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Old Feb 28, 2012, 11:19 AM   #1
DDustiNN
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Some questions for established developers and/or professional accountants...

I have recently delved into the world of mobile app development, and there are some things that are unclear to me and I'm not really sure who to ask. If you know the answer to any of these, please do share... If not, a simple "I don't know" will suffice. I just don't want any incorrect information.

So, first thing's first... I know Apple keeps 30% of the purchase cost (so if I charge $.0.99, I get $0.70 for each sale), and does not report to the IRS, but I would assume I'll still need to claim my earnings as income. They do deposit directly to my bank account on a monthly basis. That is still considered "income", correct? Or is there some other classification for it? And what is the amount I would need to make before reporting it? I've heard that as a general rule of thumb, don't worry about it if it's under $600, but I'm sure the amount will be higher by the end of the year.

This brings me to my next issue... Should I continue publishing as an individual, or should I register a business? I am not sure which would benefit me more, tax-wise... individual or LLC. I assume it is based on the amount of money, but I am honestly clueless.

And lastly... I bought a Macbook Air for development, since you need a Mac for iOS development. Is there any way to write this off as a business expense, since that's what it's used for? If so, would I be able to as an individual, or would I have to go the business route that I mentioned above? And does its cost make a difference when compared to how much money it produces?

If anyone knows the answer to any of these questions, I would very much appreciate the help! Thanks!
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Old Feb 28, 2012, 12:14 PM   #2
chown33
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You didn't say what country you're in. Tax and business advice is specific to a jurisdiction: country, state, and sometimes even city (e.g. NYC).

You should talk to a real accountant about these things.

All your income from Apple counts as income. Your accountant will advise you about amounts and taxability.

You've neglected the "Sole Proprietor" option in your list of possible taxable entities. This is not the same as LLC or individual. Again, consult your accountant.

I've been a sole proprietor for years, in the USA. I deduct my work-related computer purchases as work-related capital expenditures. Whether this is expensed entirely in one year or amortized over several years depends on my income that year, my expected income the next year, and the total expenditure, along with knowing the IRS rules on what equipment deduction lifetimes is. I expect my accountant to know these things.
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Old Feb 28, 2012, 12:16 PM   #3
ArtOfWarfare
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My thoughts:
Your computer, OS, test device, and any software used to create your apps are all business expenses. So is the $100 registration fee. So unless you manage to make several thousand dollars, I wouldn't even bother thinking about taxes.

Granted, I'm a very broke college student, so maybe I'm not the best one to listen to.
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Old Feb 28, 2012, 12:37 PM   #4
dejo
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Quote:
Originally Posted by DDustiNN View Post
I know Apple ... does not report to the IRS
They don't? How come I get 1099s from them, then?
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Old Feb 28, 2012, 02:58 PM   #5
DDustiNN
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Quote:
Originally Posted by chown33 View Post
You didn't say what country you're in. Tax and business advice is specific to a jurisdiction: country, state, and sometimes even city (e.g. NYC).

You should talk to a real accountant about these things.

All your income from Apple counts as income. Your accountant will advise you about amounts and taxability.

You've neglected the "Sole Proprietor" option in your list of possible taxable entities. This is not the same as LLC or individual. Again, consult your accountant.

I've been a sole proprietor for years, in the USA. I deduct my work-related computer purchases as work-related capital expenditures. Whether this is expensed entirely in one year or amortized over several years depends on my income that year, my expected income the next year, and the total expenditure, along with knowing the IRS rules on what equipment deduction lifetimes is. I expect my accountant to know these things.
I am in the U.S., in Michigan's Detroit area.

I don't know anything about LLC, Sole Proprietor, or anything like that, so that's why I'm trying to see what I should be looking into.

I don't have an accountant, and I'm just trying to see what I would need to do or if it's even worthwhile to look into. I just wasn't sure if I would have to pay an advisor or anything, so I'm just looking to see what sort of stuff would be involved and what direction I should take.

Quote:
Originally Posted by dejo View Post
They don't? How come I get 1099s from them, then?
That is a very good question, as I did not receive anything from them for 2011. During some perusing on Google, I found that many people say Apple doesn't report or 1099 you. Maybe it's only if you make over a certain amount or something? I really don't know, that's why I'm asking though.

----------

Quote:
Originally Posted by dejo View Post
They don't? How come I get 1099s from them, then?
Also, this is directly from the iTunes Connect FAQs:

Quote:
Will Apple send a U.S. Tax Form 1099 for my sales?
No. Sales on the App Store are sales by you, the developer of copyrighted works, to end users. Therefore, Apple takes the position that payments made to you for these sales are payments for products or goods, which are specifically exempt from reporting on Form 1099 even though the payments may be taxable income to you.

You are responsible for determining your own tax obligations with respect to these payments. If you are uncertain of your tax obligations, we recommend that you consult with a tax professional.
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Old Feb 28, 2012, 03:18 PM   #6
brianbauer04
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Start with this page:

http://www.irs.gov/businesses/small/...=99336,00.html

They also have a link to a page about Michigan in particular:

http://www.irs.gov/businesses/small/...=99552,00.html

The first question the IRS will ask is if you are doing this as a business or a hobby. Then you think about how to organize your business.

Start at the first page I linked. Turn off your cell phone, shut down your email, and read for 20 minutes. It is not complicated but, just like programming, if you skip a line the whole thing doesn't work.

You don't need to digest the whole thing in one sitting and the vast majority of tax law doesn't come close to applying to you and your situation.
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Old Feb 28, 2012, 03:19 PM   #7
dejo
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Oops, my bad! Yeah, I forgot. My 1099 is for Ad Revenue and not for App Sales, which you need to keep track of yourself. My apologies.
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Old Feb 28, 2012, 06:20 PM   #8
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How you do all this depends in part on the kind of person you are. I'm in the US. I've had apps on the app store over three years and I don't have an LLC. I have a buddy who told me he was interested in writing some apps under his own name (he does have the ability) so he set up an LLC. He hasn't started writing the apps yet. That's just the difference between me and him.

You have plenty of time yet to get this stuff right, to your own level of comfort. Nobody here is a lawyer or tax accountant.
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Old Feb 28, 2012, 06:21 PM   #9
chown33
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Quote:
Originally Posted by DDustiNN View Post
I don't know anything about LLC, Sole Proprietor, or anything like that, so that's why I'm trying to see what I should be looking into.

I don't have an accountant, and I'm just trying to see what I would need to do or if it's even worthwhile to look into. I just wasn't sure if I would have to pay an advisor or anything, so I'm just looking to see what sort of stuff would be involved and what direction I should take.
Befriend Wikipedia:
http://en.wikipedia.org/wiki/Limited_liability_company
http://en.wikipedia.org/wiki/Sole_proprietorship


Talk to the owner of some local small businesses you visit. Something like a small store or restaurant. Ask the owner who does their accounting. My accountant was willing to discuss business planning before I became a client. Some won't, but I imagine a business prospect would at least get you some suggestions on where to look next, or what to read.

Most community colleges have classes on starting or operating a small business. See what the instructors have to say.
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Old Mar 1, 2012, 04:14 PM   #10
firewood
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If you are in the U.S., go to your local library or bookstore, and get a book (Nolo press, et.al) or several books on the legalities, tax and accounting issues of starting and running a small business in your legal jurisdiction. There are multiple options, and depending on which option you pick (sole proprietorship, LLC, S-Corp, et.al), you may have to visit city hall or further consult with a lawyer and CPA in your locale.

Apple did not mail me a 1099 for my apps. I did mail out my own 1099's for my development and design sub-contractors.
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