This important update was just posted on the SFWA website.
Tax Guidance For Audible/ACX Royalties Reporting
SFWA recently received guidance from the Authors Guild, one of our sister organizations, on a significant United States tax-reporting change that many independent authors have shared concerns about since January 1. That’s when Audible/ACX changed their tax-reporting practices for royalties from audiobook productions, by including royalties for both authors and their audiobook narrators on the same form delivered to authors. This move created a lot of confusion about how to file taxes for independent authors; its effects are explained more fully below.
Although it is now late in this year’s tax season, we do hope that affected authors will find this guidance useful in preparing or amending their United States taxes for 2021 and looking forward to next year’s. Thank you to the Authors Guild for compiling this guide, and do feel free to share it with other authors you know who may be affected by the reporting change.
Audible/ACX’s New Tax Reporting Policy: What Authors Should Know
As of January 1, 2021, authors who publish their own audiobooks on ACX and use ACX producers must now declare the producers’ portion of the royalties as income and then deduct those payments as business expenses when they file their taxes. This is because Audible/ACX now reports all of the net earnings from ACX audiobooks on the authors’ 1099-MISC forms, including the earnings it paid over to producers, as the authors’ royalty earning. It has also stopped issuing 1099-MISCs to producers and instead now issues 1099-Ks to producers that meet the income threshold.
With these new accounting practices, Audible/ACX is treating the payments it makes to voice actors, audiobook producers, and studio pros (collectively referred to as Producers in the agreements) as part of the royalties payable to the authors (referred to as Rights Holders in the agreements)—on the notion that it is the authors, not Audible/ACX, who hire the Producers and owe the Producers a share of their own royalties as compensation for recording the book. The new structure makes clear that Audible/ACX is limiting its role to that of a third-party payment settlement service, even though it makes the Producers’ services available to their authors, sets the terms of that engagement (a 50/50 royalty split), and is the one to send payment to the Producers.
When authors first learned of this change, many were concerned that they would be liable for taxes on the entire amount reported on their tax forms from Audible/ACX, though they were only paid their half. Further, it was unclear how Rights Holders could deduct the amounts paid to the Producer as business expenses, as there were questions about how to determine the amount paid and issue tax documentation (such as 1099-MISC forms) to the Producer.
The Authors Guild discussed these issues with the Audible/ACX team and received feedback from an independent tax advisor, which we are sharing below to help authors navigate their taxes in light of the changes. Audible/ACX also expanded their tax FAQs with new information to address our concerns.
Are authors liable to pay taxes on the entire earnings reported on their 1099-MISCs, including amounts paid out to the Producer?
No. Authors can write off the Producer’s share as a business expense. Please contact your tax advisor for more information.
Authors can find their net and gross earnings, the amounts paid to Producers, and documentation of those amounts (as support for the business expense deductions) through their Audible/ACX dashboard. Specific directions on how to locate this information can be found on the Audible/ACX FAQ page.
Do authors need to issue 1099-MISCs to Producers?
No. Authors do not need to send separate 1099-MISC forms to the Producers. Producers will get a 1099-K form Audible/ACX reflecting their earnings. Producers will separately report their earnings from the Royalty Share program on their taxes.
Authors should download and keep all financial information related to their earnings from the Audible/ACX dashboard. Authors should consult their tax advisors to ensure they are capturing everything needed from the dashboard for their records. The Authors Guild is discussing ways to streamline the process next year so authors will have all the tax documentation they need easily available from Audible/ACX. This may take the form of a letter issued by Audible/ACX along with the 1099-MISC form that breaks down the amounts paid to Producers vs. Rights Holders, but that is not yet confirmed.