Filing Those 1099 Forms
Question: In addition to my stock business, I've authored photo and software instruction books, and I also do photo decor books. Presently, I am represented by two agents -- one for books, and another rep for my decor work. Under the contracts with my agents, each gets a percentage of my earnings.
When filing time rolls around, both agents send me 1099 forms, and I understand that copies also go to the Internal Revenue. The 1099 forms show what money they have sent me during the year in terms of advances, royalties received from publishers, and other payments related to my books or decor contracts. But they do different kinds of bookkeeping!
One agent's 1099 lists the gross (full) amount she received from clients as my income; that is, she does not allow for the commission subtracted by her up front before sending a check for the balance to me. The other one handles things differently; his 1099 lists only the net payment (after commission) he actually sent to me.
How should I report these payments on my return? I know that I have to include payments received from agents in the total figure shown on line 1 (gross receipts) of Schedule C of Form 1040, but I'm not sure which figures to report!
Answer: Let consistency be your guide. The amount of income you declare should be consistent with the figures shown on your 1099 forms. Otherwise, the Revenue Service's ever-vigilant computers might go bananas, with unpleasant consequences to you.
When it comes to monies you received via an agent, what you should declare depends on whether the agent submits a 1099 form for you that shows the gross amount (total paid by the publisher or client) or the net amount (amount actually paid to you after commission is deducted).
Does the 1099 filed by the agent list the gross amount? Then that's the figure you should include in totaling your income to come up with your gross line 1 of your Schedule C -- and remember to include the agent's commission, which is deductible, on line 11 (commissions and fees); otherwise, you'll overstate your income and overpay your taxes, a miscue that the Internal Revenue's computers are not programmed to detect.
Does the 1099 from your agent instead list the net amount, the sum on the check actually sent to you after the agent's commission taken off the top? Then you should use that amount in arriving at your gross income figure -- and you should not deduct the commission on line 11, since it's already been subtracted from the income figure.
Here's an example. Say your agent receives a check from your publisher in the amount of $50,000 (think big!), deducts a 15-percent commission of $7,500, and sends you a check for $42,500. After that year's end, you receive a 1099 form that shows $50,000. You should include the full $50,000 in your reported gross income on line 1 and deduct the $7,500 commission on line 11. If, on the other hand, the 1099 shows only the amount actually sent to you, $42,500, you should include only $42,500 on line 1 -- and deduct nothing on line 11. Either way, you pay tax only on the $42,500; and either way, the serenity of the Revenue Service's computers will be preserved.
When filing time rolls around, both agents send me 1099 forms, and I understand that copies also go to the Internal Revenue. The 1099 forms show what money they have sent me during the year in terms of advances, royalties received from publishers, and other payments related to my books or decor contracts. But they do different kinds of bookkeeping!
One agent's 1099 lists the gross (full) amount she received from clients as my income; that is, she does not allow for the commission subtracted by her up front before sending a check for the balance to me. The other one handles things differently; his 1099 lists only the net payment (after commission) he actually sent to me.
How should I report these payments on my return? I know that I have to include payments received from agents in the total figure shown on line 1 (gross receipts) of Schedule C of Form 1040, but I'm not sure which figures to report!
Answer: Let consistency be your guide. The amount of income you declare should be consistent with the figures shown on your 1099 forms. Otherwise, the Revenue Service's ever-vigilant computers might go bananas, with unpleasant consequences to you.
When it comes to monies you received via an agent, what you should declare depends on whether the agent submits a 1099 form for you that shows the gross amount (total paid by the publisher or client) or the net amount (amount actually paid to you after commission is deducted).
Does the 1099 filed by the agent list the gross amount? Then that's the figure you should include in totaling your income to come up with your gross line 1 of your Schedule C -- and remember to include the agent's commission, which is deductible, on line 11 (commissions and fees); otherwise, you'll overstate your income and overpay your taxes, a miscue that the Internal Revenue's computers are not programmed to detect.
Does the 1099 from your agent instead list the net amount, the sum on the check actually sent to you after the agent's commission taken off the top? Then you should use that amount in arriving at your gross income figure -- and you should not deduct the commission on line 11, since it's already been subtracted from the income figure.
Here's an example. Say your agent receives a check from your publisher in the amount of $50,000 (think big!), deducts a 15-percent commission of $7,500, and sends you a check for $42,500. After that year's end, you receive a 1099 form that shows $50,000. You should include the full $50,000 in your reported gross income on line 1 and deduct the $7,500 commission on line 11. If, on the other hand, the 1099 shows only the amount actually sent to you, $42,500, you should include only $42,500 on line 1 -- and deduct nothing on line 11. Either way, you pay tax only on the $42,500; and either way, the serenity of the Revenue Service's computers will be preserved.
Question: In addition to my stock business, I've authored photo and software instruction books, and I also do photo decor books. Presently, I am represented by two agents -- one for books, and another rep for my decor work. Under the contracts with my agents, each gets a percentage of my earnings.
When filing time rolls around, both agents send me 1099 forms, and I understand that copies also go to the Internal Revenue. The 1099 forms show what money they have sent me during the year in terms of advances, royalties received from publishers, and other payments related to my books or decor contracts. But they do different kinds of bookkeeping!
One agent's 1099 lists the gross (full) amount she received from clients as my income; that is, she does not allow for the commission subtracted by her up front before sending a check for the balance to me. The other one handles things differently; his 1099 lists only the net payment (after commission) he actually sent to me.
How should I report these payments on my return? I know that I have to include payments received from agents in the total figure shown on line 1 (gross receipts) of Schedule C of Form 1040, but I'm not sure which figures to report!
Answer: Let consistency be your guide. The amount of income you declare should be consistent with the figures shown on your 1099 forms. Otherwise, the Revenue Service's ever-vigilant computers might go bananas, with unpleasant consequences to you.
When it comes to monies you received via an agent, what you should declare depends on whether the agent submits a 1099 form for you that shows the gross amount (total paid by the publisher or client) or the net amount (amount actually paid to you after commission is deducted).
Does the 1099 filed by the agent list the gross amount? Then that's the figure you should include in totaling your income to come up with your gross line 1 of your Schedule C -- and remember to include the agent's commission, which is deductible, on line 11 (commissions and fees); otherwise, you'll overstate your income and overpay your taxes, a miscue that the Internal Revenue's computers are not programmed to detect.
Does the 1099 from your agent instead list the net amount, the sum on the check actually sent to you after the agent's commission taken off the top? Then you should use that amount in arriving at your gross income figure -- and you should not deduct the commission on line 11, since it's already been subtracted from the income figure.
Here's an example. Say your agent receives a check from your publisher in the amount of $50,000 (think big!), deducts a 15-percent commission of $7,500, and sends you a check for $42,500. After that year's end, you receive a 1099 form that shows $50,000. You should include the full $50,000 in your reported gross income on line 1 and deduct the $7,500 commission on line 11. If, on the other hand, the 1099 shows only the amount actually sent to you, $42,500, you should include only $42,500 on line 1 -- and deduct nothing on line 11. Either way, you pay tax only on the $42,500; and either way, the serenity of the Revenue Service's computers will be preserved.
When filing time rolls around, both agents send me 1099 forms, and I understand that copies also go to the Internal Revenue. The 1099 forms show what money they have sent me during the year in terms of advances, royalties received from publishers, and other payments related to my books or decor contracts. But they do different kinds of bookkeeping!
One agent's 1099 lists the gross (full) amount she received from clients as my income; that is, she does not allow for the commission subtracted by her up front before sending a check for the balance to me. The other one handles things differently; his 1099 lists only the net payment (after commission) he actually sent to me.
How should I report these payments on my return? I know that I have to include payments received from agents in the total figure shown on line 1 (gross receipts) of Schedule C of Form 1040, but I'm not sure which figures to report!
Answer: Let consistency be your guide. The amount of income you declare should be consistent with the figures shown on your 1099 forms. Otherwise, the Revenue Service's ever-vigilant computers might go bananas, with unpleasant consequences to you.
When it comes to monies you received via an agent, what you should declare depends on whether the agent submits a 1099 form for you that shows the gross amount (total paid by the publisher or client) or the net amount (amount actually paid to you after commission is deducted).
Does the 1099 filed by the agent list the gross amount? Then that's the figure you should include in totaling your income to come up with your gross line 1 of your Schedule C -- and remember to include the agent's commission, which is deductible, on line 11 (commissions and fees); otherwise, you'll overstate your income and overpay your taxes, a miscue that the Internal Revenue's computers are not programmed to detect.
Does the 1099 from your agent instead list the net amount, the sum on the check actually sent to you after the agent's commission taken off the top? Then you should use that amount in arriving at your gross income figure -- and you should not deduct the commission on line 11, since it's already been subtracted from the income figure.
Here's an example. Say your agent receives a check from your publisher in the amount of $50,000 (think big!), deducts a 15-percent commission of $7,500, and sends you a check for $42,500. After that year's end, you receive a 1099 form that shows $50,000. You should include the full $50,000 in your reported gross income on line 1 and deduct the $7,500 commission on line 11. If, on the other hand, the 1099 shows only the amount actually sent to you, $42,500, you should include only $42,500 on line 1 -- and deduct nothing on line 11. Either way, you pay tax only on the $42,500; and either way, the serenity of the Revenue Service's computers will be preserved.
posted by zzzzzzzzzzz at
2:32 AM
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