Hi all,
I was wondering for the members that have had (or a going to have) a Kickstarter campaign, do you know if the earning pledged are TAXABLE?
I mean let's say you are asking $4,000 for purposes of playing an artist to illustrate your game, is any of that taxable? I mean it will be used for the purpose of artwork. Your bottom line would not be affected by gain because they would be paid out to another person...
Anybody have any thoughts about this???
IANAL, but yes, it is taxable. It's income, even if it's going to pay someone else. Think about it this way: your paycheck (assuming you get one) is taxable, even though it's going to pay others for food, bills, gas, etc.
You need to budget in taxes when planning a Kickstarter/IndieGoGo campaign.
Talk to your tax professional for more details.
-Ed
as far as I understood you don't need to claim it on your taxes
Well that's not 100% certain - from my understanding. If you are doing a personal project and need to raise like $2,500 for it, PERSONALLY the earning you earn are taxable (like normal income - think salary). But if you are a real corporation (not just naming like abc.co), taxing is applied on gross income not on every plus or minus you earn. So in the case of a corporation, if you spend those dollars during the year (for inventory, an artist, or just pay yourself) what matters in how much is left over - that amount is taxable.
BTW if you paid yourself, that also is taxable but you simply declare it in your personal tax declaration that you earned an extra $2,500 (as an example) of taxable income (personally).
Amazon will file a 1099 for the following criteria:
• More than $20,000 in unadjusted gross sales, and
• More than 200 transactions.
More detailed info here:
http://www.amazon.com/gp/help/customer/display.html?nodeId=200663310
Does that apply for Kickstarter? If your campaign earns you $15,000 that is income you need to declare personally. I mean YOU EARNED $15,000 dollars - it must be taxable even if Amazon does not send you a form. But as a corporation, you can spend it (on any other matters) and not pay any taxes. Not sure what a 1099 is, but as a non-resident of the USA, I don't know how that applies.
Quest CCG: Just an off topic note for you, I just want to remind you that Kick Starter is currently illegal in Canada, so if you intend to go into this direction, you won't be allowed to do it unless the project's financing is managed by somebody outside Canada.
From what I read, it seems to be related to something like all investors must be somehow registered. So when they made their legislation, they have not considered crowd funding because it did not exist yet.
Why Canada? What do they have against our neighbors in the Great White North? They have recently been accepting projects from across the pond in jolly ol' England, why not the Canucks? At least their currency is in dollars and not pounds. How much do I need to take out of my bank account for something that costs this: £30
Well you are right Voodoodog... They are now allowing projects from the United Kingdom! Unfortunately not Canada - maybe never... All it takes is for someone to be located in the USA and giving a small percentage like 10% for the effort in creating the account.
I think canada wanted to regulate something that other countries did not regulate. But that regulation simply hit a wall when the concept of crowd funding arrived. I imagine that they will have to adapt their legislation to now support crowd funding. I imagine It's just a matter of time.
The are a few other stupid regulations, like the CRTC that blocks Non- Canadian TV stations that broadcast FREE content on the internet to force you buy cable TV to watch them (They force you to pay for something free). It has apprently something to do about competition with the local TV stations.
How can us yanks assist you in getting your project off the ground? You mentioned 10% to have someone in the U.S. set up the account. What are the logistics of that and how can we help? 10% seems pretty generous, but I don't know what exactly would be involved. We all work very well with each other here at the BGDF, and I would like to brainstorm with the other members on how we can give you a hand or two on your launch. It's what helped make our country so great! Hoo-Rah and Semper Fi!
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Well I know as personal gains, you need to declare the earnings as income (earned during the year). However as a business, we have deductions for things like inventory. At the end of the year, you pay taxes according to your gross earnings. So even if you raise $5,000 dollars from a Kickstarter campaign, if you shell out that money to pay for an artist (or even to manufacture product) basically your NET EARNING (as a corporation) are ZERO ($0). And therefore you have to pay $0 taxes...