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Author Topic: Taxes  (Read 9367 times)

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« on: March 03, 2009, 15:20 »
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Hi there!

I apologize if this has already been discussed - if so, please point me in the right direction.

I was wondering when/if you have to claim microstock earnings on your US federal taxes? I have heard that you have to make over $500 as well as $600 - not sure what to believe. Also, does that mean $500 or $600 for each site? or all together considering you are on multiple sites? With having to fill out a 1099 for SS, I was thinking maybe the rules have changed? I have not made $500 there yet but still had to do a 1099. I'd ask about state as well, but I'm sure it varies from state to state, so I won't bother.

Thanks everybody!
-J


« Reply #1 on: March 03, 2009, 15:57 »
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The way I understand it is that you have to report your income if the total amount exceeds $400 in a given year. So if you made $100 at iStockphoto, $50 at Bigstockphoto, and $250 at Shutterstock then you would have to pay taxes.

« Reply #2 on: March 03, 2009, 17:41 »
0
Hi there!

I apologize if this has already been discussed - if so, please point me in the right direction.

I was wondering when/if you have to claim microstock earnings on your US federal taxes? I have heard that you have to make over $500 as well as $600 - not sure what to believe. Also, does that mean $500 or $600 for each site? or all together considering you are on multiple sites? With having to fill out a 1099 for SS, I was thinking maybe the rules have changed? I have not made $500 there yet but still had to do a 1099. I'd ask about state as well, but I'm sure it varies from state to state, so I won't bother.

Thanks everybody!
-J
TECHNICALLY, you have to report ANY and ALL income.  SS will send you a 1099-MISC form for your earnings (you most likely would have gotten it by now because they have to be sent out by the end of Jan).  IMO it's not worth the fines and penalties to try and avoid paying $75 in taxes (approximately) on $500.  Just report it, pay your taxes, and feel like a good person for being honest.  If you have any questions about how to file, refer to the irs website.  Just google irs and 1099 and it'll come right up.  It's a PDF file.

« Reply #3 on: March 03, 2009, 17:51 »
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In the U.S., you are technically supposed to report ALL income (no matter how small).

But the way it normally works in real-life is that you generally report income that the IRS knows about.  This is why people work "off the books" (to avoid having to pay taxes on the income).  Generally, you will receive a 1099-MISC form from a business if you have made over $600 from a business in income during the calendar year.   So if you receive a 1099-MISC form from a business, then it needs to be reported (since the IRS also receives this information).  Please note that the $600 is per business. 

Here is some more info:

http://www.irs.gov/pub/irs-pdf/i1099msc.pdf

Legalese: I am not an accountant or an attorney, and this should not be construed as accounting or legal advice.  If the IRS puts a lien on your job and your home, then it is your own fault.  At that point, you can probably apply for the Obama bailout.


« Reply #4 on: March 03, 2009, 17:55 »
0
Hi there!

I apologize if this has already been discussed - if so, please point me in the right direction.

I was wondering when/if you have to claim microstock earnings on your US federal taxes? I have heard that you have to make over $500 as well as $600 - not sure what to believe. Also, does that mean $500 or $600 for each site? or all together considering you are on multiple sites? With having to fill out a 1099 for SS, I was thinking maybe the rules have changed? I have not made $500 there yet but still had to do a 1099. I'd ask about state as well, but I'm sure it varies from state to state, so I won't bother.

Thanks everybody!
-J


You  are required to report any and all income "from whatever source derived". That includes any microstock earnings no matter how small. There are technically suppose to be reported on Schedule E as royalty income if you're not claiming that microstock as a business. If it is a realatively small amount, like less than $1,000, then you can also report it as hobby income on line 21 without really increasing your chances of an audit, but again that is if you're not seeking business deductions for your expenses.  Schedule E is available on a major tax software or if you're doing it by hand, then it is available here: http://www.irs.gov/pub/irs-pdf/f1040se.pdf

For State: it is included in your gross income. Most states do not have a royalty specific entry and if you're using software it would automatically add it to your state gross income.

Circular 230 Disclaimer: To comply with IRS requirements, please be advised that, unless otherwise stated by the sender, any tax advice contained in this message and its attachments is not intended or written to be used, and cannot be used, by the recipient to avoid any federal tax penalty that may be imposed on the recipient, or to promote, market or recommend to another any referenced entity, investment plan or arrangement.
« Last Edit: March 03, 2009, 18:33 by yingyang0 »

« Reply #5 on: March 03, 2009, 18:04 »
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In the U.S., you are technically supposed to report ALL income (no matter how small).

But the way it normally works in real-life is that you generally report income that the IRS knows about.  This is why people work "off the books" (to avoid having to pay taxes on the income). 
Despite your disclaimer, suggesting people commit tax fraud isn't a good idea.

KB

« Reply #6 on: March 03, 2009, 18:04 »
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But the way it normally works in real-life is that you generally report income that the IRS knows about.  This is why people work "off the books" (to avoid having to pay taxes on the income).
This is so true.
[soapbox]
Is it any wonder that so many of our politicians have recently been caught "forgetting" to pay taxes?

I bet if everyone paid the taxes they are supposed to pay, we would have a budget surplus. Ok, maybe that's going too far! But it is a shame that the sense of right and wrong has become so twisted and frankly lost in so many, that "everyone" tries to get away with it, hoping they won't get caught.

(And, yes, I declare every penny I make, even $1 for taking an online survey. Not only because it isn't worth it if I get caught not doing so, but because it is the right thing to do.)
[/soapbox]

ETA: This was not directed at anyone in this thread; just a general rant.
« Last Edit: March 03, 2009, 18:06 by KB »

« Reply #7 on: March 03, 2009, 18:34 »
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Every penny made is declared. Always. Once you enter the murky tax world of "gray areas" think "red flag". I speak from experience -- having my phone number permanently on the IRS's direct dial system.

« Reply #8 on: March 03, 2009, 19:30 »
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In the U.S., you are technically supposed to report ALL income (no matter how small).

But the way it normally works in real-life is that you generally report income that the IRS knows about.  This is why people work "off the books" (to avoid having to pay taxes on the income). 
Despite your disclaimer, suggesting people commit tax fraud isn't a good idea.

yinyang:

Get off your high horse.  I wasn't suggesting anybody create tax fraud.  I was explaining how it normally works in the real world.

People are supposed to pay taxes on Internet purchases (from Amazon, eBay, etc), but most people don't normally do that either.


« Reply #9 on: March 03, 2009, 21:36 »
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You  are required to report any and all income "from whatever source derived".

I think it's the same in any country, with variations about the minimum value to declare.  In Brazil you allways have to sum all your sources and then see in which tax percentage you are, from 0 to 27.5%.

One question: do you consider sales or payouts?  I consider only payouts, as sales are not real earnings (see LO and other sites that evaporated with some of our $$).

Regards,
Adelaide

« Reply #10 on: March 03, 2009, 23:26 »
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yinyang:
Get off your high horse.  I wasn't suggesting anybody create tax fraud.  I was explaining how it normally works in the real world.
People are supposed to pay taxes on Internet purchases (from Amazon, eBay, etc), but most people don't normally do that either.

Give me a break, you were in fact advocating tax fraud and you're telling me to get off my high horse for saying that's not a good thing to tell people to do? Since when is telling people not to commit tax fraud considered such a lofty moral standard? It's like I'm having to teach my children basic life lessons again: "If everyone else jumps off a bridge, does that mean you should do it to?" My position of not committing blatant tax fraud isn't a 'high horse' position.

Every time I hear someone give your excuse it really pisses me off so I'm going to let this be my last post about the subject. I don't care if "everyone does it" (which isn't true), or the latest one "if Geithner got away with it, I should get away with it to." The voluntary compliance rate in the US is between 85% and 99.8% (depending on who's data you're using), so everyone isn't doing it. Knowingly leaving off income is a fraudulent filing, and people can and do go to federal prison for it. Even famous people can't get off when it comes to tax fraud.

Wesley Snipes, Richard Hatch (first winner of Survivor), Pete Rose, Annie Lebovitz (photographer), Joe Francis ("Girls Gone Wild" guy), and those are just the ones that come to mind...oh and of course Al Capone.

Oh, and for the tax cheats out there the Housing and Economic Recovery Act of 2008 contains reporting requirements for services like PayPal, which take effect in 2011. It only applies to people that make 200+ transfers or a total greater than $20,000, but at least it is good start to stopping the tax fraud being committed by the large ebay sellers (and others) that aren't fully reporting their income.

As you can tell I'm passionate about this subject because it's something I use to do. I'm no longer involved in tax law but I still prepare free returns for low-income people through the IRS's VITA program.
« Last Edit: March 03, 2009, 23:29 by yingyang0 »

helix7

« Reply #11 on: March 04, 2009, 00:34 »
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...Oh, and for the tax cheats out there the Housing and Economic Recovery Act of 2008 contains reporting requirements for services like PayPal, which take effect in 2011. It only applies to people that make 200+ transfers or a total greater than $20,000, but at least it is good start to stopping the tax fraud being committed by the large ebay sellers (and others) that aren't fully reporting their income...

Regardless of when that takes effect, I would have thought that the simple fact that most of us take our payments via a very trackable method (PayPal) that has a history and a memory, that alone would be enough to convince people to report accurately. We're not talking about cash under the table. These are electronic transactions, they are trackable, they have a history, and they are going to bank accounts. Quite frankly I think that anyone not reporting all of the money going through PayPal to a bank account is really taking a chance.

Maybe I'm just paranoid and overly cautious. But it does surprise me to hear that so many people are this lax about microstock earnings. I've always thought it was a bit strange that the only time we ever see tax discussions is leading up to April. How many people make quarterly tax payments on microstock earnings? I bet a lot of people aren't doing it but should be.


RacePhoto

« Reply #12 on: March 04, 2009, 00:56 »
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I declare every cent I make on photography. I also take depreciation on equipment and deductions for expenses. Unfortunately my accountant said I can't claim the mileage and some clothes, because unless it's job specific and I could never wear it anywhere else, it's not legitimate. Ya, I want to wear the photo vest, floppy hat and rain gear out to lunch.  ;D But since we can, it doesn't count.

What he was saying is, anything that's work related and not used for other things, is deductible. The camera and lenses I don't understand, because I may take a picture of my garden or something. I suppose a plumer can work at home, but his tools are still work specific.

I keep a notebook with expenses, and equipment, and when I sell something on eBay, like an old camera or lens, I list that also.

In the end this works out to my advantage. This isn't a one way street. Some parts of taxes work to reduce your liability.

« Reply #13 on: March 04, 2009, 07:28 »
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« Reply #14 on: March 04, 2009, 08:17 »
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Yinyang:

For someone that claims to be extremely intelligent, you seem to fail the litmus test.

I never "suggested" that anyone do anything.  Maybe the problem is that you don't speak English as a primary language.

At the beginning of my post, I stated what the law says:

In the U.S., you are technically supposed to report ALL income (no matter how small).

I then stated how it normally works in real-life:

But the way it normally works in real-life is that you generally report income that the IRS knows about. 

Stating how the world works is very different from making a recommendation.

If I state that most people are jumping off bridges, that does not equate to recommending that they themselves jump off a bridge.

The word "suggest", "recommend", "propose", "advise", etc. do not appear anymore in my post.  Those words first appear in your post.  So how you can misconstrue my message is beyond me.  Unless you have an agenda and are trying to twist my words - in which case you owe me an apology.



« Reply #15 on: March 04, 2009, 14:56 »
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YOU INSULT ME AND THEN HAVE THE NERVE TO ASK FOR AN UNDESERVED APOLOGY.

Listen Mr. *,
I was curt but still polite when I said "suggesting people commit tax fraud isn't a good idea", whereas you have been exceptionally rude with your "high horse" comments and now your outright insults.

In your post you do state the law, but you qualified it with "technically". Then you tell him:
But the way it normally works in real-life is that you generally report income that the IRS knows about. 

How you cannot read that as telling him that he only has to report the income that the IRS knows about is beyond me. But that's not all. You go further and tell him:

...you will receive a 1099-MISC form from a business if you have made over $600 ... So if you receive a 1099-MISC form from a business, then it needs to be reported (since the IRS also receives this information).

Are you really trying to claim that you weren't telling him that you receive a 1099 for income over $600 and that "in real-life" you don't report other income because the IRS doesn't know about it?

Tell you what, if others chime in and say that they didn't read your post in the same way I did (and the same way everyone I've shown your post to has) then I give you a half-hearted apology. Half-hearted because I don't respond kindly to people who aren't capable of discussion without resorting to insults.

Since I refuse to stoop to your level and return the outright insults, I'll await others replies and bid you a good day.
« Last Edit: March 04, 2009, 15:21 by yingyang0 »

lisafx

« Reply #16 on: March 04, 2009, 16:06 »
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Well, since you are asking for opinions, I personally didn't read GeoPappas' post as recommending anyone commit tax fraud.  I read it as informational, as in "this is how you are supposed to do it (report all income) but some people don't do that and this is how they justify it to themselves".  Which is perfectly true as you yourself admit.

I also found the wording of your reply (yinyang) accusing him of "suggesting people commit tax fraud" to be incendiary.  The same for your offering of information about paypal changes in 2011 to "all the tax cheats out there".  As though anyone who is interested in that information is automatically a tax cheat.

Perhaps your intentions are to be helpful, and as an expert on taxes you are certainly in a position to offer great advice and information, but inflammatory language like the above doesn't help the debate IMO.   
« Last Edit: March 04, 2009, 16:08 by lisafx »


« Reply #17 on: March 04, 2009, 16:11 »
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I think both sides are now understood, nobody is suggesting anyone to commit fraud, and I remember a forum member a few days ago clearly saying he was not declaring earnings not to pay taxes, so it is a real life case (though not in the US). 

Regards,
Adelaide

« Reply #18 on: March 04, 2009, 16:37 »
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Well, since you are asking for opinions, I personally didn't read GeoPappas' post as recommending anyone commit tax fraud.  I read it as informational, as in "this is how you are supposed to do it (report all income) but some people don't do that and this is how they justify it to themselves".  Which is perfectly true as you yourself admit.

I also found the wording of your reply (yinyang) accusing him of "suggesting people commit tax fraud" to be incendiary.  The same for your offering of information about paypal changes in 2011 to "all the tax cheats out there".  As though anyone who is interested in that information is automatically a tax cheat.

Perhaps your intentions are to be helpful, and as an expert on taxes you are certainly in a position to offer great advice and information, but inflammatory language like the above doesn't help the debate IMO.   

Then I do apologize to Mr. *, of *, because it's possible that your intent was not what I and others read into it, and I have no doubt you yourself have reported all your income.

Lisa, I did not mean the "suggesting" comment to be incendiary because I believed him to be advocating tax fraud and honestly thought it wasn't a good idea to suggest people not report income. But you're right that I did mean the "all tax cheats out there" to be incendiary. It wasn't directed toward you, who would obviously be interest in that information, but toward the ebay cheaters, money launders, etc. that commonly use Paypal to evade taxes as the statement says.

lisafx

« Reply #19 on: March 04, 2009, 16:57 »
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Lisa, I did not mean the "suggesting" comment to be incendiary because I believed him to be advocating tax fraud and honestly thought it wasn't a good idea to suggest people not report income. But you're right that I did mean the "all tax cheats out there" to be incendiary. It wasn't directed toward you, who would obviously be interest in that information, but toward the ebay cheaters, money launders, etc. that commonly use Paypal to evade taxes as the statement says.

No worries - I didn't take it personally :)

Honestly, I had no idea that paypal was used for money laundering etc (thought that was what Cayman Isl. banks were for ;) )I guess I just assumed that since paypal keeps records etc. that they were reporting to the IRS also.  Certainly it seems like a dumb idea to try to hide money there when its so easily traceable. 

No accounting for what folks will do to avoid taxes...!

« Reply #20 on: March 04, 2009, 17:12 »
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I change all my royalties into Monopoly money, which I use to extort funds from my children.  Tax free.

« Reply #21 on: March 04, 2009, 20:04 »
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I change all my royalties into Monopoly money, which I use to extort funds from my children.  Tax free.
I suppose you're the bank when you play and you make your kids get adjustable rate mortgages on their properties when they land on boardwalk?  ;)

helix7

« Reply #22 on: March 05, 2009, 00:59 »
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I've got the solution to all of our tax troubles. We just need to set up banks in Switzerland where we can stash our microstock earnings and avoid taxes!

;)




 

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