The TurboTax questions for my 1099-MISC don't quite apply. For a YouTube video, should I use schedule C or E?

[KittyM]

What type of income was the 1099-MISC issued for?

[Anonymous]

Box 2 - royalties. It is from a YouTube video that I own. I have a 3rd party that does the leg work for me so the income goes from YouTube to the 3rd party then the 3rd party pays me after taking their fees. The 1099 was issued from the 3rd party.

[KittyM · Accepted solution]

If you created the video yourself, your income will generally be reported on Schedule C.  However, this issue is fuzzy (as you have noticed) and determining which approach to take is something you must decide.  Here is some detail to help you with the decision:

The IRS has ruled that an person who writes only one book (or creates only one video) as a sideline and never revises it is not regularly engaged in an occupation or profession, and the royalties are not considered earnings from self-employment.  However, preparing new editions and creating new materials reflect the conduct of a trade or business.  

Even though an individual is not currently involved in his or her creative pursuit of income, any royalties received are business income if the individual was engaged in the business at the time the material generating the royalties was produced. Therefore, royalty income should be classified as business income for individuals who were in the business at the time the intellectual property was created.

[Anonymous]

Answering the questions differently on TurboTax dictates which schedule is selected. I have done it both ways and the results are similar as far as the money owed (Schedule C vs E). The back of the 1099-MISC states to use E for "copyrights" in the Box 2 section: (Report royalties from oil, gas or mineral properties, copyrights, and patents on Schedule E (Form 1040). However, report payments for a working interest as explained in the box 7 instructions. For royalties on timber, coal, and iron ore, see Pub. 544)

This is why I am having a hard time determining which. So you are %100 sure that Schedule C is the correct form for this income?

[KittyM]

@joeyalangore Please see my expanded answer above.

[MWonder]

The way to report these remains a little fuzzy, maybe not just to me, but from what I understand, in mid 2021, Youtube changed the way payments are reported on 1099-MISC to now report on Box 2, Royalties.

Further more, as the OP pointed out, on the back of 1099-MISC for 2022 tax year, it guides the recipient to use Schedule E for these Royalties, not Schedule C.

There's a youtube with someone talking specifically about the decision on which form to use and these Mid 2021 changes here if interested titled Royalty Income for YouTubers - Form 109-MISC.

https://www.youtube.com/watch?v=5Dta-gEnxf4

Not sure if links are allowed, but the key identifier for the video URL: 5Dta-gEnxf4

I post Youtube videos as a hobby, I wouldn't say I'd ever need to put expenses or losses on these tax forms, so for me, the choice between C or E is a matter of which is more simple to fill out, if you are a content provider that's not really seeing it as a business or active trade you're engaging in.

In 2021 tax year, I attached a 1099-MISC for Youtube royalties with Schedule C based on some guidance I saw online at that time from some youtuber.

Schedule C also calls for you to categorize yourself with a code from the Principal Business or Professional Activity Codes list, and for 2022 tax year there is a category 516000 for Broadcasting & content providers.  I used a different code 519100 in 2021 tax year.

Schedule E does not ask for that code and seems simpler to fill out.  Again, I might have used Schedule C by mistake in 2021, but for 2022 tax year I am using Schedule E

In 2022 for my case at least with  a simple youtuber hobby, the impact on my taxes is the same whether I enter this 1099-MISC under Schedule C or Schedule E.

Hope that above helps, not confuses more.

-MW