Article
September 2, 2026
By Erin Lowry
Authors often earn inconsistent, variable income, which can make it feel impossible to create financial stability. But it doesn’t have to be this way. Instead, authors can replicate what the traditionally employed have and put themselves on a salary. This adjustment helps to navigate the highs-and-lows of variable income and provides stability for day-to-day life.
The best part: You do not need to incorporate your business to pay yourself a salary.
Note that this page provides only a general overview of ways to structure your
income to navigate the boom-and-bust cycle of being a writer. Whether or not you should structure your business as an LLC or S-Corp should be discussed with a CPA and/or lawyer.
The most important and necessary financial practice for authors is to create a separation between business and personal accounts. The simplest way to do this is to set up a business checking account and a personal checking account, the latter of which you probably already have.
This is a legal requirement for certain business entities, like S-Corporations, but you don’t have to set up an S-Corp or an LLC to reap the benefits. Not only will it make it easier to pay yourself a salary, but it’s also helpful for tracking business expenses at tax time and to legitimize your return in the case of an audit.
All the income you earn should be deposited into your business account.
Business checking accounts:
Personal checking accounts earmarked for business:
Tracking expenses:
It’s easy to overspend or try to play catch-up during high-income months and then stress about making ends meet during low-income times. Paying yourself a salary—which in this case is based on net income, aka after taxes and retirement contributions—helps level out a lot of those chaotic feelings.
The first step is to figure out the minimum you need monthly. This includes housing, utilities, transportation, insurance premiums, child and/or pet care, food, medicine, personal care, household goods, toiletries, debt payments, and prorated annual payments. For the last one, divide annual payments by 12 to know what you need to set aside monthly. (It’s a good practice to set aside the monthly stipend for your annual payments into a savings account so you aren’t tempted to spend this money.) The final number is your minimum salary for the month.
Of course, it’s reasonable to want a salary that pays more than the bare minimum so you can account for savings goals and living a higher quality of life. Just add a reasonable sum on top of what you need to determine your monthly salary. The bare minimum option is there for lean times when you need to reduce your salary to preserve runway in your business account.
If you aren’t an S-Corp:
Consider two “business” accounts, even if these are technically personal accounts. One should be checking and the other a high-yield savings account.
Payments from clients and publishers get deposited into your business checking account.
Every time you get paid, you should immediately transfer 30% to 40% into your business savings account. This money is set aside specifically for quarterly estimated taxes and retirement contributions.
If you are an S-Corp:
All income gets deposited into your business checking account, which allows high-income months to accumulate.
You can separate reserves into a savings account, but it should be an actual business savings account.
You could be eligible to make retirement contributions from your business account depending on your entity. Making monthly contributions instead of waiting until the end of the year helps your business account reflect your actual runway.
The remaining money stays in your checking account and is used to pay yourself a monthly salary. All that means is transferring the amount you determined in Step 1 from your business account to your personal account. You can split the monthly amount in half and pay yourself bi-weekly or in one lump sum monthly. This strategy allows funds to build during profitable times in order to help sustain your cash flow during slower income months. It also helps separate your tax obligation from your available cash.
If you are an S-Corp, pay yourself via payroll:
S-Corporations are required to run payroll and typically utilize software, some of which even handles paying the businesses quarterly estimated taxes. You are required to pay yourself a “reasonable salary.”
How to determine a reasonable salary for an S-Corp:
The IRS requires employees (including shareholder employees) of a business taxed as an S-Corp to earn a reasonable wage.
There is no specific formula for what constitutes a reasonable wage. The general advice is that it needs to be comparable to what a similar business would pay someone in the same position. A drastic increase in income, which for authors could be a result of receiving an advance or high royalties, may require you to adjust your salary to fall within the IRS guidelines of reasonable. Consult a CPA with any questions.
An author who structures their business as an S-Corp runs payroll and pays taxes similar to a W2 employee. The difference is that you’re both the employee and employer! You’ll then file an annual tax return for your S-Corp by March 15 and then your personal tax return by April 15.
Those who are an LLC or sole proprietor need to pay quarterly estimated taxes in addition to filing an annual return. Even those with a traditional job may still need to pay quarterly estimated taxes on writing income.
Regardless of your business entity, it’s possible you’ll still owe taxes when you complete your annual return, so it’s always wise to have a buffer for any penalties or unexpected tax costs. It’s also good to have money set aside to put towards your retirement account.
Your money should never be a “set it and forget it” situation. It’s important to routinely evaluate and determine if your strategy and salary are in alignment with your cash flow and financial needs. Reducing your salary can help weather a sustained downturn in income or an anticipated slow season. A bountiful season can be celebrated by increasing how much you pay yourself, within reason of course.
Remember, regardless of being a S-Corp, LLC, or sole proprietor, you need to treat your money like you’re running a business, because you are. That means keeping business and personal separate and paying yourself a salary.
Erin Lowry is the author of the four-part Broke Millennial series, including: Broke Millennial, Broke Millennial Takes On Investing, Broke Millennial Talks Money and the Broke Millennial Workbook. Erin has written for The New York Times, Marie Claire, and been a columnist for Bloomberg Opinion. She writes two newsletters: Hopefully Helpful and My Name Isn’t Mom.
