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For Writers: What are Royalties and Advances?

Writer smiling and ready to workRoyalties and advances for books are how publishers pay for the work of their writers. Essentially, when a publisher contracts a writer to write a book, the author gives the publisher the right to publish his or her work for an amount that they both fully agree on.

But how much could the writer make and what about the advance payment?

Calculating book royalties and advances

The book royalty is the agreed-upon price and usually expressed as a percentage of book sales. Similar to points related to right assignments and delivery of books, your book contract includes the royalty rates.

To illustrate, let us say that your book “Andie the Awesome” is for sale at $10 and your royalty rate for sales in bookstores is 10%. This means that you stand to earn $1 for each book the bookstore sells.

Take note that when calculating royalty rates for your work, there are products that automate the process like what some companies like MetaComet® Systems, Inc. offer. A book advance, on the other hand, is an advance against your book royalties.

When Do I Receive My Book Royalties?

Once your book “earns out”, that is, when your book sales surpass the book advance paid to you, you would start receiving royalty checks regularly as long as your publisher prints it and sells it.

In general, publishers send royalty checks twice yearly, either directly to you or to your literary agent, who will be the one to give it to you, minus his or her fee. As you can see from the above examples, calculating royalty rates for your book sales is not really a walk in the park.

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You would also have to report your book royalties to the Internal Revenue Service or IRS since it is taxable income. You would need to state where your royalties come from and exactly how much you receive among others.

To that end, consider getting an experienced royalty accounting professional to do all the accounting (even managing and tracking royalties) for you to avoid issues come tax time and make certain that you’re getting every single penny you’re entitled to.

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