Using crowd funding to raise money for your book

September 27th, 2012 → 6:09 pm @ // One Comment

Phil Whitmarsh wrote a blog post over at Publishing Basics on

Pros and Cons of Kickstarting Your Project

Kickstarting (or, more broadly, crowd funding) as Phil explains, is ” an Internet-based program where creative people can pitch potential supporters to raise funds to produce a short- or feature-length film, record music, publish a book, and many other products.”

Here’s an excerpt from Phil’s article:

Other People’s Money – Maybe you don’t have the cash or credit to fund your own book, but if you can convince others that your book is worthwhile, you might be able to raise the money. You can remove your risk by raising all of the funds you need.

Don’t underestimate the value of helping others feel good. You’re helping others pay it forward. There is great value in allowing others to help you reach your dreams.

Pre-selling With a New Spin – Pre-selling is tough enough. With Kickstarter you’re basically pre-selling copies of your book (and recognition for the assistance) to your network of friends, family, co-workers, and anyone looking for a way to help.

Read the other pros and cons of crowd funding  here.

 

That got me to thinking (with my CPA-tax mind): How does the IRS see income from crowd funding sources like Kickstarter?

The accounting software company, Outright.com, has an informative page about taxes from crowd-sourcing income.
http://outright.com/blog/accounting-for-crowd-funding-what-you-need-to-know-before-starting-a-kickstarter-campaign/

The IRS will probably see income from crowd funding as exactly as Phil described: pre-selling books. That means the income from Kickstarter is taxable to an author who is pre-selling books.

Also, an author may have to pay sales tax on the sale of those books, even if they are digital books.

Here’s a list of 22 states (and Wash DC) that charge sales tax on digital products: http://taxesforwriters.com/do-you-buy-or-sell-ebooks-list-of-states-that-tax-digital-products/

Sorry, to be a downer here, but you need to know that there is no free lunch when it comes to crowd funding!

Carol Topp,CPA


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One Comment → “Using crowd funding to raise money for your book”

  1. […] recommend that you learn about the tax responsibilities for crowdfunded dollars in her posts “Using crowd funding to raise money for your book” and “Are gifts from Kickstarter taxable income or a […]

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