Anybody 1099 co-writers for royalties?

[DaNolman]

We have some co-writers who make some pretty ok scratch and others who only make about $15. The instructions state to 1099 anyone paid royalties of $10 or more.

Seriously?

Does anyone know the repercussions for not filing that $15 1099? Would it just be that you can't write off their $15? Or would it be something ridiculous like a fine and jail time ???

You never know . . . TIA!

[simonparker]

Just file it. Now that I told you my opinion of what I think you should do, here's what I understand (not legal/tax advice, go see your tax advisor for advice).

The IRS taxes individuals on all sources of income derived. There are exceptions, but as a general rule, if you earned it, you pay tax on it.

Royalties paid/accrued during a tax year are generally reported on form 1099-MISC should they be equal to $10 or more. The form 1099-MISC is usually given to persons, and not corporations. So if you make a royalty payment to your co-writer, and the payment is to a corporation (your co-writer as the corporation, or his publishing company), you are generally exempt from having to file a 1099-MISC with the IRS and sending a copy to your co-writer.

Failure to file. This is common with small business, though the IRS doesn't usually show a lot of mercy. The penalty can range from $15 for a 30-day late filing up to $250 should you show willful neglect in not reporting a 1099 form. If you have 25 writers that make $10 each and you don't feel like filing the 1099-MISC, you could be looking at $6,250 in penalties.

Of course, the IRS would have to somehow have to figure out the fact that you didn't send a 1099 or multiple 1099s.

[DaNolman]

Thanks Simon! I'm just glad there are still humans involved. Once we go totally digital, I'm sure it'll be easier for the IRS to issue those fines!

[guitarhacker]

Yeah...ditto...


If the IRS says to file it for earned income above $10... file the form. You do not want to butt heads with the IRS agents. They have no sense of humor or mercy on taxpayers who do not understand and follow all 800,000 pages of the tax code.

Tell your co-writers when you send them their share of the money that THEY need to calculate and pay the taxes on that money. And inform them that you will be sending 1099s at the end of the year. That way, they are not surprised, pissed off or mad at you because they though/assumed that you had paid the tax for them already. Make it clear in a nice way.....

Since they are not your employees, you are not required to deduct payroll & SS taxes. You can pay them the full untaxed amount. The larger it is (in dollars) they may actually need to file a quarterly payment to avoid penalties and interest at years end. You too. Before you send them the money, since it came to you and the PRO or publisher will be sending you a 1099 for the full amount..... so unless you want to pay taxes on it, you need to get the co-writer's SSN and send them the 1099 at years end. That way, you are able to write off the total amount you paid to the co-writers in royalty as normal business expenses and owe no tax on it.

It's part of the business of music.

[DaNolman]

Yeah...ditto...


If the IRS says to file it for earned income above $10... file the form. You do not want to butt heads with the IRS agents. They have no sense of humor or mercy on taxpayers who do not understand and follow all 800,000 pages of the tax code.

Tell your co-writers when you send them their share of the money that THEY need to calculate and pay the taxes on that money. And inform them that you will be sending 1099s at the end of the year. That way, they are not surprised, pissed off or mad at you because they though/assumed that you had paid the tax for them already. Make it clear in a nice way.....

Since they are not your employees, you are not required to deduct payroll & SS taxes. You can pay them the full untaxed amount. The larger it is (in dollars) they may actually need to file a quarterly payment to avoid penalties and interest at years end. You too. Before you send them the money, since it came to you and the PRO or publisher will be sending you a 1099 for the full amount..... so unless you want to pay taxes on it, you need to get the co-writer's SSN and send them the 1099 at years end. That way, you are able to write off the total amount you paid to the co-writers in royalty as normal business expenses and owe no tax on it.

It's part of the business of music.

Thanks guitarhacker. Great advice and I like the better safe than sorry motto. I haven't been doing the part about giving co-writers a heads up, but will def start doing that in the future.

[mojobone]

We have some co-writers who make some pretty ok scratch and others who only make about $15. The instructions state to 1099 anyone paid royalties of $10 or more.

Seriously?

Does anyone know the repercussions for not filing that $15 1099? Would it just be that you can't write off their $15? Or would it be something ridiculous like a fine and jail time ???

You never know . . . TIA!

$10 or more is a good rule of thumb, but you don't technically need to 1099 anyone who earned less than $400 in a given year, since they wouldn't need to declare it. This is an opinion, based on the number of 1099s I received while an independent contractor while retained by various nightclubs over the course of several dozen years, (your mileage may vary) but your accountant and/or tax lawyer might know better.