Royalty Expenses

Forum|Forum|4 years ago
February 4, 2022
5 replies
55 views

I have an LLC with my spouse and we pay royalties to artists that license out their work for us to re-sell. Not all of our artists are from the United States. I understand for the United States royalties of $10 or more require us to create a 1099 for the artists. My question is for the international artists is there a form we need to furnish? My reason for asking is I want to deduct the royalty expenses but I'm not sure if there is a form that needs to be filed in order to do so.

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Best answer by thecrafted

In case any one else runs in to a similar question. I went through a bunch of different IRS docs explaining what needs to be done. There is a Publication 515 which details how much taxes are to be withheld depending on the type of income paid to foreign individuals or entities. Then I found each treaty from the countries we have artists in who we pay royalties to for their work. The treaties typically state withholding is 0% but some only change the default withholding for royalty income from 30% to something less. Finally, there are forms 1042 and 1042-S. The form 1042 helps you fill out 1042-S which is the one you would file and the one you would give a copy to to all foreign individuals even if no taxes were withheld. Hopefully this helps any one else in the future.

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ThomasM125

Alumni - Intuit

You would furnish the same form to your artists that work out of country if you have a federal ID number that would allow you to do so. Otherwise, you don't need to furnish a form to them. Even if you don't furnish the reporting form, you can deduct the payments on your tax return.

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thecraftedAuthor

Level 2

Would you happen to know what form that would be or is it different depending the country they are in?

ColeenD3

Alumni - Intuit

The form you would issue is the same 1099-Misc. There is no specific form that you would issue an international artist.

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thecraftedAuthorAnswer

Level 2

In case any one else runs in to a similar question. I went through a bunch of different IRS docs explaining what needs to be done. There is a Publication 515 which details how much taxes are to be withheld depending on the type of income paid to foreign individuals or entities. Then I found each treaty from the countries we have artists in who we pay royalties to for their work. The treaties typically state withholding is 0% but some only change the default withholding for royalty income from 30% to something less. Finally, there are forms 1042 and 1042-S. The form 1042 helps you fill out 1042-S which is the one you would file and the one you would give a copy to to all foreign individuals even if no taxes were withheld. Hopefully this helps any one else in the future.