I have some questions as far as paying taxes on the beats I sell. I just started getting into the music production business and i wanted to know how to report my earnings as far as tax purposes are concerned. I also want to know what forms i should fill out and stuff for tax purposes.
That’s a good question something i’m definitely interested in knowing as well.
The best thing you can do is become an LLC if you haven’t already. You can do it really quickly and easily at LegalZoom.com. Depending on what state you live in the fee varies, but expect to pay around $500 ish. That gives you a lot of legal services along with LLC documents and it’s a really good investment (it’s also a tax write-off).
From there, you just have to keep track of what you spend and what you earn so you can report it all for tax season. Assuming you get paid through Paypal, you will have to provide them with your tax ID number and then they will send you an email saying they will send you a 1099-K form at the end of the year.
But at the end of the day, my accountant told me as long as you’re keeping records of your spending/earning and report that to the IRS, that’s the most important thing. And the the way Paypal itemizes all your transactions automatically helps out a lot.
1099 = no taxes come out of your profits am i correct?
1099 means you have to pay taxes at the end of the year… Like if you have a job, and you get paid cash under the table… you pay no taxes on pay days, but at the end of the year you have to pay taxes on that income. Some states probably vary with amounts and rules though.
If you make $20,000 or more in a taxable year AND 200 or more transactions then PayPal (and all other payment processors) will send you a 1099-K that you have to report to the IRS.
If you make under $20,000 or under the 200 transactions then I wouldn’t even report the income unless you want to so you can buy a house or whatever in the near future (to show you have income so you can get a loan).
I’m from the uk so i don’t exactly know how the IRS works but for HMRC my accountant told me a tip that when your on a low income it is a good idea and is expected that you will defer claiming on large £$ items. this effectively allows you to hold back some big expenses until you have the profits to balance them out against. eg I bought a new keyboard synth, speakers ect n have them waiting in the accounts so I can use them to save on a tax bill if/when it comes rather than wasting then on last years declaration with witch the losses can only be carried forward a year.