What? Pay taxes on my meager earnings as an author? Please say it isn't so.
It is true that author royalties are taxable, as well as the revenue you collect from books you sell on your own at events. On the plus side, of course, all your writing related expenses are deductible, so the tax burden may even out.
Infinity Publishing has a nice summary of all the deductions authors are entitled to take. Writing is considered a business expense, unless you don't produce revenue within five years. Then, you are downgraded to "hobby" status.