your situation, it's actually fairly simple. Schedule E is designed to capture income and expenses from a variety of sources. Assuming you only have writing income and not real estate income, partnership or corporation income, etc., it will just be your writing income and and any related expenses you can claim. You only need to fill in the parts that pertain to your situation. The rest you can leave blank.

This evening I'll try to remember to review my form so I can verify what I'm about to say, but assuming I'm remembering everything correctly, here's what you need to do:

Part I:

Line 4, column A: Enter your income from the 1099-MISC and any other writing income you might need to report.

Lines 5 through 22, column A: Enter any expenses related to your writing income. I report my Medium membership as an expense. I think I put that in line 19 ("Other") and probably report it as "Memberships". I'll check on that. If you have other expenses related to creating, promoting and selling your writing, you can enter it in the appropriate lines. They're pretty easy to figure out. Advertising and marketing expense, for example, goes on line 5. Put all entries in column A, under the reported income.

Totals:
- Line 20 will be the total of all entered expenses.
- Line 21 is royalties minus expenses. This will be positive if you made money, negative if you lost money.
Line 23b - Enter the amount from line 4 (total royalties)
Line 24 - If line 21 is positive, enter it here (income)
Line 25 - If line 21 is negative, enter it here (losses)
Line 26 - Enter line 24 minus line 25 (basically, copy whichever of those lines isn't blank).

Skip parts II, III, and IV. They don't pertain to you.

Part V:

Line 41: Copy the total from Part I line 26 here. This is the amount that will go over to your 1040 as taxable income.

Again, I'll verify this against my own tax forms to make sure I'm telling you everything correctly, so don't submit the form before you hear back from me. And if you don't hear back from me, do prompt me, because sometimes I forget to do things in the mad rush of my life. ;-)

Dale, Thank you so much for taking the time to prepare these explicit instructions. I had no idea writing income earned royalties... I thought it was just other income. Thank you again. Hugs

Sam (Rescue Dog Mom, Writer, Hugger) wrote: "Dale, Thank you so much for taking the time to prepare these explicit instructions. I had no idea writing income earned royalties... I thought it was just other income. Thank you again. Hugs"

You're quite welcome!

Soooo . . . in looking over my tax forms, I'm actually treating my writing business as a sole proprietorship and using schedule C to report income. I have 1099-MISCs from both my own publishing business (which pays me royalties on my books) and Medium. I sum those are report them on Schedule C as income, then use the rest of the form to deduct any expenses I paid (as opposed to what my business paid).

So I haven't actually used Schedule E before, but I think it would work. Both C and E do basically the same thing: report your earnings, back out expenses, and give you the income or loss that gets transferred to your 1040.

Just bear in mind that I'm not a tax professional. I do my own taxes (including business taxes) every year and have only gotten a nastygram from the IRS a couple of times when I forgot to report something they knew about. So I'm fairly confident I know what I'm talking about. However, this is just friendly advice, not professional advice.

Thank you very much, Dale for this additional information. Would like to clarify one thing... In your 2nd paragraph, you state "Both C and E do basically the same thing." Just want to confirm I pick one form, not use both C and E. Yup, I'm that nervous about messing this up. Thank you again.

Sam (Rescue Dog Mom, Writer, Hugger) wrote: "Thank you very much, Dale for this additional information. Would like to clarify one thing... In your 2nd paragraph, you state "Both C and E do basically the same thing." Just want to confirm I pic..."

Yes, just use one or the other. C is probably more appropriate if you consider your writing "career" to be a business, even if you haven't formally created a business. E may be more appropriate if not.

By the way, if anyone else with experience in this wants to chime in, it wouldn't hurt . . .

Dale wrote: "Sam (Rescue Dog Mom, Writer, Hugger) wrote: "By the way, if anyone else with experience in this wants to chime in, it wouldn't hurt . . .
..."

I agree, Dale. Other opinions would help, as those of us writing on Medium are in the same boat.

I hope to finish and publish my book someday and have no idea which way to go because I actually have a business license for Samantha Beach Publishing registered with the state. I thought I had to do that in order to write under a pen name rather than my real name.

All of you who write on Medium have published books, but I haven't. I would be eternally grateful for additional advice. Thank you. Hugs to All

Sam (Rescue Dog Mom, Writer, Hugger) wrote: "I actually have a business license for Samantha Beach Publishing registered with the state...."

Do you have a federal EIN for your business (employer ID number)? If so, then I'd suggest using Schedule C. If not, you can get one very easily from the IRS (it's free and can be requested online).

Dale wrote: "Do you have a federal EIN for your business (employer I..."

I actually do have an EIN because I thought it was the only way I'd be allowed to write under a pen name. Thank you.

Sam (Rescue Dog Mom, Writer, Hugger) wrote: "Dale wrote: "Do you have a federal EIN for your business (employer I..."

I actually do have an EIN because I thought it was the only way I'd be allowed to write under a pen name. Thank you."

Great, then you're all set. ;-)

Dale wrote: "Great, then you're all set. ;-) ..."

Yup, except since I have a business license in order to use a pen name, I think that means I have to file Schedule C. I didn't think of that when I obtained my business license. Ugh! Thank you again for your valuable information. Hope your wife is feeling well. Hugs

I use a tax preparer for my taxes, but I try to understand most of what he is doing. We file 2 separate Schedule Cs every year. One is for my T&E Treasures business and the other is for my author work. If I lose money 3 years in a row (over a 5 year period), then my author status would change to a hobby instead of a business. I would then file a schedule E. I found schedule C has better options for business write-offs.

It sounds like you don't have many (if any) expenses to claim or inventory to track with your writing, which is what Part II and III record, so it shouldn't be too bad.

Erica wrote: "I use a tax preparer for my taxes, but I try to understand most of what he is doing. We file 2 separate Schedule Cs every year. One is for my T&E Treasures business and the other is for my author w..."

Erica, You and I are in the same boat. I write and sell jewelry. I now understand I must file 2 separate schedule C's because I have business licenses registered with our state. Thank you. Hugs

Erica wrote: "If I lose money 3 years in a row (over a 5 year period), then my author status would change to a hobby instead of a business."

I had always heard that, but I wonder if that only applies to a sole proprietorship? Our LLC has lost money for 9 years running, and we always filed schedule C for it.

To keep the same EIN, I'm going to rename the LLC but keep the management structure (my wife and I co-own it), which I hope lets me report losses as they occur instead of worrying about it.

I am filing as a sole proprietor so that may be the case.