At 11/6/13 09:38 AM, LichLordMusic wrote:
Hey guys, LichLord here.
I'm fairly worried about if I ever sell an Album or if I develop a software library for commercial use. In the event that I do, would I have to declare and pay Tax and if the answer is yes, what do I do? I've heard stories around the web of people getting nasty surprises from the tax man for certain things after not declaring after a certain while and I'm not sure if there is any point in gaining any profit if it ends up making you worse off later on. I don't know who or where I would find someone to speak to who knows the laws for this.
Any answer would be lovely if someone has an idea of the laws related to it.
I know if you are in the US, you do.
No matter if it is a performance or composition gig, you must still file your taxes. Yes, I understand that if you are just getting a couple hundred dollars here and there for a playing a gig or maybe doing music for an indie developer will pretty much keep you under the radar from the IRS. It's somewhere around 400$ where you need to keep track of everything...
You are self-employed for self-employment tax purposes if you carry on a trade or business as a sole proprietor, an independent contractor, or a member of a partnership. This income would be reported on Schedule C or C-EZ of Form 1040. It would also be subject to self-employment tax, reportable on Schedule SE, if net earnings are $400 or more.
Here's the form I use:
If you earn money online through PayPal and earn 00,000$+ OR sell "200+ items" they will force you to fill out the 1099-K form. You'll know it when you do because PayPal will either send you a letter in the mail, call you or send you an e-mail. (I was notified all three ways >__< )
Also, I've learned it's much easier to deal with if you register your business so your business expenses/taxes are separate from your personal ones; Mortgage, insurance, car payments, etc...
Everyone that has an hourly salary based job are also paying the same taxes so don't feel too terrible about it.
This stuff can be really frustrating and confusing to some... I would highly consider getting someone with some expertise and/or experience with these things to help you. Before you search Google for finding financial consultants to help you, making money as a sole proprietor or being self employed is more common than you think, I'm sure that there must be someone you know in your family or within your circle of friends who have to deal with self employment tax. Make sure you keep your receipts and keep track of everything you spend money on that is business related, like a new MIDI keyboard or something. Those expenses won't be taxed as it is something you need to do your business.
So yes, your wonderful new orchestral library is tax exempt this fiscal year!
April is a fun month.