Freelancing, independent contractor agreements, and taxes

Hello there. I apologize if this isn't quite the right forum for this discussion, but since I’m nearing the end of my degree, I’m eager to jump into the workforce as soon as possible. I find myself somewhat lost regarding how tax filings work for those in Freelancing, specifically when all income is sourced internationally via the internet. My plan involves uploading files to platforms that specialize in selling digital goods; they handle the sales and then pay me a monthly fee, which they refer to as royalties. I realize this essentially functions as a type of copyright agreement, but since my "agreement" consists merely of clicking through their terms of service, I am unsure how to substantiate this to the IRS without a formal signed contract. Would I be expected to generate some sort of manufactured invoices to satisfy them? 😵

In many cases, these companies don't even send payments directly to the US, so I would likely receive funds through PayPal or similar services before transferring them to my local bank account. This brings up another complication: how do I prove to the authorities that I'm not somehow receiving double income, when in reality, the discrepancies in amounts are simply due to the transaction fees these third-party services strip away? Should I just report the final amount that actually hits my bank account and ignore the rest? Since these transactions involve companies based in the US, they will likely withhold their own taxes, and I am sincerely hoping I won't be forced to pay taxes on money that never even reaches my hands in the first place. 🤦

The recent shifts in tax reform have left me feeling increasingly muddled. If we assume my situation is treated as a copyright agreement subject to specific contributions, and I were to register as a small business or a sole proprietorship, would I be paying contributions based on the standard business coefficients or those tied to the specific nature of the contract? 🤔

If anyone here has navigated a similar path or possesses any clarity on these matters, please leave a comment or reach out via private message. Most of the information I can find seems tailored toward people with side hustles or those working directly with clients, whereas I have absolutely no direct relationship with the actual buyers. I am simply trying to figure out the most efficient way to structure this so that I actually have something left after the heavy tax burden, rather than ending up in the red. 🤣

Thanks.

Regarding the whole copyright thing, I honestly think the trick is to license the rights to your work rather than selling them off entirely. It’s more like giving them a permit to use it. But hey, you should probably double-check that with the U.S. Copyright Office (or whatever the official 😬 is) just to be safe.

As for getting paid through PayPal or something similar, my rule of thumb is to report exactly what hits your account. That’s how it worked for me with my independent contractor agreements, and I’m pretty sure if you end up with a formal copyright contract, the rules would be basically the same.

When it comes to the actual client who ends up buying your stuff, I don't think that's the main concern. What really matters is who is actually sending you the money—in this case, the platform you're registered with.

Honestly, your best bet is to head down to the IRS and ask them directly. From my experience, they aren't always super clued-in on these specific niches, so it might be worth hitting up a few different offices or calling them up. If you call a smaller office like the one in Spokane, they’re usually pretty helpful and love a good chat, whereas the folks in New York City or Miami will probably just ignore your call.🤣

The whole licensing aspect hadn't even crossed my mind, but then again, this isn't some custom commission where someone pays you once and the transaction is dead and buried. Though, I'm honestly not sure if that distinction actually changes anything legally. I'll have to do some digging online regarding those specific regulatory agencies.

I already tried reaching out to the IRS for some clarity, but all I got were these useless, non-committal answers. I have zero desire to let them trip me up just because it's easier for their bureaucracy to squeeze more money out of me. 🤣 From what I've gathered, some people haven't been asked for proof when reporting foreign royalties, though I can't tell if that's because the amounts were negligible or if they were just treating it as minor side income that didn't trigger any red flags.

The more I read into this, the more confused I get. Does anyone know if registering as a sole proprietor or a freelancer means there’s no formal copyright contract involved, forcing me to issue dummy invoices? And if I somehow manage to file this strictly under copyright income, can I keep doing that every month regardless of the amount without being forced to register a formal business? I'm also curious if that 30% expense deduction is actually going to stick after these tax reforms. If it doesn't, I'll probably end up paying those new contributions for nothing since I'd still be classified as unemployed. 😵 It's enough to make anyone lose the will to work. 🙏

Betty Sanchez10 said:The whole licensing aspect hadn't even crossed my mind, but then again, this isn't some custom commission where someone pays you once and the transaction is dead and buried. Though, I'm honestly not sure if that distinction actually changes anything legally. I'll have to do some digging online regarding those specific regulatory agencies.

I already tried reaching out to the IRS for some clarity, but all I got were these useless, non-committal answers. I have zero desire to let them trip me up just because it's easier for their bureaucracy to squeeze more money out of me. 🤣 From what I've gathered, some people haven't been asked for proof when reporting foreign royalties, though I can't tell if that's because the amounts were negligible or if they were just treating it as minor side income that didn't trigger any red flags.

The more I read into this, the more confused I get. Does anyone know if registering as a sole proprietor or a freelancer means there’s no formal copyright contract involved, forcing me to issue dummy invoices? And if I somehow manage to file this strictly under copyright income, can I keep doing that every month regardless of the amount without being forced to register a formal business? I'm also curious if that 30% expense deduction is actually going to stick after these tax reforms. If it doesn't, I'll probably end up paying those new contributions for nothing since I'd still be classified as unemployed. 😵 It's enough to make anyone lose the will to work. 🙏

I’ve spent the last few months just wandering around, trying to find some actual answers. It feels like everywhere you turn, you just pick up another random little piece of the puzzle, and eventually, you hope it all clicks together into one big, clear picture. 😬

Betty Sanchez10 said:The whole licensing aspect hadn't even crossed my mind, but then again, this isn't some custom commission where someone pays you once and the transaction is dead and buried. Though, I'm honestly not sure if that distinction actually changes anything legally. I'll have to do some digging online regarding those specific regulatory agencies.

I already tried reaching out to the IRS for some clarity, but all I got were these useless, non-committal answers. I have zero desire to let them trip me up just because it's easier for their bureaucracy to squeeze more money out of me. 🤣 From what I've gathered, some people haven't been asked for proof when reporting foreign royalties, though I can't tell if that's because the amounts were negligible or if they were just treating it as minor side income that didn't trigger any red flags.

The more I read into this, the more confused I get. Does anyone know if registering as a sole proprietor or a freelancer means there’s no formal copyright contract involved, forcing me to issue dummy invoices? And if I somehow manage to file this strictly under copyright income, can I keep doing that every month regardless of the amount without being forced to register a formal business? I'm also curious if that 30% expense deduction is actually going to stick after these tax reforms. If it doesn't, I'll probably end up paying those new contributions for nothing since I'd still be classified as unemployed. 😵 It's enough to make anyone lose the will to work. 🙏

Honestly, it feels like in this country, staying off the grid and working under the table is just way too easy. It’s almost like the system isn't even trying to stop it. ☕

Betty Sanchez10 said:The whole licensing aspect hadn't even crossed my mind, but then again, this isn't some custom commission where someone pays you once and the transaction is dead and buried. Though, I'm honestly not sure if that distinction actually changes anything legally. I'll have to do some digging online regarding those specific regulatory agencies.

I already tried reaching out to the IRS for some clarity, but all I got were these useless, non-committal answers. I have zero desire to let them trip me up just because it's easier for their bureaucracy to squeeze more money out of me. 🤣 From what I've gathered, some people haven't been asked for proof when reporting foreign royalties, though I can't tell if that's because the amounts were negligible or if they were just treating it as minor side income that didn't trigger any red flags.

The more I read into this, the more confused I get. Does anyone know if registering as a sole proprietor or a freelancer means there’s no formal copyright contract involved, forcing me to issue dummy invoices? And if I somehow manage to file this strictly under copyright income, can I keep doing that every month regardless of the amount without being forced to register a formal business? I'm also curious if that 30% expense deduction is actually going to stick after these tax reforms. If it doesn't, I'll probably end up paying those new contributions for nothing since I'd still be classified as unemployed. 😵 It's enough to make anyone lose the will to work. 🙏

You can report it as royalty income without needing any specific paperwork—you just pay and file your JOPPDov based on whatever hits your bank account. It looks like the 30% expense deduction still stands, and you'll actually start accruing Social Security credits now that we're required to cover those contributions too. Just keep an eye on this thread; there's also plenty of discussion on this over in the Freelancing thread on the PDF job and career board.

Hey everyone,

I don't want to clutter things up by starting a whole new thread, but I have a few quick beginner questions regarding paying taxes on freelance royalties:

I just received my first royalty payment from an overseas client, and if I understand the rules correctly, I have an 8-day window to pay the tax (using the Federal Reserve exchange rate—in my case, the fee was in USD), submit my JOPPD form, and complete my business registration.

So, here is what I am wondering about:

- Can this be handled in smaller increments? I'm currently in Brooklyn and the local office is right here, so I wasn't sure if I actually need to trek all the way to the main headquarters in Manhattan or if the local branch suffices?
- Is the business registration process really just a matter of submitting the RPO forms... and that's it?
- Should I pay the tax via a traditional check/money order, or can I just use online banking? Also, do I need to attach a receipt or confirmation to the completed JOPPD?
- Does anyone happen to have a sample of a filled-out JOPPD form specifically for international freelance royalties?

Thanks! 🙂

darkowl56 said:Hey everyone,

I don't want to clutter things up by starting a whole new thread, but I have a few quick beginner questions regarding paying taxes on freelance royalties:

I just received my first royalty payment from an overseas client, and if I understand the rules correctly, I have an 8-day window to pay the tax (using the Federal Reserve exchange rate—in my case, the fee was in USD), submit my JOPPD form, and complete my business registration.

So, here is what I am wondering about:

- Can this be handled in smaller increments? I'm currently in Brooklyn and the local office is right here, so I wasn't sure if I actually need to trek all the way to the main headquarters in Manhattan or if the local branch suffices?
- Is the business registration process really just a matter of submitting the RPO forms... and that's it?
- Should I pay the tax via a traditional check/money order, or can I just use online banking? Also, do I need to attach a receipt or confirmation to the completed JOPPD?
- Does anyone happen to have a sample of a filled-out JOPPD form specifically for international freelance royalties?

Thanks! 🙂

Any local branch will work.

- So, business registration just involves handing in the forms... and that's it?

Yes. Same deal—just go to your local branch.

- Do I pay the tax via a traditional check/money order, or can I use online banking? And do I need to attach proof of payment to the JOPPD?

Online banking is fine; no need to attach proof. Once you submit the JOPPD, an agent checks when the payment clears and sends you an email confirming whether the filing was accepted or rejected.

- Is there a sample of a completed JOPPD form specifically for foreign royalties?

Yes. Here, you'll find several PDF examples at the end.

I assume you're aware that these calculations change after January 1st.

Thanks, redpanther9!

Just two quick follow-ups:

- Can I just print out the forms and fill them out myself, or am I actually required to show up at the IRS or The New York Times to deal with them in person?

- Also, if you happen to be in New York City too, do you by any chance know the IBAN for the payment?

redpanther9 said:Any local branch will work.

- So, business registration just involves handing in the forms... and that's it?

Yes. Same deal—just go to your local branch.

- Do I pay the tax via a traditional check/money order, or can I use online banking? And do I need to attach proof of payment to the JOPPD?

Online banking is fine; no need to attach proof. Once you submit the JOPPD, an agent checks when the payment clears and sends you an email confirming whether the filing was accepted or rejected.

- Is there a sample of a completed JOPPD form specifically for foreign royalties?

Yes. Here, you'll find several PDF examples at the end.

I assume you're aware that these calculations change after January 1st.

I've skimmed through some info on that, though nothing in depth—is there a specific article that dives into the details of this?

Will the actual procedure stay the same, with only the math changing?

Tnx! 🙂

darkowl56 said:Thanks, redpanther9!

Just two quick follow-ups:

- Can I just print out the forms and fill them out myself, or am I actually required to show up at the IRS or The New York Times to deal with them in person?

- Also, if you happen to be in New York City too, do you by any chance know the IBAN for the payment?

I've skimmed through some info on that, though nothing in depth—is there a specific article that dives into the details of this?

Will the actual procedure stay the same, with only the math changing?

Tnx! 🙂

Yeah, I can print it out. I actually managed to dig up a PDF where you can just plug in all the numbers—fill everything in, then hit print. You sign it, make two copies, hand one to the clerk, and they stamp the other one and hand it right back to you. Simple enough.

If you happen to be in New York City as well—do you know which account number I should use for the transfer?

Yep, I’m based in New York City: US-123456789 Quote

I’ve skimmed through some bits regarding this—nothing too deep—but is there an actual article out there that dives into the specifics?

The procedure remains unchanged—only the calculation itself shifts.

We were dropping links to a few articles over on... Topics. Working on the freelance contract—and there’s also this other thing... Calculator..

There isn't much written about this yet—I suppose we won't have any real clarity until those laws actually pass. As for the procedure... I'm in the dark there, too. My guess is that JPMorgan Chase will handle the filings just like they always have, though it looks like there will be an additional requirement to make pension contributions to some sort of fund.

Thanks for all the info. I have a few more questions brewing. Is there any way to file that RPO report and those JOPPD forms online or via some kind of digital submission? I’ve heard people mention things like the IRS website or various government portals, but I have no clue if anyone can just access them or how the whole process actually works. Alternatively, could someone else just handle the filing on my behalf? Getting down to the local IRS office isn't really in the cards for me right now, so I'm trying to figure out how to navigate this without the hassle. 😵

You can mail them, or just have someone else drop them off at the IRS office. As for the RNC, I’m not entirely sure—it’s probably best to call your local branch directly and ask.

Anyone can file through the official government portals, but there’s usually a fee involved, and I assume the Treasury needs to authorize those systems first. I haven't personally dealt with that side of things, so someone else might have more insight.