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Tuesday, January 3, 2012

Indie-Published Authors, Await Your 1099-MISCs

I am not a tax attorney or an IRS guru, so take the following with a grain of salt.  I'm new to the royalties business, but a quick search of the Amazon Community shows that Amazon sends out 1099s for $10 and more.  See the last of three entries at http://forums.kindledirectpublishing.com/kdpforums/thread.jspa?messageID=46344&#46344 which purports to be answered by a KDP representative.

As for the IRS website, here's a good legal analysis from 2004 where a publisher sends the royalties to the agent who then sends them to the author (after each has taken their cut):  http://www.irs.gov/irb/2004-20_IRB/ar08.html.  Still the author pays taxes on the gross amount, not the amount s/he receives in the end.  In the article, the writer states that in 2004, "the royalties paid by the publisher exceeded $10."  That seems to be relevant from 2004 on through the present.
Per the instructions for Schedule E (referenced on line 17 of Form 1040 re royalties), here's an excerpt found at http://www.irs.gov/instructions/i1040se/ch02.html#d0e477:

     Royalties.   Report on line 3b royalties from oil, gas, or mineral properties
     (not including operating interests); copyrights; and patents. Use a separate 
     column (A, B, or C) for each royalty property.   If you received $10 or 
     more in royalties during 2011, the payer should send you a Form 
     1099-MISC or similar statement by January 31, 2012, showing the 
     amount you received. Report this amount on line 3b.   If you are in 
     business as a self-employed writer, inventor, artist, etc., report your 
     royalty income and expenses on Schedule C.
Based on the above, ignore line 17 of the 2011 tax form 1040, for reporting of royalties and asking for the attachment of Schedule E, Supplemental Income and Loss, and use Schedule C instead for reporting author royalties.  
I'll advise when I receive my 1099-MISC from Amazon and B&N.  In the meantime, I can still be gathering all my other info and drafting out my 1040 and various schedules, forms.  
For the Indie-pubbed authors, await those 1099-MISCs forms--even though we do not attach them to the 1040, like we would for a W-2.  Per the IRS website, we should receive them by January 31.

Ahem.  And I was expecting a refund this year, so I won't be getting it in January.  

Good luck, all!

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