Tax aspects of an author's first book.

• Author: Starkman, Jay

What tax situation do Jimmy Carter, Laura Bush, Barack Obama, and Hillary and Bill Clinton have in common? They all paid self-employment (SE) tax on their first book, perhaps unnecessarily.

The IRS's longstanding position is that "if an individual writes only one book as a sideline and never revises it, he would not be considered to be 'regularly engaged' in an occupation or profession and his royalties therefrom would not be considered net earnings from self-employment" (Rev. Rul. 55-385; Rev. Rul. 68-498). Even when the book is revised, the Tax Court has held that only the royalties from the revised edition are subject to SE tax (Langford, T.C. Memo. 1988-300, aff'd without published opinion, 881 F.2d 1076 (6th Cir. 1989)).

The IRS's position does not appear to be well known. Jimmy Carter paid self-employment tax on his first book, Why Not the Best?, published in 1976. Hillary Clinton dedicated all earnings--over $1 million--from her 1994 first book, It Takes a Village, to charity. She paid tens of thousands of dollars of self-employment tax on the book royalties.

In 2004, Bill Clinton paid SE tax on his first book, My Life, as did First Lady Laura Bush on her recently published first book, Read All About It! Barack Obama's first book, Dreams of My Fathers, originally...