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Author Topic: Moving to the U.S.; tax questions  (Read 843 times)

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« on: September 20, 2020, 14:39 »
0
I'll be moving to the U.S. soon (got a job there), and I have some rather simple questions in regards to taxation of microstock income. I will talk to a tax specialist there as well of course, but I thought to prepare as much as I can before I depart. So;

1. In which category does one report microstock-based earnings?
2. What's the rough tax rate? I know this might depends on the state (mine will be MD), so are there online calculators to give an estimate? If one earns $3000 per month, how much can he expect to keep after the IRS takes their part?
3. Is there anything particular I need to keep an eye out on when reporting income from microstock?


rinderart

« Reply #1 on: September 20, 2020, 19:34 »
+2
suggest you email a us Tax attorney . Not a Microstock forum.

Shelma1

« Reply #2 on: September 20, 2020, 19:42 »
+2
I'll be moving to the U.S. soon (got a job there), and I have some rather simple questions in regards to taxation of microstock income. I will talk to a tax specialist there as well of course, but I thought to prepare as much as I can before I depart. So;

1. In which category does one report microstock-based earnings?
2. What's the rough tax rate? I know this might depends on the state (mine will be MD), so are there online calculators to give an estimate? If one earns $3000 per month, how much can he expect to keep after the IRS takes their part?
3. Is there anything particular I need to keep an eye out on when reporting income from microstock?

Microstock-based earnings will be reported as royalty income. You should probably find an accountant in the U.S. once you get here who can give you an idea of how much you should pay in estimated taxes each quarter. I have no idea how any of it works if you're a citizen of another country. I do remember a partner of mine having to pay taxes both here and in Switzerland, where she was from.

« Reply #3 on: September 21, 2020, 00:07 »
0
suggest you email a us Tax attorney . Not a Microstock forum.

+100

« Reply #4 on: September 21, 2020, 04:59 »
+1
As mentioned, it's best to get in touch with an accountant since the US tax code can be rather complex for business related income. Many tax deductions can be made for equipment, mileage etc. and an accountant will be able to help you navigate this. If you're making enough income you also may look into your accountant creating an S Corp (personal corporation), which has many tax advantages.

« Reply #5 on: September 21, 2020, 09:38 »
+1
Microstock-based earnings will be reported as royalty income.

No they aren't.  They're reported as regular income.

You can find a tax table on the IRS site to give you a basic idea, or maybe even a calculator somewhere, to give you a general idea.  If I make $X, what is my tax rate?  That's disregarding costs and such, of course.

« Reply #6 on: September 21, 2020, 09:42 »
+1
Microstock-based earnings will be reported as royalty income.

No they aren't.  They're reported as regular income

How is "royalty" income different from "regular" income?  I have both and never knew there was a difference.

Shelma1

« Reply #7 on: September 21, 2020, 10:31 »
+3
Microstock-based earnings will be reported as royalty income.

No they aren't.  They're reported as regular income.

You can find a tax table on the IRS site to give you a basic idea, or maybe even a calculator somewhere, to give you a general idea.  If I make $X, what is my tax rate?  That's disregarding costs and such, of course.

Just double-checked my Shutterstock 1099 from 2019, and my earnings are reported in box 2, "Royalties." I report my royalty income as royalties on my income tax returns. Because that's what they are.

"Although there is no blanket equation for royalty taxes, typically royalties received from your work are reported as self-employment income, and are taxed at a higher rate. You report these on Schedule C of IRS form 1040. If you earn more than $400 through self-employment, including royalties, you must report that income on your tax return."

https://money.howstuffworks.com/personal-finance/personal-income-taxes/what-is-royalty-income-and-how-is-it-taxed.htm
« Last Edit: September 21, 2020, 10:34 by Shelma1 »

« Reply #8 on: September 21, 2020, 11:39 »
+2
I always reported them as royalties, too, because thats where the numbers were entered on the 1099s.

« Reply #9 on: September 21, 2020, 12:01 »
0
Microstock-based earnings will be reported as royalty income.

No they aren't.  They're reported as regular income

How is "royalty" income different from "regular" income?  I have both and never knew there was a difference.

"Royalty" income does not get taxed for self-employment taxes - FICA, etc.  "Royalty" income is for when you are no longer actively participating in the production.  If I stopped creating content as my "job" and then just sat back, it becomes "royalty" income.

In active production and receiving payment for licensing is taxed as "regular" income.  It doesn't matter how they report it on the 1099.

Here's an old thread: https://www.microstockgroup.com/general-stock-discussion/%27royalties%27-on-1099-misc/

« Reply #10 on: September 21, 2020, 12:03 »
0
typically royalties received from your work are reported as self-employment income

Yes, that's what I said.  Thanks.

Shelma1

« Reply #11 on: September 21, 2020, 12:24 »
+2
typically royalties received from your work are reported as self-employment income

Yes, that's what I said.  Thanks.

No, you said they're reported as "regular" income. I consider "regular" income to be wages. When you use Turbotax it separates wages, reported on W-2, from royalties, reported on 1099. Wages and royalties (or self-employment income) are taxed differently.

« Reply #12 on: September 21, 2020, 12:35 »
0
suggest you email a us Tax attorney . Not a Microstock forum.

The second sentence in my post was: "I will talk to a tax specialist there as well of course, but I thought to prepare as much as I can before I depart."

I'm just looking for a rough estimate and if there are online tax calculators, just to have a rough idea of what I will keep.

I don't think I will be able to claim any expenses related to microstock, as I won't be producing any stock while working in the US.

« Reply #13 on: September 21, 2020, 12:40 »
0
typically royalties received from your work are reported as self-employment income

Yes, that's what I said.  Thanks.

No, you said they're reported as "regular" income. I consider "regular" income to be wages. When you use Turbotax it separates wages, reported on W-2, from royalties, reported on 1099. Wages and royalties (or self-employment income) are taxed differently.

Youre confusing things.  Our royalties are not royalties as far as tax reporting.  Yes, they are regular income.  No, they are not wages, W-2.

« Reply #14 on: September 21, 2020, 12:41 »
0
For example, I found this online calculator: https://www.calcxml.com/do/self-employment-tax-calculator

If I earn $50k from my day job and another $50k from royalties, it spits out that I'd pay $7,065 in taxes (on self-employment income).

That's around 14%, which is pretty good. I find anything below 20% to be good. I'm just wondering if that's relatively accurate or is the tax rate dramatically different. Like, is it 5% or 35%. Of course I'll get more details from my accountant when I move, I'm just doing a back-of-the-envelope calculation here

EDIT: This calculator also spits out 14.13%: https://www.irscalculators.com/tax-calculator
I entered the amount in Self-Employment: (self-employed and Schedule K-1 Income)

I'm just asking people who live in the US is that relatively accurate, as these online calculators can be wildly inaccurate.
« Last Edit: September 21, 2020, 12:53 by spike »

« Reply #15 on: September 21, 2020, 16:24 »
0
I'm just asking people who live in the US is that relatively accurate, as these online calculators can be wildly inaccurate.

As was said earlier, you'd be smart to consult a US tax accountant. We don't seem to agree on much around these parts.  ;)

Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #16 on: September 22, 2020, 10:25 »
0
typically royalties received from your work are reported as self-employment income

Yes, that's what I said.  Thanks.

No, you said they're reported as "regular" income. I consider "regular" income to be wages. When you use Turbotax it separates wages, reported on W-2, from royalties, reported on 1099. Wages and royalties (or self-employment income) are taxed differently.

Youre confusing things.  Our royalties are not royalties as far as tax reporting.  Yes, they are regular income.  No, they are not wages, W-2.

Correct, mine go on the Schedule C - Profit or Loss from business (Photography) Gross Receipts.

Back to the OP, I pay an accountant and she saves me more every year, than what it costs me to have her do all the work and fill out the forms, and she knows the laws and regulations, she's up to date, which means no problems with the IRS. What I'm saying is, very few people can do their own taxes as well as a professional. I've done mine with the software, and always had the calculations show I owed more, than when I eventually had my accountant do them right.

If you want good photos, you should find a trained professional, photographer. If you want your taxes done right, don't do them yourself. That's my advice.  ;D Don't trust an online calculator.

Photo income is taxed at the same rate as everything else.

I'm just asking people who live in the US is that relatively accurate, as these online calculators can be wildly inaccurate.

As was said earlier, you'd be smart to consult a US tax accountant. We don't seem to agree on much around these parts.  ;)

And for good reason, proof is in the answers.  ;)


 

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