My wife is employed FT as professor, and published a book in 2016. The press holds the copyright. She received $80 in royalties on 1099-MISC box 2. How do we report it? She is not self-employed.

[DawnC0 · Accepted solution]

Royalty income from your business, including artist royalties or operating a natural resources business (Schedule C), includes income from natural resources that you extract from your property as well as royalty payments from intellectual property that you created as an inventor, writer, artist, etc. This goes on Schedule C.

The IRS considers this activity as Self-Employment.  However, since the net business income will be under $400 for 2016, no SE tax will be due.  If you expect more royalties in the future, you may as well set up your Schedule C now.  Among the several very good reasons to report your royalties as business income are:

• You can deduct your losses in any given year if your expenses exceed that year's royalty payments;
• You will be in compliance with applicable law by paying any self-employment tax due; and
• As a consequence of paying self-employment tax, your earnings record with the Social Security Administration will be properly credited with your earnings, contributing to your eventual Social Security benefits.

To do this for 2016, simply enter the 1099-MISC data into TurboTax as business income by entering your 1099 by clicking:

• Federal Taxes >>
• Wages & Income >>
• Other Common Income >>
• Form 1099-MISC >>

TurboTax will walk you through setting up Schedule C for your royalty income.

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If you do not expect future revenue or do not wish to set up the business now, you can report the income under Miscellaneous income since you will not owe SE tax on the $80 of royalty income. To report it this way:

1. Go to the Federal Taxes category.
2. Go to the Wages and Income section.
3. Choose the option "I'll choose what I want to work on".
4. In the 2016 Income Summary, find the section labeled "Less Common Income"
5. Choose the option Miscellaneous Income, 1099-A, 1099-C by clicking start or update.
6. Click start on the line labeled Other reportable income.
7. Click yes, you have other taxable income.
8. Enter a description "Form 1099-MISC Book Royalty" (or whatever) and the amount.  You may disregard the note to not include 1099-MISC income here.