1. Your status as student will not affect your status as author. Yes, you will be considered a sole proprietor and will report the KDP income on Schedule C.
To do this in TurboTax, follow these steps:
- Inside TurboTax, go to the search box and enter schedule c.
- Click the Jump to link in the search results to begin the interview.
For more details, see: Where do I enter my Schedule C?
2. Hobby income must be reported, but hobby expenses are not allowed through tax year 2025 due to the Tax Cuts and Jobs Act legislation. Your income would be considered a hobby if you made less than $400.
For more information, see: When the IRS Classifies Your Business as a Hobby - TurboTax Tax Tips & Videos
Hobby or Business? IRS Offers Tips to Decide | Internal Revenue Service
3. Yes, self-employed persons are subject to self-employment tax, which is 15.3%: 6.2% social security plus 1.45% Medicare tax as the employee and the employer.
- This tax is on net income from the business, not gross revenue. Offset any expenses for your writing, such as business use of the computer, fees to submit the writings, any memberships in author groups, advertising, business use of the internet, etc.
- The IRS allows a deduction from income of 50% of self-employment tax because the total income is also subject to your income tax rate. If you have no other income, this would be 10%.
- For an estimate of what taxes to expect, see:
- For the 2021 tax rate, see: IRS 2021 Tax Bracket adjustments. Navigate to the section Marginal Rates which shows that the first $9,950 of income for single individuals will be taxed at 10%, but if the income does not exceed the standard deduction, that tax would not necessarily apply. It is still calculated because of the tiered tax bracket system.
- Keep in mind that as a single person, the standard deduction for single filers will be $12,550 and should be used if itemized deductions sum to less than $12,550. The first $12,550 would not be subject to income tax. The self-employment tax will still apply, however.
4. Yes, you should set aside some tax as you go and submit it as an estimated payment if the taxes will exceed $1,000, which would require more than $6,500 earned. Self-employed persons pay taxes four times a year, 4/15, 6/15, 9/15, and 1/15. Since 4/15 has already passed, do not pay it late. Simply calculate the tax from January 1 through May 31 for the June 15 estimate. If your net income is less than $6,500, then the tax can be paid when the 2021 tax year is filed in the spring of 2022 and no estimates would be necessary to avoid penalties and interest.
For more information, see:
Can TurboTax calculate next year's federal estimated taxes? Keep in mind, since you did not have 2020 self-employment, then on step 2 from this link, answer Yes to adjust the self-employment information.
How do I make estimated tax payments?
Can TurboTax calculate the estimated payments for next year's state taxes?
5. Unless you are paying independent contractors more than $600 to help you with this business, you do not need an EIN. It can be filed with your social security number. If you choose to get one, it can be applied for online at the IRS here: How to Apply for an EIN.
6. See item 2 above regarding hobby income.
7. For schools outside the country, they may still qualify for some credits if the university participates in a student aid program administered by the US Department of Education.
For more information, see:
What is an Eligible Educational Institution?
Federal Student Aid Federal School Code Search
Who is eligible for the Lifetime Learning Credit?
These answers are getting a little technical and assume you are a U.S. Citizen and are aware of separate requirements for foreign bank account reporting, etc. Please reply in this thread if you need further clarification. We are happy to help.
@Balletgirl88
