Many people receive royalties on a regular basis, sometimes several times a year. Royalties are generally payments for the use of a creator's prior published works. Royalties are most common in the entertainment and creative industries. Certain artists are paid for their past works of art in the form of royalties, usually a set fee for each performance, or a percentage of any sales. Many commission-independent sales representatives receive 1099 income, and in essence, royalty income.
What Is Not Royalty 1099 Income
The Internal Revenue Service has ways to keep up with everyone's income. Typical employees of a company have their income reported on W-2s. This is a wage earner's statement of income and lists deductions for any taxes withheld or Social Security taxes paid by the employer. Unlike a W-2 form, a 1099 form lists no deductions.
Royalties and commissions are paid to certain individuals or corporations as independent contractors. Unlike an hourly employee, an independent contractor is, in essence, self-employed. An independent contractor may receive income from several sources. The independent contractor is required to pay his own income taxes and Social Security taxes on income.
Book publishers, movie production companies and record producers keep track of funds dispersed to artists due royalties. The IRS requires them to keep these records. Royalty checks may be mailed monthly or quarterly, but the company files a form 1099 once a year with the IRS. The 1099 form is the total of all royalties paid to the artist over the preceding year. A duplicate copy is mailed to the artist/independent contractor as a record of royalties paid to the artist during the preceding year.
Important Tax Documents
A1099 form is a record to the recipient and the IRS that money has been paid to the recipient. It is the artist/recipient's duty to file this form with her tax returns. The money designated on the 1099 form is considered earned income. The recipient must pay taxes due on the self-employment royalty income.