Business crap (US-centric)

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fluffy
Eisenhower
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Business crap (US-centric)

Post by fluffy »

So, I know I'm totally getting ahead of myself, but let's say I (hypothetically) were to put out an album, and it actually sold more than 12 copies, and (hypothetically) actually gets enough income that the IRS would want to know about it.

What is the easiest way to make this legit? Would I just report it as self-employment income on my 1040? Do I need to file a 1099? What about the issue of tax deductions for gear I buy? Do I need to get a business license, especially if I want to simplify things by putting everything out under a single label? (Or does that actually simplify things or really provide any net benefit other than legitimately giving my stuff a collective name to be released under?)

What do the Songfighters who have actually put out somewhat-successful albums done? Is everything just under the table? Even though CDBaby and PayPal take your tax ID number and theoretically report transactions to the IRS? I don't think cash-only CD sales at a gig are anything to worry about, but while CDBaby and so on handle sales tax and such for you, they gloss over the issue of income tax.

I don't want to get busted for tax evasion like Al Capone! (And neither do you!)
LMNOP
de Gaulle
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Post by LMNOP »

Stuff on this:

This is all handled differently depending on whether your income is from a business or a hobby. Google "hobby taxes" or somesuch to find how you determine which is which but basically if you have a full-time job and make a record for the fun of it in your bedroom and sell it on CDbaby, you've got a hobby.

Hobby income is reportable as "other income" on your 1040. You can only deduct expenses if (a) you itemize, and (b) your expenses, along with other miscellaneous deductions, are greater than 2% of your adjusted gross income.

A 1099 is sent by the payor (not filed by you) to the payee and the IRS if the total amount paid for the year is $600 or more. You still owe taxes on amounts less than $600, even cash transactions, but as you alluded to, the IRS doesn't have a piece of paper that says you got that money.

Business licensing is a state-by-state thing.
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fluffy
Eisenhower
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Joined: Sat Sep 25, 2004 10:56 am
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Post by fluffy »

Okay, that's exactly what I needed to know. Thanks!
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