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Subject: Crowd funded tax responsibilities? rss

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Nathan Stout
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For those of you who have run a successful crowd funded game:

What did you have to do tax wise for your funding? Is the money just considered normal income? Is there anything special I need to keep in mind.

Setting up a KS has been a game of micro-details and staying on top of all of them. I can see how people can loose their house over a poorly planned KS that funds.

pre-project expenses
...advertising
...misc costs (prototyping, etc)
production costs
...art
...design
...physical components
shipping costs (from manufacturer)
shipping costs (to backers)
storage costs (with all those extra units you still need to sell)
tax considerations

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Travis Worthington
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2010 Releases ........................................ The Resistance, Haggis & Triumvirate ..................................... Now accepting submissions for 2011 releases ........................................ www.IndieBoardsandCards.com
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yes, it is considered income and you'll have to pay income tax on any profits - so be sure to track expenses to offset the incomes (especially shipping costs!).

You will also have to pay sales tax on any in state shipments.

You really should form either an LLC or s-corp and run everything through that, and get a sales license in your state. And get an accountant if you aren't familiar with all the records you need to keep as a business, and how taxes are handled differently, and just keep you on top of all the forms you need to fill out and file with federal, state & local authorities.

If you do a kickstarter in 2013 and don't deliver to 2014 you will want to work that out with your accountant as you wouldn't want to be on a cash method to show profits and losses.

Going through kickstarter to publish a game means you are the publisher and need to work out all the business aspects yourself.
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Jesse Catron
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You may want to listen to the latest Funding the Dream podcast on this very subject:

http://www.buzzsprout.com/4646/87687-kickstarter-and-taxes-e...
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Tunguska's CPA
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If you're not incorporated or set up with a discrete business (e.g. an LLC), you'd probably be considered self-employed. The KS pledges would be your revenue against which you'd net your expenses on your schedule C.*

It'd be better financially and legally** to set up a separate entity as your game company. This provides a legal barrier between you and everything else (at least in regards to matters involving the company) as well as separate financial records.

The company would be taxed separate from you (most likely, as each way of incorporating has different tax effects) and would (could) pay you wages, a salary, or dividends, depending on how you set it up and what you want to do with it.*

In short, KS pledges are revenue and would be netted against expenses before arriving at net income, which would be taxed. Some jurisdictions may tax gross revenues. I can't speak on sales taxes.

Regardless, I would contact a lawyer and/or CPA in near you to discuss the above in more detail and help develop a long-term plan for your company.

Good luck!

*I am a CPA, but I do not specialize in taxes.
**I am not a lawyer
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T Worthington wrote:
yes, it is considered income and you'll have to pay income tax on any profits - so be sure to track expenses to offset the incomes (especially shipping costs!).

You will also have to pay sales tax on any in state shipments.

You really should form either an LLC or s-corp and run everything through that, and get a sales license in your state. And get an accountant if you aren't familiar with all the records you need to keep as a business, and how taxes are handled differently, and just keep you on top of all the forms you need to fill out and file with federal, state & local authorities.

If you do a kickstarter in 2013 and don't deliver to 2014 you will want to work that out with your accountant as you wouldn't want to be on a cash method to show profits and losses.

Going through kickstarter to publish a game means you are the publisher and need to work out all the business aspects yourself.

If anyone knows the ins and outs, it's this guy. --^
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Nathan Stout
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Thanks guys!
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