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Consider the following three was of publishing a book in the United States: (1) Find a publisher that will publish your manuscript. (2) Form an LLC and publish the book under that title. (3) Upload the book to Amazon.

Now, I had been under the impression that the royalties paid the author under scenario (1) were exempt from the FICA tax (which I recall is on the order of 15.3%). However, I have read some conflicting articles lately; and now, I'm nor so sure.

I am also under the impression that scenario (2)---the LLC route---results in all book profits being taxed as ordinary income, and therefore, subject to the FICA tax.

And (3)---the Amazon route---I thought (perhaps erroneously) that the "self-publishers" who upload their books to Amazon do not pay Social Security taxes on the "royalties" paid to them by Amazon.

QUESTION: Can someone tell me which one(s), if any, of these publishing avenues will result in an exemption from the Social Security tax for either an American citizen or a foreigner with a green card?

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    As a fine point that really just refines what you mean to ask, everything but wage and salary income paid by an employer and tips paid by customers, is exempt from FICA tax. The pertinent issue is whether it is exempt from self-employment tax which is a tax in lieu of FICA tax on the earned income from services or operation of a business (that is not merely an investment) of self-employed people. There is also a third tax, often called the Obamacare tax, in lieu of Medicaid taxation, on some investment income.
    – ohwilleke
    Feb 22, 2023 at 20:16
  • @ohwilleke If I am interpreting your comment correctly, would that imply that at least royalties paid by a publisher to an individual would not be subject to FICA tax, as the publisher is not the author's employer, nor are the royalties wages or salary?
    – DDS
    Feb 22, 2023 at 20:37
  • @ohwilleke Also, if it's not too much trouble, where might I find an official declaration to the effect "everything but wage and salary income paid by an employer and tips paid by customers, is exempt from FICA tax"?
    – DDS
    Feb 22, 2023 at 20:39
  • @michristians They might be subject to self-employment tax but not FICA. Thinking it isn't subject to FICA without realizing the issue of potential self-employment tax exposure misses the point.
    – ohwilleke
    Feb 22, 2023 at 21:06

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