Author Topic: $45,000 Kickstarter Funds and TAXES  (Read 3569 times)

AppleDapples

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$45,000 Kickstarter Funds and TAXES
« on: December 10, 2014, 01:26:22 PM »

Hello All,

To be brief, we did a Kickstarter campaign for a film project and raised $45,000. The campaign ends today and then Amazon Payments holds the funds for 14 days but we could wait until 2015 to withdraw the money.  Amazon reports the income as a 1099-K and since the transactions will be individually processed in 2014, the incoming funds are reported for 2014 regardless of when we actually receive the money.

Unfortunately, the bulk of our production and expenses will take place in 2015. My fear is that because the 1099 is going to reflect $45,000 of income for our production company in 2014 and then all of our business expenses are taking place in 2015, that we're essentially screwed on our taxes for 2014 and will pay full tax with no deductions. We will certainly spend all $45,000 and more on production costs in 2015.

Does anyone have any insight on how to handle this?  Should we scramble to spend as much as possible before then end of the year? Are there other things i'm not considering?

Thanks!



MustachianAccountant

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #1 on: December 10, 2014, 01:58:48 PM »
Your taxes will show $45,000 in income in 2014, with no offsetting expenses.
Your taxes in 2015 will show a lot of expenses, and not much (or any) income, so you will show a loss (negative income) on your tax return.

All that being said, this could have been planned better.
Someone else could chime in with possible elections that could be made (accrual accounting?), though I can't think of any off the top of my head.

gatorNic

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #2 on: December 10, 2014, 02:00:05 PM »
No way to extend the campaign past the first of the year?

AppleDapples

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #3 on: December 10, 2014, 02:07:37 PM »
No, there's no way to extend the campaign.

Timmmy

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #4 on: December 10, 2014, 02:18:38 PM »
What type of entity?  Is this income coming to you?  A corporation?

Some suggested reading. 

http://www.accountingtools.com/nol-carryforward
http://www.irs.gov/publications/p536/ar02.html

Specifically the section about loss carrybacks.  Assuming the lack of income will create a loss in the following year.

MustachianAccountant

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #5 on: December 10, 2014, 02:24:45 PM »
What type of entity?  Is this income coming to you?  A corporation?

Some suggested reading. 

http://www.accountingtools.com/nol-carryforward
http://www.irs.gov/publications/p536/ar02.html

Specifically the section about loss carrybacks.  Assuming the lack of income will create a loss in the following year.

AH! Loss carryback, of course. I've been out of the tax game for too long. ;-)
Good on you Timmmy

Cpa Cat

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #6 on: December 10, 2014, 02:38:37 PM »
What type of entity?  Is this income coming to you?  A corporation?

Some suggested reading. 

http://www.accountingtools.com/nol-carryforward
http://www.irs.gov/publications/p536/ar02.html

Specifically the section about loss carrybacks.  Assuming the lack of income will create a loss in the following year.

AH! Loss carryback, of course. I've been out of the tax game for too long. ;-)
Good on you Timmmy

In fairness to you, going with accrual accounting and treating it as unearned revenue may be preferred, since it avoids the issue of paying out cash for taxes in advance.

In any case, I would like to echo the suggestion that the OP consults with an accountant to select the best plan. Do it immediately, before year end, so that you know what path you're taking and still have time to work with in the 2014 tax year if needed.

AppleDapples

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #7 on: December 10, 2014, 02:39:49 PM »
My husband and his creative partner have an LLC for their production company.

Thank you, I will read up about loss carrybacks.

Timmmy

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Re: $45,000 Kickstarter Funds and TAXES
« Reply #8 on: December 10, 2014, 04:17:17 PM »
What type of entity?  Is this income coming to you?  A corporation?

Some suggested reading. 

http://www.accountingtools.com/nol-carryforward
http://www.irs.gov/publications/p536/ar02.html

Specifically the section about loss carrybacks.  Assuming the lack of income will create a loss in the following year.

AH! Loss carryback, of course. I've been out of the tax game for too long. ;-)
Good on you Timmmy

In fairness to you, going with accrual accounting and treating it as unearned revenue may be preferred, since it avoids the issue of paying out cash for taxes in advance.

In any case, I would like to echo the suggestion that the OP consults with an accountant to select the best plan. Do it immediately, before year end, so that you know what path you're taking and still have time to work with in the 2014 tax year if needed.

Accrual accounting can create other problems but it's certainly an option.  The most important thing is to go, like now, to a professional and explain the situation.  It's worth it to pay them a few dollars to come up with a good plan.