Usual disclaimers: You're not an expert, consult a real lawyer, etc., etc. I know. Just looking for advice.
I'm an American and Divine Madness Press did pretty OK this year. What are my obligations re: taxes? I distribute through Lulu and OBS. I'm not really a "small business." Is this "other income"? Any thoughts?
Hi,
Here's my understanding regarding federal taxes, subject to whatever local/state considerations are involved as well.
If your company isn't incorporated, then this is "other income" if you make more than ... if I recall correctly, $400. Less than that (or whatever value, if I'm not recalling correctly), you don't have to report.
If your company is incorporated, then you have to submit a full financial report no matter what happened with it.
Either way, how the books get printed, distributed, and shipped isn't relevant. If you're collecting the profits, then it's a business.
The greyest area, according to my accountant anyway, is whether it counts as income if it goes into your Paypal account but not into your bank account. I try to keep my Paypal balance as low as possible, shifting its content into the real bank account, to avoid that issue.
Best, Ron
Thanks. This is very helpful. I also have profits go directly to PayPal, so I guess I'm in that grey area also.
You only pay taxes on your profits so you need to keep a record of what your expenses are during the year and subtract them from the income.
It's important to know that when you buy books for stock that is NOT an expense until the item is sold. Until then they are an assest - inventory. When they are sold it's a special expense "Cost of Sale".
If you don't keep the records then you pay income tax on the full income.
If you want to be able to subtract the expenses from income you need to fill out a business tax form. They aren't hard - just one page front and back.
The other tax to consider is sales tax to your state. If you have a business license then they will want their cut. You have to send in a report of your income and expenses (I have to do it once a year in Indiana). If you don't then they will send you a bill for what they estimate you owe them. They have inflated ideas of what game companies make so it's best to do the paper work.
The record keeping for all this does not have to be extensive. Single entry book keeping will do. I recommend getting a "Dome Guide" at an office supply store.
Good luck with your endeavor!
Chris Engle
Oh yeah and I'm no lawyer or accountant - the above is just my experience running a small business.
I'm hoping to keep it as simple as possible. I have no stock; my books are solely PDF and POD.
You "profits" would end up on a "schedule" k.
Or..schedule K might be specifically for partnerships. There might be a different schedule for sole proprieter.
Either way, its only your profits. Since you have no inventory, that simplifies your accounting greater. Doubly so if you have no capital equipment above $75 as a part of your enterprise. Simply deduct all of your expenses from your publishing income and file it away on the proper schedule form. Debate hard is any deductions you might get from a home office (assuming you are using a dedicated home office) against the increased probability of getting audited. Unless its a larger than small number, its generally not worth it.
Thanks,
Ryan S. Johnson
Guild of Blades Retail Group - http://www.gobretail.com
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com