| Patent Royalites; Estimated Taxes |
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Adrian
Contributing Member
Cash: $ 6.40
Posts: 31
Joined: 13 Oct 2005
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| Patent Royalites; Estimated Taxes |
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Hi all,
I have a couple of tax-related questions. I received royalties from a patent this year which were reported to the IRS on a 1099-MISC form. It looks to me as though this gets included on 1040 schedule E and is simply taxed as part of my income. Is there anyone out there that has experience with this and knows whether this is correct? I thought I had read somewhere that patent royalties were taxed at a different rate (as sort of an incentive to invent useful stuff), but I can't find any information of that kind now.
Also, I've been on a fellowship from which income tax cannot be witheld, so I've been paying estimated taxes quarterly so as not to incurr a pentalty for owing the gov't more than $1k when I do taxes. This patent payment came as a complete (albeit very pleasant) surprise, and completely screws up my estimated taxes (it makes my income for the year about 150% of what I estimated it to be). If I recall correctly, there is some provision for such a situation... the gist of it being that you're not held responsible for estimating/prepaying taxes if your financial situation changes during that year. Does anyone know the details on this?
Thanks in advance for any help you're able to offer.
-Adrian
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Mon Jan 09, 2006 4:23 pm |
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Adrian
Contributing Member
Cash: $ 6.40
Posts: 31
Joined: 13 Oct 2005
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quote:
Originally posted by coaster
PS - just wanted to add it's probably not a real good idea to act solely on free tax advice given online by non-professionals. It's your money. Check to make sure first. 
I couldn't agree more... just hoping someone might point me in the right direction.
I'm not so sure about the upcoming estimated tax deadline. If I recall correctly, they frown upon uneven estimated payments- that is, they want four equal payments, not one large payment at the end of the tax year.
Also, I won't have paid 90% of my 2004 tax since my 2004 salary was significantly higher than my 2005 salary. I knew this would be the case, and it was reflected in my estimated tax payments.
Anyway, I'll probably spend some time at the library researching this and then post the details of whatever I decided to do.
-Adrian
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Tue Jan 10, 2006 3:45 pm |
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Adrian
Contributing Member
Cash: $ 6.40
Posts: 31
Joined: 13 Oct 2005
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That's good to hear.
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Tue Jan 10, 2006 5:52 pm |
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