StevenGliebe saidForeign Account Tax Compliance Act
What I’m curious about and so far have not been able to get an answer on is how the law of one country can bind a business in a foreign country. Specifically, how and why is an Australian company is required to comply with U.S. law?
Perhaps Envato sees itself now as a financial institution
We shall receive interest then. More tax complications.
Seriously though, I assume there is something like what you referenced but that would apply to Envato’s business. I still hope to see an answer.
I know a few people have asked about 1099’s from PayPal. Most online payment providers issue these, I believe Skrill does as well for example. As always it’s a good idea to talk to your tax advisor about how your online income is attributed.
My tax advisor wants to know if you will be filing 1099-MISC forms for authors who have been paid exclusively by PayPal (who files 1099-K forms on the same income). Please refer again to this if necessary: http://themeforest.net/forums/thread/important-information-for-us-authors/144314?page=21#1133310
A lot of us have effectively paid tens and hundreds of thousands of dollars to Envato. I don’t expect everyone to like the answers so long as they’re accurate but every question does need to be fully answered. This is difficult to handle in a forum thread.
collis saidPlease cite a source. I need to understand this.
Nonetheless US federal tax law requires us to report to the IRS on income paid to US persons. Even though we’re an Australia-based company, this law still applies.
This is definitely true. In the US, any money you make has to be reported so you should be doing this anyway, if you are not then it will come back to haunt you for certain. It’s called tax evasion and unfortunately is a federal crime in the States.
Envato reporting the earnings for US authors is simply a way of the US Government to verify and check up on any US author who is receiving money. As stated, the federal law requires any business to report earning to the IRS for any US persons.
For example, lets say “Joe” is an author here on TF who makes $5000 a month, but is not reporting it to the IRS. Envato will now be sending the earnings reports for all US authors so it will show that “Joe” has made $5000 a month from Envato. It is 100% Joe’s responsibility to be reporting those earnings to the IRS and paying his taxes, so everything should match up from Envato’s report to Joe’s report.
If you think about it, I’m honestly surprised that Envato has not done this in the past. I guess it is just the natural evolution of a marketplace that hosts over 4 million members, it had to be done at some point.Cheers! Luke
This is good information but not an answer to my particular question. I’ve been paying taxes as a self-employed person for 12 years now and I’m aware of my responsibilities.
What I’m curious about and so far have not been able to get an answer on is how the law of one country can bind a business in a foreign country. Specifically, how and why is an Australian company is required to comply with U.S. law? For example, is there an Australian law that requires compliance? I only want Envato (or anybody) to cite a source because I have never seen this before and it seems as odd to me as a Japanese business being forced to deal with an Egyptian taxing agency (or every business in every country being under the law of every other country).
If there is a basis for this and my other questions are answered, I will gladly comply. If there is no actual requirement then I prefer not to unnecessarily have sensitive information on file (as with dentists, doctors, etc. who ask for more than they need) or risk having Envato double report 1099-MISC with 1099-K like so many other business do and for which I have not been able to get a clear answer on either.
Envato, you need to consider this. Don’t cause double reporting of income for U.S. people by filing 1099-MISC forms when not required. A lot of US business have been doing this incorrectly since 1099-K was introduced a couple years back.
Prior to the implementation of the 1099-K, many businesses were required to provide a 1099-MISC form to many of their suppliers if they did more than $600 in business together annually. If the transactions occurred through credit card or third-party processors, there is a possibility of these transactions being reported on both forms. The IRS has directed that any 1099-MISC payments that are reported on a 1099-K should be reported on the latter form only, and that a 1099-MISC need not be produced. However, in practice, many companies are still providing 1099-MISC forms…https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/What-Online-Business-Owners-Should-Know-About-IRS-Form-1099-K/INF23095.html
Many Envato authors and affiliates are paid exclusively by PayPal, which is a third-party processor and reports sales on 1099-K forms. Therefore, US authors and affiliates earning more than $600 that are paid only via PayPal should not have their earnings reported on 1099-MISC. If you do that, you’re creating a double-reporting issue.
I didn’t believe this myself last year until a US-based theme shop explained it to me and another US-based company acknowledged that they had reported my income incorrectly. The Intuit article explains it pretty clearly but you can see this on the 1099-MISC instructions too.
Form 1099-K. Payments made with a credit card or payment card and certain other types of payments, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-Khttp://www.irs.gov/pub/irs-pdf/i1099msc.pdf
Be very careful that you do things absolutely perfectly if somehow you actually are required to involve yourselves with the tax laws of other countries.
dnp_theme saidThey’re probably getting a US office and or moving some of the payment systems to the US…..
Is Australia a colony of the US? Why should Envato care about IRS anyway?
Did Collis confirm this? It’s the only sane reason I could see for a foreign company voluntarily dealing with the IRS when they are absolutely under no obligation to do so.
I’d love to see the whole of Envato move to the U.S.
If being based on Australia is steeping into the business maybe they should re-locate, don’t you think? If a company like Facebook were facing problems because of the country they are based in they would most likely move.
Envato might not see author controlled pricing as an advantage. I don’t know. That’s one of the things I’m wondering. It’d be nice to have insight from Collis or someone of Envato authority on this.
Let the free market decide what is valued.
This was my thought too. I see very little faith in a free market here.
If one author sets their price to $20 and another to $80 for two themes of similar quality, it’s true that the cheaper theme has an advantage as far as price. It will sell more copies. But the guy pricing at $80 can keep up with only one-fourth of the sales. And their support burden will be four times less while doing so. Perhaps they can use that time to release more themes faster or add features their cheaper competitors don’t have.
Is there not one in four on ThemeForest that would prefer and pay for a theme that doesn’t have a rock-bottom price? Maybe it costs $500 to build a site for a client. If the client likes the $80 theme’s design or features better, are they really likely to opt for the $20 theme in order to pay $520 instead of $580? Price is not the only factor. Preference for design, necessity of features, and desire for a certain level of support are factors too.
Some people purposely avoid the cheapest option. Some people pay $300 for purses that are arguably no better than others. I’m not picking on ultra-low pricing though. I can see how that might work for some authors in certain places. That’s great. But higher pricing can work too. Not everyone buys the cheapest item on the rack. Walmart hasn’t put Target out of business. ThemeForest hasn’t put $75 and $100 shops out of business. The market is bigger than ThemeForest alone. Buyers for higher priced themes exist.
Nobody can be said to be right without testing it though. I suppose the whole conversation is null if it’s true that there’s no way for Envato to let authors set their own prices under Australian law.