How to Report Royalties on a 1099

1099-MISC royalty payments you receive during the year must be reported to the IRS using one of two schedules, depending on the activity that generated the royalties. Some royalties are subject to self-employment tax and others are not. Regardless of the schedule you use to report royalty income, each schedule allows you to deduct eligible expenses related to earning your royalty income.

Step 1

Determine the IRS schedule to report your royalty income. If the royalties you receive are a result of ownership in the rights to oil, gas or mineral deposit extraction, you must report royalties on IRS Schedule E. If your royalties are a result of an invention, work of art or written publication, you must report the income on IRS Schedule C. These forms are available on the IRS.gov website.

Step 2

Report royalty income. If you file Schedule E, report the amount shown in box 2 of your 1099 on line 4 of Schedule E. If you file Schedule C, report box 2 1099 income on lines 1, 5 and 7.

Step 3

Calculate expenses related to the production and receipt of your 1099 royalty income. Examples of royalty expenses for writers and artists include commissions and copyright fees. Examples of expenses for gas and oil royalties include taxes and drilling expenses. Report expenses in the "Expense" section of the schedule you use to report your royalty income.

Step 4

Subtract total expenses from your royalty income. The result is your net 1099 royalty income. If you file Schedule C, you must pay self-employment tax on net royalty income in excess of $400. Use IRS Schedule SE to figure your self-employment tax.

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