26 Replies Latest reply on Sep 5, 2019 1:29 PM by danzima

    Being taxed ~$2,000.00 for a RoadTest.

    jkutzsch

      Curious from the experience of others here.  I participated in a roadtest where it looks like the product is now going to cost me around $2,000.00 from "self-employed" taxes.  Needless to say this is unplanned.  Do other RoadTest participants in the US have suggestions on this?  Is this a common expected event?  My wife is pretty much saying my budget for anything is now blown.

        • Re: Being taxed ~$2,000.00 for a RoadTest.
          volly

          jkutzsch, Please substantiate. I do not really get this.

           

          Yunus

          • Re: Being taxed ~$2,000.00 for a RoadTest.
            peteroakes

            What product is that from ??

             

            Also, are you declaring the "Gift" as a company asset, there not a corporate / Company (Your Company) gratuity, if anything they should be declared (If at all) as a prize from a contest ??, or atleast thats my understanding, if you participate in a free raffle in your region and win $1000 (A 50/50 draw, or "Your our 1000,000 customer, hers a $1000 to spend in our store) do you declare it as income, do you even declare it at all ?, its for you as an individual, not you as a company??

             

            I would talk to your accountant for professional advice and how if at all this should be declared, you must also have received something well over 10K$ to get that much tax hit ?.

             

            If you have already submitted it, you may have opened up a whole can of pain that may be difficult to get out of but worth the call to your accountant, or at least consulting one.

            3 of 3 people found this helpful
              • Re: Being taxed ~$2,000.00 for a RoadTest.
                ntewinkel

                ...are you declaring the "Gift"...

                 

                Except that Randall now has made it clear it's not a gift, but more of a payment for writing a review. In which case the taxman has a pretty good case that it's work income.

                 

                For someone in a top tax bracket, and depending on the country, the tax paid on the top dollar earned gets closer to half (40% in Canada if above like $120k I think).

                 

                I would go with Inderpreet's suggestion of considering it a sample, but I don't know if that means the taxes are any different, or if there's an exemption to how much a sample can be.

                 

                Good question for a tax specialist for sure. I'd like to hear what the official response is.

                 

                Cheers,

                -Nico

                2 of 2 people found this helpful
                  • Re: Being taxed ~$2,000.00 for a RoadTest.
                    jkutzsch

                    DAB ntewinkel hmm, so maybe this is something new due to the 1099-MISC form being used?  Due to that being filed with the Government I can't argue this being a sample of a value worth $0.00 since it clearly is declared at $3,890.00.

                    2 of 2 people found this helpful
                      • Re: Being taxed ~$2,000.00 for a RoadTest.
                        jkutzsch

                        On a side thought, we may need to tweak the information for RoadTests to let people be aware of their Free product potentially costing them with taxes appropriate to their location.

                         

                        3. How much does a RoadTest cost?

                        There is no charge to participate in the RoadTest program. Once you have been selected as a RoadTester, element14 will send you the product for FREE in exchange for your feedback.

                         

                        11. If I am selected as a RoadTester, can I keep the product I tested?

                        Yes. That's the great benefit of being a participant in the RoadTest program. You get the product for free in exchange for your objective feedback.

                         

                        I can't even imagine the intricacies of tax forms for all of the Countries that participate.  Guessing there should be a general amount of value that is the required minimum before Element 14 has to file special tax paperwork on their side.

                        4 of 4 people found this helpful
                  • Re: Being taxed ~$2,000.00 for a RoadTest.
                    ipv1

                    Technically the roadtest product is a sample and not sold so you should have to pay taxes on $00.00 which should be around.... $0.00

                     

                    Ive had issues with customs BUT since I am now dangerously near the poverty line this year, I won't need to worry about any taxes

                    1 of 1 people found this helpful
                      • Re: Being taxed ~$2,000.00 for a RoadTest.
                        jkutzsch

                        To be specific.  The RoadTest required a 1099-MISC form to be filed with the Federal Government stating that I received $3,890.00 as nonemployee compensation. 

                         

                        Preliminary investigation is showing this is pushing me into self-employed that I now I have to pay taxes on at both a federal and state level.  Even though it is a piece of test equipment not actually "wages".  The basic form is showing that the difference in my tax return with this 1 RoadTest has changed my expected return by what I was told was around $2,000.00.

                         

                        Having never participated in a RoadTest that required a 1099-MISC to be filed this is all new to me.  I am also not an accountant and previously my general wages and lifestyle is mediocre enough with no fluctuation that it has allowed me to file taxes online.  So I have not approached a tax professional as of yet.  I thought I would see what other members may have experienced and can suggest.

                         

                        I keep looking out there for specification in regards to wages versus hardware and everything I can find seems to imply actual wages/money received.  But i am still researching.

                        2 of 2 people found this helpful
                          • Re: Being taxed ~$2,000.00 for a RoadTest.
                            ntewinkel

                            Wow, that sucks. If you are generally an "employee", the only suggestion I can add is that as "self-employed" you are entitled to claim a lot of expenses related to making that self-employed income.

                             

                            For me (in Canada) I am allowed to claim part of my home expenses for my home office, depreciation on equipment (including my computer), and work related shares of cell phone and internet costs.

                             

                            If the government is pushing you into having to claim that self-employed income, then after expenses you could actually end up with a loss to reduce your overall taxes.

                            2 of 2 people found this helpful
                        • Re: Being taxed ~$2,000.00 for a RoadTest.
                          DAB

                          I have not had any problems in the US for roadtest items, so I am baffled.

                           

                          DAB

                          3 of 3 people found this helpful
                          • Re: Being taxed ~$2,000.00 for a RoadTest.
                            jkutzsch

                            I asked around and I was told that perhaps a 1099-MISC form is not the correct form to be used for what is being accomplished.  It sounds like what is trying to be done now is stating that E14 is bartering with a Member for services by providing a product.  No cash/monies are being exchanged which would be what the 1099-MISC form would be used for.  Instead a 1099b form would be used for bartering. 

                             

                            https://www.irs.gov/businesses/small-businesses-self-employed/barter-exchanges

                             

                            https://www.irs.gov/pub/irs-pdf/i1099b.pdf

                             

                            So confusing.  For instance the "Fair Market Value" for the 1099b, is that the retail value or something more appropriate.  And does a 1099b change the amount I owe, don't know.  1099-MISC better or worse then a 1099b, don't know.  :-)

                             

                            Luckily I live in a rural place, I was told that potentially I could have had additional municipal taxes added as well.

                            • Re: Being taxed ~$2,000.00 for a RoadTest.
                              Andy Clark (Workshopshed)

                              I do take payments for blog posts and reviews on my site and do declare that as additional income which is taxed.

                               

                              However, I'd never really thought about the value of the items for roadtest being a payment. I supposed if I counted those, I'd be giving even more of them away.

                               

                              For that much it's worth checking with an accountant. There's a possible game of skill element in that you have to submit your proposal to be selected but that might just be looked upon as tendering.

                               

                              One key thing to think about is the value of the item. It was never retailed so you want to look at the wholesale price as it's value.

                              3 of 3 people found this helpful
                              • Re: Being taxed ~$2,000.00 for a RoadTest.
                                rsc

                                I also received a 1099-misc for my design contest prize. Cost me about $200 in taxes.

                                What really sucks is that Olympic winners have to pay taxes on the price of their medals    That doesn't seem right. Time for some tax reform!

                                Scott

                                6 of 6 people found this helpful
                                • Re: Being taxed ~$2,000.00 for a RoadTest.
                                  mcb1

                                  I thought our customs charges (plus all the other "hanger-on" charges by them and the freight forwarder) were bad enough.

                                   

                                  I wonder if you registered as a 'company' for the RT's would you have to do the same.

                                  At least you'd be in a different tax bracket, and could claim costs, ie time, internet, computer, portion of house, etc to offeset it.

                                   

                                  Mark

                                  3 of 3 people found this helpful
                                  • Re: Being taxed ~$2,000.00 for a RoadTest.
                                    dougw

                                    Canadians have a much better time with prizes than US citizens.

                                    The US IRS requires all winnings to be considered as income and if the value is over $600 the sponsor must send a Form 1099-Misc.

                                    In Canada, the CRA does not require contest prize winners to pay fees or taxes of any kind on prize winnings, except prizes from your employer may be considered income benefits and you may pay travel taxes on trips.

                                    I believe there is also a reciprocal tax agreement between the USA and Canada where citizens are taxed according to their place of residence - so if a Canadian wins a US contest, they pay no tax, but if a US citizen wins a Canadian contest, they probably pay tax on it.

                                    US sponsors routinely withhold taxes on winnings, but I'm pretty sure Canadians can claw that back, if they are willing to go through a lot of aggravation and red tape.

                                    I knew there was a reason I chose to live in Canada.

                                    3 of 3 people found this helpful
                                    • Re: Being taxed ~$2,000.00 for a RoadTest.
                                      pettitda

                                      Thanks for the eye-opener, jkutzsch  That certainly puts a different light on participating in a Road Test. 

                                      1 of 1 people found this helpful
                                      • Re: Being taxed ~$2,000.00 for a RoadTest.
                                        clem57

                                        So I hope $600 is the cutoff for 1099-Misc for Road Tests or whatever. rscasny can you comment on this?

                                        Thanks,

                                        Clem

                                          • Re: Being taxed ~$2,000.00 for a RoadTest.
                                            danzima

                                            Hi Clem,

                                             

                                            For US folks, if the RoadTest item has a value of over $600 we do have to go through the process to issue them a 1099-MISC. I completely agree with those in this thread that it's silly, since it's really just a product sample provided for review, but that's the way it is!

                                            4 of 4 people found this helpful