October 27, 2023

The Bandcamp Tax Form (1099-K): What Musicians Should Know

Contents

Independent musicians use Bandcamp to share their music with fans across the world. For many, it’s essential to financially sustaining their musical endeavors.

However, with money comes taxes and that’s where the Bandcamp tax form comes into play.

At the end of the year Bandcamp will send you a tax form called the 1099-K. This form reports the payouts that Bandcamp sent you during the previous year.

Bandcamp sends the 1099-K to both you and the IRS. You’ll use it to prepare your tax returns and pay taxes on your Bandcamp income. As a self-employed musician, you might be eligible for deductions that reduce the amount of tax you’ll pay. 

In this guide I’ll walk you through the tax filing process. I’ll show you where to find your Bandcamp 1099-K, explain what’s on it, and how to use it for filing your tax returns. At the end I’ll throw in some tips to make filing your taxes less stressful.

What is the Bandcamp 1099-K?

The 1099-K is a tax form that reports your Bandcamp earnings from the previous year. Bandcamp files the 1099-K with the IRS. You’ll also receive a copy, which you’ll use to prepare your tax returns.

As an online marketplace based in the United States, Bandcamp is required to file a Form 1099-K for platform users who earned greater than $600.

It’s important to not ignore the 1099-K. Because the IRS has a copy, they’ll expect you to include it on your tax return. If you fail to report and pay taxes on your Bandcamp income, you might get a letter from the IRS letting you know that you owe taxes, penalties, and interest.

Fortunately, as a business owner, you can deduct business expenses that offset your Bandcamp income and lower your tax liability, including the fees that Bandcamp collects.

This is why it’s important to file a tax return. 

Aside from avoiding penalties, by filing a tax return you can adjust the amount of taxable income that the IRS has on file by claiming allowable business deductions. The IRS only knows about the amount reported on your 1099-K. They don’t know about your business expenses. 

Where to find the Bandcamp tax form?

According to their support page, Bandcamp will deliver your 1099-K to the email address associated with your account on or before January 31st.

If you haven’t received your Bandcamp 1099-K yet, there are a couple possible reasons why.

  • Below Earnings Threshold - Per tax law, Bandcamp is only required to file a 1099-K if you earned at least $600 through the platform. If you earned less than $600, Bandcamp isn’t required to provide a 1099-K.
  • It’s Too Early - It’s also possible that Bandcamp hasn’t issued you a 1099-K yet. Although Bandcamp states they’ll distribute 1099s-K before January 31st, per IRS rules Bandcamp has until March 31st to file a 1099-K so you may just need to wait.

Follow up with Bandcamp’s support team if you earned more than $600 on Bandcamp and January 31st has passed. Also check your spam folders.

Reviewing the Bandcamp 1099-K for Accuracy

Once received, it’s important to review your 1099-K because it will impact how much tax, if any, that you’ll pay. If the form is incorrect you might misreport your income, costing you time and money to resolve the issues with the IRS.

Here’s what you should look for when reviewing your 1099-K.

Filer’s Information

The 1099-K should show Bandcamp’s parent company Epic Games as the filer, including their company name and TIN (“Tax Identification Number”). If this information isn’t associated with Epic Games, then you’re looking at the wrong 1099-K. You’ll need to track down the correct 1099-K from Bandcamp.

Recipient’s TIN

Your name and TIN (i.e. Social Security Number or Employer Identification Number if you’re filing taxes as a business) should be reflected on your Bandcamp 1099-K. You should review both items before filing your tax returns. If either is incorrect, follow up with Bandcamp support to get a corrected 1099-K.

Box 1a. Gross amount of third party network transactions

Your Bandcamp 1099-K includes all payouts you received from Bandcamp during the year. You should review your bank statements to confirm that the total amount of payout deposits aligns with the amount reported on your 1099-K. Follow up with Bandcamp’s support team if you notice any discrepancies.

Bear in mind that your Bandcamp 1099-K reports gross payouts before deductions. According to Bandcamp’s Fair Trade Music Policy, the payment processor deducts a 4-7% fee in addition to Bandcamp’s 10-15% fee so you’ll need to add these expenses back to the total deposits received in your bank account to re-calculate the gross amount reported on your Bandcamp 1099-K. 

How to file taxes with the Bandcamp tax form?

Assuming your Bandcamp 1099-K is correct, the next step is to file your tax returns.

If you’re new to filing taxes, and comfortable with a DIY solution, software such as FreeTaxUSA, TurboTax, or the IRS’ free filing program are all good options. You can also have a tax professional prepare your tax returns if you’re not comfortable doing it yourself.

When preparing your tax returns, You’ll need to consider whether your music production is a business activity or a hobby. The decision requires careful analysis because it impacts how Bandcamp income gets reported on your tax return. 

You’re probably self-employed for tax purposes if you hope to make money from your music, even if it’s only a little bit or if you’re operating at a loss

On the other hand, you’re more likely to be a hobbyist if you produce music sporadically without the intention of profiting from your music. The IRS publishes a list of factors that help distinguish whether you’re operating a hobby or business.

It might be difficult to argue that you don’t have a profit-seeking motive if you’re selling through Bandcamp, in which case the IRS would consider you to be self-employed.

In the event of an audit, be prepared to justify your decision to report Bandcamp earnings as self-employment income or hobby income based on the facts and circumstances of your situation.

Self-Employment Income

Self-employed taxpayers, like any other business owner, can take deductions that decrease their business income. They’re also required to pay self-employment taxes on their business income after taking deductions. 

You’ll report your Bandcamp earnings on Schedule C of your federal tax return. The amount on Box 2, Form 1099-K should be reported in the income section of Schedule C. 

As a musician, you might have also earned income from sources other than Bandcamp. For example, if you also played gigs then you’ll need to include your performance income on Schedule C in addition to the income reported on your Bandcamp 1099-K. 

You don’t need to file a separate Schedule C for each tax form or income source related to your music business. You can group business income on one Schedule C and take deductions against the total income.

Hobby Income

Hobby income is income related to pleasure or leisure activities. It’s earned incidentally, not intentionally. In the unlikely event that your Bandcamp income is hobby income, report it on Schedule 1 of your tax return. 

Unlike business income, you won’t pay self-employment taxes on income reported on Schedule 1. You also can’t take deductions to offset the income. You’ll simply transfer the amount from your Bandcamp 1099-K to Schedule 1 and you’re done.

Additional tax tips for independent musicians

Few people enjoy taxes, but being proactive will make filing your taxes less stressful

Keep good records

A simple system for tracking your income and expenses, including receipts and other documents, will be beneficial come tax season. Clean, well-organized financial records will help you take advantage of deductions that you may have otherwise forgotten. 

You’ll also be prepared in the event of an IRS audit, since the IRS will ask you to provide support for any deductions that you take. Having your receipts, bank statements, and other supporting documents together will help you substantiate your deductions to avoid back taxes and penalties.

Segregating your personal and business finances is an easy but effective way to stay organized. For example, having a dedicated bank account for your Bandcamp payouts and business expenses will help you more quickly calculate your income and expenses during tax season.

An income and expense tracking tool, such as spreadsheets or accounting software, will allow you to produce a categorized profit & loss statement. You can use this statement to prepare your tax return or share it with your tax preparer.

Set aside money for taxes

Those Bandcamp deposits are nice to see in your bank account. But remember that a portion of the payouts needs to be set aside for taxes. Taxes are an expense that you accrue while earning income but pay later.

If you fail to set aside money for taxes, when filing your tax returns the following year you might get hit with a large tax bill that you’re not able to pay for. 

A good system of saving for taxes is to transfer a percentage of your payouts (maybe 25-35%) into a savings account. You’ll earn interest on the transfers and also have your tax bill covered. The remaining amount is yours to spend on yourself or reinvest in your music business.

Make estimated tax payments

Self-employed taxpayers typically don’t have taxes withheld from their income, so the IRS requires business owners to make quarterly estimated tax payments.

Failing to make quarterly estimated tax payments could result in underpayment penalties and interest. At a minimum you should pay 100-110% of last year’s tax liability or 90% of this year’s estimated tax liability (whichever is less). By paying the minimum amount you’ll avoid the penalties and interest, which means more cash in your pocket.

Here’s a guide to calculating estimated taxes for self-employed individuals.

Don’t forget about self-employment taxes

Self-employment taxes are your contribution as a business owner to the Medicare and Social Security systems. They’re roughly equal to 15.3% of your business income. 

Self-employment taxes are in addition to regular income taxes. When estimating your taxes for the year, include an additional estimate for self-employment taxes to avoid falling short of taxes owed.

When to consult with a tax professional 

Feeling confident about what to do with your Bandcamp tax form? Great. 

Nevertheless, at some point working with a professional could be beneficial. Not only can a qualified tax pro file your returns, they can also advise on strategies to optimize your tax savings. 

Augur CPA helps music industry clients stay IRS compliant and find potential tax savings. If you have questions about your Bandcamp taxes, or other tax questions, please don’t hesitate to get in touch through the contact form below.

Bandcamp Tax Form: FAQs

Where does the Bandcamp 1099-K go on my tax return?

The amount in Box 1a of your Bandcamp 1099-K goes on Line 1 (“Gross Receipts”) of Schedule C on your personal tax return. If you’re reporting Bandcamp income as hobby income, the amount goes on Schedule 1 instead of Schedule C as “Other Income.”

Does the Bandcamp 1099-K reflect refunds, chargebacks, fees, etc.?

No, tax law requires Bandcamp to report the “gross” amount it collects without regard to adjustments such as refunds, chargebacks, fees, and other adjustments. You can, as a business owner, deduct these items on your tax return to offset the gross amount reported on your Bandcamp 1099-K.

Does Bandcamp collect sales taxes?

Yes, Bandcamp collects sales taxes but it depends on the type of sale (digital vs. physical) and whether Bandcamp is the payment processor for the transaction. 

Bandcamp collects the applicable sales tax on all sales of digital items. 

For physical item sales, Bandcamp collects sales taxes if you’re using the “Enhanced Payments” feature. If you’re using the “Standard Payments” feature, where Bandcamp is not the payment processor and payments go directly to your PayPal account, then Bandcamp will not collect sales taxes. You might be required to file a sales tax return with your state independently. 

Refer to this Bandcamp support article for more information on sales taxes.

Are Bandcamp gratuities subject to sales taxes?

Bandcamp gratuities aren’t subject to sales taxes. When you sell something on Bandcamp, only the minimum asking price is included in the sales tax calculation. However, gratuities are included in your Bandcamp 1099-K and must be reported on your income tax return.

Why is Bandcamp asking for my tax information?

The IRS requires marketplaces like Bandcamp to collect tax information and file a tax form (called the “1099-K”) for users who earn over $600 per year on their platform. If Bandcamp asks for your tax information, it’s likely that you’ll meet this threshold and will receive a 1099-K. Use this tax form to file your tax return.

Do non-US Bandcamp users need to provide their tax information?

Yes, Bandcamp users who are nonresidents of the United States will need to provide their tax information. As a U.S. based marketplace, Bandcamp is subject to U.S. tax law which requires online marketplaces to collect tax information from all of their users, including users outside the United States.

Who should provide tax information for a Bandcamp account with multiple owners?

The account’s legal owner should provide their tax information. Bandcamp will file a tax form (Form 1099-K) under your Social Security Number. If you need to split the Bandcamp income with someone else, the IRS suggests filing the appropriate tax form (Form 1099-K or Form 1099-MISC) for the other individual and include their share of the Bandcamp income on the form. The other individual is responsible for reporting that income. Keep good records to support any deduction you take for the payments to the other individual. 

I received a 1099-K from PayPal and Bandcamp, will I be taxed twice?

No, you won’t be taxed twice on the same income. You should follow up with either PayPal’s or Bandcamp’s support team depending on which issued the incorrect form. If they don’t issue a correct form, you should still report the incorrect amount on Schedule 1 of your tax return on the “Other Income” line. Write “Form 1099-K received in error.” You can take an equal deduction on the “Other Adjustments” line and write “Form 1099-K received in error” to result in $0 of net income.

This content is for informational purposes only and does not constitute legal, business, or tax advice. You should consult your own attorney, business advisor, or tax advisor regarding matters mentioned in this post. We take no responsibility for actions taken based on the information provided.

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