Music royalties, how to pay taxes?

[Josefine]

I've earned money for music royalties through a music distribution company (STEM), but I haven’t withdrawn the money yet. How is this being taxed? Should I file for quarterly taxes as a self-employed individual or will royalties distribution companies send tax forms before tax season?

My husband and I will be filing jointly and with FEIE (foreign earned income exclusion) this year will that impact how I pay taxes for the earned royalties?

Thank you!

[DashonnonH]

You should received Form 1099Misc from the company paying you royalties. If you are a self-employed artist/writer you will have to file the 1099Misc on Schedule C and pay self employment taxes on the net profit that is $400 or more. 

If you owe self-employed taxes or expect to owe income taxes when you file your return, you should pay quarterly taxes to avoid any interest and/or penalties. 

https://www.irs.gov/businesses/small-businesses-self-employed/what-is-taxable-and-nontaxable-income#....

The foreign income exclusion only applies to income tax. Self employed taxes are not excluded. You should still make quarterly payments for the self-employed taxes. Please see link below for additional information.

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion#:~:text=Self....

Thank you for joining us today!

[Josefine]

Thank you very much for your answer! 

I have one follow up question for you, I haven't withdrawal any money payed out yet from the distribution company. Once I do, do I pay quarterly taxes in the following quarter (for example september 2024, if I withdrawal today)?

Since we will be filing our taxes with Foreign Exclusion Income tax, the money I have earned through royalties will also be under that tax exception? 

Many thanks!

[DashonnonH]

You're Welcome!

If the royalties are accessible by you, they are considered paid. Unfortunately, once accessible you will owe taxes whether you withdraw the royalties or not.

Only foreign earned income is allowed to be excluded with the foreign earned income exclusion. If the royalties are US sourced then this income would not be included in the exclusion. If they royalties are foreign sourced, yes they can be included with the foreign income exclusion. 

Self Employed income is typically earned from where your work and/or live. If your self-employed work is earned/sourced in the foreign country and you meet the requirements for foreign income exclusion, then the royalties will be included with the exclusion.