I am curious as a US author I thought we were going to be sent some sort of tax form for our 2015 Taxes (which are due next monday). I was under the impression the new way they show our statements with both the “author fee” subtracted from our earnings was because we would need to report the full amount and then use the author fee as a deduction. Am I wrong that any form was sent? Can I simply use my full actual earnings amount? Can someone please clarify what exactly i’m supposed to do? Thanks in advance!
I am not an author here, but I run a small business, so I will try to help. I am not a tax expert in this area, but n case no one else answers, I make an educated guess.
They can not send you a tax form, unless you first signed a form with them, like a W-3, which gives them info to send you a 1099-Misc. They are not goiing to accept a W-3 from you unless they wish to have an account with the IRS. This is an Australian company, so I am doubtful they are going to be mindful of the dizzying amount of tax forms in the USA, or all the rest of the countries in the world
You just treat this as income how you would normally file for this business of yours. If you haven’t before, I would consider this miscellaneous income for self employment. That is a Schedule C. The royalties they take out, I would say is not an expense, because you never actually sent them money. You could say its an expense I suppose, but the net income would still be the same. I wouldn’t report it unless your reporting basis is what you invoice, that is - if you personally measure your sales as the price that is paid for by customers, for your records - only so that you are consistent (are you measuring sales across different vendors and then subtracting different fees?). But if you literally just say - My monthly income was this and that’s it - so go with that and no expenses related to the sale. Some expenses outside of the fee might be whatever costs you have to get your money - is there a fee to transfer the money to your account? .
Also to consider is how you count your money. Do you count your earnings for all sales, or when you get the money (must you make $50 to get them to send you a check?, or suppose you have $45 residing in an account but you don’t have access to it because you have to meet a threshold - in that case, you are on a cash basis). And - don’t forget to deduct your internet fee (I would and do because I use the web as a part of conducting my business), or at least say 25% of your internet is used for this self employment and deduct 25% of the internet hookup fee.
Because I employ people and I have insurance requirements, namely liability insurance which is based on net sales, I count my total sales I do through credit cards (which I try to avid at all times because of the fees) for reports, then expense the fees. My net income is the same, but not counting my total sales would skew my total sales and I do not want to be accused of insurance fraud (for whatever little impact that would be), and later I expense the insurance. Now, if I sold through a third party, I would call my insurance agent up and ask what to do. If I didn’t have insurance requirements based on net sales, I probably wouldn’t care how I did it - net income is net income.
You will also have to acquaint yourself with your state tax law. Will you owe sales tax? I doubt Envato is charging it and submitting it to your state. Most states are now set up - if you sell anything - you owe a sales tax, whether or not you included it with the sale. In that case if you do, that will change things. Its probably easier to just say that your sales tax is included with the sale. SOOO… if you are to owe sales tax, then you count the sales as the sales on the website, and owe sales tax on that and expense the fees. You might be able to say in your personal accounting methods that the price includes your sales tax. Then you calculate the actual sales price and pay the sales tax ( sales price = Envato price / (1+tax rate%) ). And fees from Envato would then be your expenses.
I pray for a flat tax someday.
Thanks for the feedback wjgo. Envato actually requested information last year from US authors so they could send out a 1099 misc to us but I never got one. If there are any US authors who could let me know if I’m supposed to just report my earnings (as in what I actually made from envato and not) or am I supposed to report the full amount of the sale and then deduct my “author fees”. If I am supposed to deduct author fees is there an easy way to calculate this? neither my statement page or earnings page has a year end summary (which would be super helpful by the way). At this point since I’m finishing up my taxes tomorrow I’m just going to report my actual earnings since I don’t know what else to do.