I'm thinking of publishing a book on kindle, but I don't currently have a business set up. Do you need a business to publish a book? I'm curious as to how to handle US taxes for the royalties. I wouldn't be publishing it from outside the US.
Answer
No, you don't need to set up a business to self-publish a book. In the U.S., royalty income and all related expenses to publishing the book (e.g. paying a graphic designer to create a cover, advertising, travel expenses for a book tour, etc.) are reported on Schedule C of your personal tax return.
EDIT
Regarding Social Security and Medicare taxes, you don't use the forms 940/941 that an employer would file. Instead, these contributions are called self-employment tax on your personal return, and cover both the employer and employee portion for Social Security and Medicare. The employer portion is a deduction on your personal tax return (available even to those that don't itemize deductions).
As Steven pointed out in his answer, don't forget that you may owe additional taxes that aren't covered by withholding of any W-2 income you may have, so you may need to make estimated quarterly payments to avoid having to pay an underpayment penalty when you file your tax return.
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