Is anyone (US filers) having a problem with their 1099 form from DP? The 1099 form I received from them says I earned $1050 from DP during 2013. I added up all the monthly totals, and it came to $618! I sent them a support message on March 30, but received no reply, so I called them a couple of days ago, and was told they need time to look into it. Has this happened to anyone else? It's causing a big tax headache for me, and I don't get it straightened out, I could end up paying income tax on $400 I never received!

Disclaimer: I am not a tax professional.

You don't have to report earning what you didn't earn. A 1099 is a company's claim of what they paid you, but they aren't always correct. If you're sure of what you earned, report that amount. If they're reporting to have paid you more and they're wrong, that's their problem and headache to deal with.

I figured out what went wrong - DP reports income according to how much they actually paid out to you during the calendar year, instead of when the royalties are actually earned. So if you let the money accumulate from a prior year without requesting a payout, the earnings from the previous year will be won't be included in that year's total on the 1099 form, they will be carried over to the following year's earnings total. Very confusing because that's not how other agencies report your earnings.

Actually that's kind of how they all report earnings. You shouldn't be reporting earnings unless you actually receive the money. The IRS doesn't care about "earnings" in a stock agency account. They care about pay, as in when a company pays you and when you receive actual money.

Did you get a Shutterstock 1099? Notice how it's based on the payouts received in the 12 months of the calendar year? It's not based on the recorded earnings from January through December, it's the payouts you received in January, Feb, March, etc...

I hate to tell you, but if you've been reporting actual income based on what the earnings in your SS, DP, etc., accounts state, you're doing it wrong. You should be reporting whatever money hits PayPal, check, etc.

Fotolia issues a 1099 based on the royalties that were credited to your account during the calendar year, not what was paid out.

I believe their rational for that was that the royalties in your account are listed as credits that you can use to purchase images so they consider that a form of payment.  Those credits can later be converted to cash when they hit the minimum payment but the time of payment is when the credits hit your account.

That's fine if that's what they want to do. But I don't recognize that as the amount I earned. And I suspect neither does the IRS. I can't pay my mortgage, bills, or ebuy a cup of coffee with Fotolia credits, so I only consider the funds they actually pay me with to be my real earnings.

If you go by that logic, then if am paid let's say $100 by check in 2014 and I don't cash that check until 2015, then the $100 doesn't count as income for 2014 and it's added to my 2015 earnings instead. The reason being that I can't pay my bills with a 3rd party check, which means I can't do anything with the money until I either deposit it in my checking account or cash the check. So by your reasoning the $100 doesn't count as income until I cash the check. I don't think it works like that.

Sorry, but no.  Once they issue you a check, you've been paid.  They've discharged their obligation.  When you decide to deposit the check doesn't change that fact.  There is such a thing as deferred compensation, but that requires an agreement on the  part of both parties to hold the money until another tax year.

If you go by that logic, then if am paid let's say $100 by check in 2014 and I don't cash that check until 2015, then the $100 doesn't count as income for 2014 and it's added to my 2015 earnings instead. The reason being that I can't pay my bills with a 3rd party check, which means I can't do anything with the money until I either deposit it in my checking account or cash the check. So by your reasoning the $100 doesn't count as income until I cash the check. I don't think it works like that.

It's not at all the same thing as what I was talking about. A check is money, or at least "payment" in the eyes of the IRS. If you don't cash a check before the end of the year, it's your problem and your headache to deal with if the IRS comes knocking.

Cash and checks are considered payment when issued. Fotolia credits are not considered payment.

Quote from: Allsa on April 13, 2014, 12:08

Quote from: EmberMike on April 13, 2014, 11:14

Quote from: klsbear on April 11, 2014, 22:06

Fotolia issues a 1099 based on the royalties that were credited to your account during the calendar year, not what was paid out.

I believe their rational for that was that the royalties in your account are listed as credits that you can use to purchase images so they consider that a form of payment.  Those credits can later be converted to cash when they hit the minimum payment but the time of payment is when the credits hit your account.

That's fine if that's what they want to do. But I don't recognize that as the amount I earned. And I suspect neither does the IRS. I can't pay my mortgage, bills, or ebuy a cup of coffee with Fotolia credits, so I only consider the funds they actually pay me with to be my real earnings.

If you go by that logic, then if am paid let's say $100 by check in 2014 and I don't cash that check until 2015, then the $100 doesn't count as income for 2014 and it's added to my 2015 earnings instead. The reason being that I can't pay my bills with a 3rd party check, which means I can't do anything with the money until I either deposit it in my checking account or cash the check. So by your reasoning the $100 doesn't count as income until I cash the check. I don't think it works like that.

It's a difference in accounting methods.  Typically in what is is known as Cash Basis you count the income when it is received, regardless of when it was invoiced or earned. In Accrual Basis You would count it when it is earned, not when you are paid.

Sounds like you are using Cash Basis for your business and Fotolia uses Accrual Basis.

Good explanation of the difference. Shouldn't the IRS require one method or the other for 1099s? It seems like allowing both would be a huge source of confusion.

Very interesting thread BTW. I never request payments late in the year because, for example, if I defer payments I might have requested in Oct, Nov, or Dec 2013 until January 2014, then I do not have to pay taxes on that amount until April 2015. If FT is really using the accrual method for 1099s, they are foiling my plan