Because no employer withholds tax from your royalty income the way a paycheck would, the IRS generally expects self-employed authors who owe $1,000 or more in tax for the year to pay estimated taxes quarterly rather than in one lump sum the following April, and missing these payments can mean an underpayment penalty even if you pay everything owed by the filing deadline. This catches many first-time author-earners off guard, since it's a genuinely different rhythm than the withholding most people are used to from traditional employment.
This article provides general information for U.S. authors, not tax advice. Consult a qualified tax professional to calculate your specific estimated payments.
This is part of the Complete Guide to Author Business Basics.
Generally, if you expect to owe $1,000 or more in tax for the year (after subtracting any withholding and credits), you're expected to make quarterly estimated payments. For most authors without a separate job providing withholding, this threshold is reached fairly quickly once royalty income becomes meaningful, often well before it feels like "real" income.
Estimated tax payments are generally due four times a year:
These dates cover income earned in roughly three-month periods throughout the year, though the periods aren't evenly split (the second "quarter" is shorter than the others). Missing a payment date, even if you pay the full amount owed by the following April, can result in an underpayment penalty for that specific period.
A common, practical approach: as royalty payments arrive throughout the year, set aside a percentage, commonly cited around 25% to 30% of net income, in a separate account, then use that set-aside amount to make each quarterly payment based on what you've earned and spent on deductible business expenses so far. Some authors instead base their estimate on the prior year's income and tax liability, particularly useful if this year's income might roughly resemble last year's.
Individual filers, including most sole proprietors and single-member LLC owners, typically use IRS Form 1040-ES to calculate and submit estimated payments. Payments can generally be made online directly through the IRS's payment system, which is faster and provides an immediate confirmation compared to mailing a check.
The IRS can assess an underpayment penalty, calculated based on how much you owed and for how long, for any quarter where your payment fell short of what was expected. This is separate from and in addition to whatever tax you ultimately owe when you file. Paying something close to your actual liability each quarter, even if not perfectly precise, is far better than skipping payments and settling everything at filing time.
If this is your first year with meaningful author income, you may not owe quarterly payments based on last year (since you had no comparable income then), but you can still owe a significant tax bill, plus potential penalties, if you don't proactively set aside money and make payments based on your actual current-year income. Don't assume you're exempt from quarterly taxes just because your prior tax return didn't include this income.
Focus on Writing; Consult a Tax Professional on Payments
While Entrada doesn't provide tax advice, we're glad to help authors think through the publishing side of their business.
Generally, if you expect to owe $1,000 or more in tax for the year after subtracting withholding and credits, yes. Most self-employed authors without a separate job providing withholding reach this threshold once royalty income becomes meaningful.
Generally April 15, June 15, September 15, and January 15 of the following year, though these can shift slightly if a date falls on a weekend or holiday.
The IRS can assess an underpayment penalty for that specific period, even if you pay everything you owe in full by the following April's filing deadline.
A commonly cited rule of thumb is 25% to 30% of net income, though your actual rate depends on your total income, deductions, and filing status; a tax professional can help refine this for your specific situation.