Comments on: Bummed out with “Grossed up” 1099s http://www.fresh-books.com/blog/archives/2006/01/bummed_out_with_grossed_up_1099s.html Literary Agency Thu, 08 Dec 2011 04:30:40 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Gail Perry http://www.fresh-books.com/blog/archives/2006/01/bummed_out_with_grossed_up_1099s.html/comment-page-1#comment-55 Gail Perry Tue, 24 Jan 2006 06:09:34 +0000 http://blog.fresh-books.com/2006/01/23/bummed-out-with-grossed-up-1099s/#comment-55 Matt is correct, that authors who pay their agents $600 or more during the year are required to issue a 1099 to the agent, assuming the agent, like Matt, is unincorporated. This actually isn't new law, it's just law that no one seemed to pay attention to in the past. The result is the 2004 ruling, wherein the IRS called attention to the fact that this should have been going on for a long time and apparently most literary agencies and their authors were ignoring the law. Revenue Rulings such as the one to which Matt refers are designed to clarify the law, not make new laws. If you look back to the 1099 tax forms from several years ago, you'll see that the directions stated very clearly that agencies were to report the full amount of royalty, not reduced by commission or other expenses, to the authors. The fact that the IRS saw fit to issue a ruling about this in 2004 means that they are now planning on paying closer attention to this aspect of the law. Even though this is just a lot of paperwork for us and shouldn't change anything about the bottom line on either the agent's or the author's tax return, the IRS seems to want to make sure all the extra paperwork is done. The important thing is that we, as authors, must now remember that the 1099 amounts we see are gross amounts, not representing the amount we actually received from our agents. We have to remember to report this gross amount as income and take a deduction on our tax returns for all commissions withheld by our agents, as well as any other costs withheld, such as express mail charges. With regard the 1099 form we are required to file for Matt, there is a $50 penalty that the IRS can inflict on us if we fail to file the form, or fail to file on time. Matt is correct, that authors who pay their agents $600 or more during the year are required to issue a 1099 to the agent, assuming the agent, like Matt, is unincorporated. This actually isn’t new law, it’s just law that no one seemed to pay attention to in the past. The result is the 2004 ruling, wherein the IRS called attention to the fact that this should have been going on for a long time and apparently most literary agencies and their authors were ignoring the law.

Revenue Rulings such as the one to which Matt refers are designed to clarify the law, not make new laws. If you look back to the 1099 tax forms from several years ago, you’ll see that the directions stated very clearly that agencies were to report the full amount of royalty, not reduced by commission or other expenses, to the authors. The fact that the IRS saw fit to issue a ruling about this in 2004 means that they are now planning on paying closer attention to this aspect of the law.

Even though this is just a lot of paperwork for us and shouldn’t change anything about the bottom line on either the agent’s or the author’s tax return, the IRS seems to want to make sure all the extra paperwork is done.

The important thing is that we, as authors, must now remember that the 1099 amounts we see are gross amounts, not representing the amount we actually received from our agents. We have to remember to report this gross amount as income and take a deduction on our tax returns for all commissions withheld by our agents, as well as any other costs withheld, such as express mail charges.

With regard the 1099 form we are required to file for Matt, there is a $50 penalty that the IRS can inflict on us if we fail to file the form, or fail to file on time.

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