Dear Fotolia,

On Feb 16, I contacted you via your website to say that I had received TWO copies of the 1099-MISC tax form (US) for 2013, each one showing (incorrectly!) that I was paid $12.50 last year. Two days later, I received a THIRD copy of the same 1099 form.

Nothing is different on any of those forms, except the third one has the CORRECTED box checked and hand written on it is this: "issued on 2-7-14". Once again, on Feb 18, I contacted you via your website. So far, I've had no response from you.

Receiving three separate/identical 1099 forms for one tax year would be odd enough but...

I received no payment whatsoever from Fotolia in 2013. Certainly not $12.50, as shown on those three 1099 forms, because that wouldn't have been enough to make payout. I didn't receive a single penny from Fotolia in 2013. So why is the IRS being notified that I received payment of $12.50 last year???

Several weeks ago, in 2014, I cancelled my Fotolia account, leaving about $12.50 unpaid to me. Frankly, I didn't expect ever to receive that. I was willing to let you keep that money. But for sure, I didn't expect to have a non-existent payment reported to the IRS for a year when I never received any money from you.

What kind of crazy, mixed-up company are you? Please explain what's going on.

Martha Marks

I can answer a part of this. The first 1099 probably showed (if it was like mine) "Non employee compensation" as the type of income. The corrected one shows "Royalties" which I think is the correct category.

On your second question - I just looked at mine. I have actually been paid out $728 (yes, bragging again) whereas my 1099 is for $982, so they are obviously reporting the royalty earnings in the year rather than what they have paid out (which could cover multiple tax years if you ask for a payout in January).

Steve

Quote from: steheap on February 20, 2014, 17:12
I can answer a part of this. The first 1099 probably showed (if it was like mine) "Non employee compensation" as the type of income. The corrected one shows "Royalties" which I think is the correct category.

Thanks for that, Steve. I just looked again and yes, the amount was placed in the wrong spot on the first two forms I received. So that at least explains the correction made in the 3rd form I received.

QuoteOn your second question - I just looked at mine. I have actually been paid out $728 (yes, bragging again) whereas my 1099 is for $982, so they are obviously reporting the royalty earnings in the year rather than what they have paid out (which could cover multiple tax years if you ask for a payout in January).

Brag away, Steve. I would too if I'd earned that much from FT!

But I still don't understand why I should get a tax form for 2013 when I received no income from FT that year. If the $12.50 being reported will actually be paid to me in 2014 (which hasn't happened yet, BTW), can I be sure I'll get no 1099 for that same payout in 2015?

This is about a piddly bit of money, obviously, but it doesn't make sense on its face. None of my other agencies does it this way.

Thanks anyway, for your explanation. I understand half of it, but the other half is still confusing.

I also received two 1099s from them both with their warped commissions. And it was this way last year and the year before.

Hi Martha

I think the answer is that they are working on what you have earned from licensing images via them in the tax year. They will be reporting their own company accounts in the same way - ie every sale from midnight on 1 Jan to midnight on 31 Dec will count as income, and your share needs to be accounted for. Cash payments in and out are something different and are accounted for in their balance sheet (I think) which tracks cash movements over the year. So they are reporting your income as seen by them. The fact that you haven't been paid it in cash is neither here nor there in that accounting treatment.

Most of us work on a cash basis - ie we track money in and out. This is a valid way of accounting for a small business. However with a 1099 around, you need to be reporting what the 1099 says, I think, to avoid issues.

Steve

Quote from: Mantis on February 20, 2014, 17:45
I also received two 1099s from them both with their warped commissions. And it was this way last year and the year before.

That's interesting to know. I only signed up w/FT last June so I have a very short history with them.

I was shocked last June to find FT only accepted 18% of the images I uploaded to them, when my acceptance level is 68% at DT and around 85% at SS and Veer. Sales were obviously low on that tiny FT inventory of less than 300 images, and after FT launched its "Dollar Club", I decided to look for the exit. Wasn't expecting to see any payment whatsoever, as I said in my letter, so it was a genuine surprise to find any payment reported, much less to have it reported for last year.

I'll wait and see what I hear back from FT... or from Mat who seems to speak for them on this forum.

Quote from: steheap on February 20, 2014, 17:52
Cash payments in and out are something different and are accounted for in their balance sheet (I think) which tracks cash movements over the year. So they are reporting your income as seen by them. The fact that you haven't been paid it in cash is neither here nor there in that accounting treatment.

Most of us work on a cash basis - ie we track money in and out. This is a valid way of accounting for a small business. However with a 1099 around, you need to be reporting what the 1099 says, I think, to avoid issues.

Thanks again, Steve. I understand what you're saying now.

My own taxes are being prepared even as we speak... even though I keep getting new 1099 forms from FT. So I guess that piddly $12.50 will be added to my income for 2013, even though I still haven't seen it.

'Twill be interesting to note when that cash payment actually comes in, assuming it does. I'll update this thread when that happens.

I report the money I actually receive on my taxes, not the 1099 amount (if it does not match).  I do inform my accountant of both amounts, but the actual amount received is used.  This is a valid way to do this according to my accountant.  Talk to your accountant.

The reason Fotolia does this is:

1) They cannot read instructions correctly for the 1099
2) They take the position that the money is available for you to SPEND on images at their website which is why they report it as cash that you have received (which is incorrect per the instructions on the 1099)

One of the reasons I no longer do business with Fotolia.

Quote from: packerguy on February 20, 2014, 19:16
I report the money I actually receive on my taxes, not the 1099 amount (if it does not match).  I do inform my accountant of both amounts, but the actual amount received is used.  This is a valid way to do this according to my accountant.  Talk to your accountant.

Sounds like you're a pretty smart guy, Packerguy.

I will mention this to my accountant, although either way, $12.50 ain't gonna make much difference to my taxes. But... it's the thought that counts! 

Quote from: Ed on February 20, 2014, 19:50
The reason Fotolia does this is:

1) They cannot read instructions correctly for the 1099
2) They take the position that the money is available for you to SPEND on images at their website which is why they report it as cash that you have received (which is incorrect per the instructions on the 1099)

One of the reasons I no longer do business with Fotolia.

Yup. Sounds like yet another great reason for me to be out of business with FT!

FYI, I just got the following message from FT. I have sent them my PP address, so we'll see.

Hi Martha,

Fotolia is required to issue a 1099 for earnings regardless if you cashed it out or not. I understand you closed your account. If you forward me your Paypal address I can schedule a payment to be made ASAP.

Sincerely,

Chad Bridwell
Director of Operations
Fotolia.com

Keep in mind that 1099's are for earnings, not necessarily payments.  If you earned $12.50 last year you should get a 1099 saying so. 

I report to IRS what I earned in any year, whether it has been paid out or not.  Since not all agencies send 1099s I have used this method and it works because my earnings are always more than the 1099s I actually receive.

1099s will not always match either earnings or payments.  SS for instance uses the date of payment (often the 15th) as the month in which something was earned.  So for 2013 they reported my December 2012 earnings but not my December 2013 since those were both paid in January of the following year.  In SS case earnings in any month = payments because I make payout each month but at other agencies this is not so and then earnings might take months or years before turning into payments.

Note that this is how I do it, it is also completely valid to work on a cash basis and only declare what money you actually received.  As long as you are consistent IRS does not care.  YMMV.

But be careful, you can only use the cash method if your average for the last 3 years was less than $1 million. I'm still somewhat under that threshold

Quote from: dbvirago on February 21, 2014, 00:56
But be careful, you can only use the cash method if your average for the last 3 years was less than $1 million. I'm still somewhat under that threshold

Yep, I'm kinda, sorta under that threshold too. 

Quite frankly, that is false.  In the U.S., we are cash basis taxpayers which means that we pay tax when cash is IN HAND.  I had this argument with Chad directly and even though I have over 20 years in the tax industry - both in public accounting and in private industry, he refused to even consider anything else.  If you read the instructions to Form 1099 it states:

"File Form 1099-MISC, Miscellaneous Income, for each
person to whom you have paid during the year:
At least $10 in royalties (see the instructions for box 2) or
broker payments in lieu of dividends or tax-exempt interest
(see the instructions for box 8 );"

If they haven't PAID YOU then they shouldn't be reporting it as being PAID TO YOU.

The thing that Chad didn't tell you (as he didn't tell me) is that if you receive payment prior to receiving the payout amount, they charge a fee.  Naturally, since they've already reported the earnings (that you didn't receive), your earnings will be overstated by the fee they charge their contributors who wish to cash out before meeting the payout threshold.

Yes, it's an unethical practice and it's bad business. 

Quote from: marthamarks on February 20, 2014, 23:32
FYI, I just got the following message from FT. I have sent them my PP address, so we'll see.

Hi Martha,

Fotolia is required to issue a 1099 for earnings regardless if you cashed it out or not. I understand you closed your account. If you forward me your Paypal address I can schedule a payment to be made ASAP.

Sincerely,

Chad Bridwell
Director of Operations
Fotolia.com

I mostly ignore 1099s. I don't care what these companies claim to have paid me. I know what I received, so that's what I report. 1099s are kind of a joke really.

PayPal gives them out, which is still mystifying to me. PayPal doesn't pay me. Shutterstock, Fotolia, Dreamstime, etc., they pay me. PayPal is just the means through which payment is made. No idea how PayPal reports having paid me anything. So I just ignore the 1099. I seriously never even look at it.

Quote from: marthamarks on February 20, 2014, 23:32
FYI, I just got the following message from FT. I have sent them my PP address, so we'll see.

Hi Martha,

Fotolia is required to issue a 1099 for earnings regardless if you cashed it out or not. I understand you closed your account. If you forward me your Paypal address I can schedule a payment to be made ASAP.

Sincerely,

Chad Bridwell
Director of Operations
Fotolia.com

Good to hear you will at least be paid.   I have only gotten two 1099s from them.  The first and the corrected one.   Hopefully that's it, since we are seeing the accountant soon.

Quote from: EmberMike on February 21, 2014, 03:03

I mostly ignore 1099s. I don't care what these companies claim to have paid me. I know what I received, so that's what I report. 1099s are kind of a joke really.

PayPal gives them out, which is still mystifying to me. PayPal doesn't pay me. Shutterstock, Fotolia, Dreamstime, etc., they pay me. PayPal is just the means through which payment is made. No idea how PayPal reports having paid me anything. So I just ignore the 1099. I seriously never even look at it.

You're braver than me.  I always pay attention to the 1099s, since thats the amount that has been reported to the IRS.  If there's any discrepency between my numbers and the 1099 number, I want to get to the bottom of it.

Quote from: Ed on February 21, 2014, 01:58
If they haven't PAID YOU then they shouldn't be reporting it as being PAID TO YOU.

That's my thinking too, Ed. Thanks for your knowledgeable input on this.

To Fotolia: You shouldn't tell the IRS you paid a supplier in a given year if you didn't actually pay them in that year... and especially if you're not planning to pay them the full amount you've already reported to the IRS.

Geez.

None of this has improved my opinion of Fotolia. I'm happy to be done with them.

Thanks, Lisa and Mike, for your input, too!

What Fotolia says doesn't make any sense.  If it was what they claimed you earned vs. what you have been paid, then they could claim you earned a million dollars through some accounting error. Even though you haven't been paid the million dollars you'd theoretically owe taxes on it.   Then later they could go "oops" and claw back the balance.  Meanwhile the IRS sends you a bill for a couple hundred thousand dollars in back taxes.

Quote from: ComfortEagle2095 on February 22, 2014, 05:44
What Fotolia says doesn't make any sense.  If it was what they claimed you earned vs. what you have been paid, then they could claim you earned a million dollars through some accounting error. Even though you haven't been paid the million dollars you'd theoretically owe taxes on it.   Then later they could go "oops" and claw back the balance.  Meanwhile the IRS sends you a bill for a couple hundred thousand dollars in back taxes.

Exactly right, Comfort Eagle. It makes no sense whatsoever, and the poor photographer is left entirely at their mercy.

Who needs this ^@#& ?

Quote from: lisafx on February 21, 2014, 03:58

Quote from: EmberMike on February 21, 2014, 03:03

I mostly ignore 1099s. I don't care what these companies claim to have paid me. I know what I received, so that's what I report. 1099s are kind of a joke really.

PayPal gives them out, which is still mystifying to me. PayPal doesn't pay me. Shutterstock, Fotolia, Dreamstime, etc., they pay me. PayPal is just the means through which payment is made. No idea how PayPal reports having paid me anything. So I just ignore the 1099. I seriously never even look at it.

You're braver than me.  I always pay attention to the 1099s, since thats the amount that has been reported to the IRS.  If there's any discrepency between my numbers and the 1099 number, I want to get to the bottom of it.

if all your income is reported thru 1099s, then  there could be questions if you report income less than the 1099 total; but as others have said, if you work on a cash basis, those numbers don't have to match up. 

if you have non 1099 income - eg, direct sales, ebay, amazon, etc, then your 1099 forms will be well under your total income reported.  as others have said - I just file the 1099's, but don't use them in actual tax preparation

Quote from: cascoly on February 24, 2014, 01:02

Quote from: lisafx on February 21, 2014, 03:58

Quote from: EmberMike on February 21, 2014, 03:03

I mostly ignore 1099s. I don't care what these companies claim to have paid me. I know what I received, so that's what I report. 1099s are kind of a joke really.

PayPal gives them out, which is still mystifying to me. PayPal doesn't pay me. Shutterstock, Fotolia, Dreamstime, etc., they pay me. PayPal is just the means through which payment is made. No idea how PayPal reports having paid me anything. So I just ignore the 1099. I seriously never even look at it.

You're braver than me.  I always pay attention to the 1099s, since thats the amount that has been reported to the IRS.  If there's any discrepency between my numbers and the 1099 number, I want to get to the bottom of it.

if all your income is reported thru 1099s, then  there could be questions if you report income less than the 1099 total; but as others have said, if you work on a cash basis, those numbers don't have to match up. 

if you have non 1099 income - eg, direct sales, ebay, amazon, etc, then your 1099 forms will be well under your total income reported.  as others have said - I just file the 1099's, but don't use them in actual tax preparation

I do have income other than shown on 1099s, of course, but still want to receive 1099s that are accurate.  Particularly last year when I also got 1099s from Paypal, which were redundant of some of the microstock ones. 

It just seems to me to be good accounting to make sure everything is reported accurately, and AFAIK you have to mail in the 1099s with your tax return (or separately if you e-file).  Has my accountant misinformed me?  Do you not have to send in the 1099s to the IRS when you do your taxes?