December 6, 2023

The SoundCloud Tax Form: A Monetization Walkthrough

Contents

If you’re an artist on SoundCloud, monetizing your music on the platform provides an additional income stream for your music business. However, monetizing your music has tax consequences which is why SoundCloud asks for your tax information during the signup process.

Whether you’re inside or outside the United States, it’s important to provide accurate tax information since it will impact how SoundCloud reports your earnings and the extent to which SoundCloud will withhold tax from your payouts.

In this step-by-step walkthrough, I’ll help you complete an accurate SoundCloud tax form to ensure your SoundCloud income gets reported correctly. If you have any questions, please don’t hesitate to reach out through the contact form.

Why is SoundCloud asking for a tax form?

U.S. tax law requires SoundCloud to report the royalty payments it sends to certain users. SoundCloud reports the payments to the U.S. tax authority, called the Internal Revenue Service (“IRS”).

U.S. citizens and residents will complete a Form W-9

SoundCloud reviews the W-9 to determine whether it needs to file a tax document on your behalf (i.e.Form 1099-MISC). This document reports your royalty earnings to the IRS. SoundCloud will also provide you with a copy which you’ll use to file a tax return before April 15th, assuming you’re required to file one.

Non-U.S. users will complete Form W-8BEN or Form W-8BEN-E, if they’re incorporated. 

The W-8 certifies your status as a foreign person for U.S. tax purposes. Depending on which country you live in and pay taxes to, you can potentially claim tax treaty benefits on the W-8 that would exempt your SoundCloud payouts from mandatory tax withholding. In some cases, SoundCloud may file an informational document that reports your income and withholding to the IRS.

Where to find the SoundCloud tax form

You can find the SoundCloud tax form in the Earnings section of your SoundCloud for Artists account. Once you’ve clicked into Earnings, click on the Payouts tab. 

Before submitting your tax information, you’ll set your payment preferences. These preferences determine how you’ll receive payouts, either through PayPal or a bank transfer, depending on where you live.

Completing the SoundCloud W-9 form (U.S. Users)

Once you’ve provided payment information, you’ll then complete the tax form to begin receiving payouts.

SoundCloud users who are U.S. residents or citizens will complete Form W-9. If that’s you, select “I am a U.S. Person.”

 In the next screen you’ll provide information as follows:

Name

Enter the name that’s reported on your tax return. Refer to the table below if you’re not sure.

If you are… Your tax return is… Enter this name…
Individual Form 1040 The name on your social security card.
Sole Proprietor* Form 1040, Schedule C The name on your social security card.
Partnership Form 1065 The name on the partnership’s tax return.
LLC with one owner** Form 1040, Schedule C The name on your social security card.
LLC with more than one owner Form 1065 The name on the legal document forming the entity.
Other Entities Various The name on the legal document forming the entity.

* If you haven’t formed a business entity with your state (such as an LLC or Corporation), provide the name that’s associated with your Social Security Number.

** A Single-Member LLC is an LLC that has only one owner. For federal tax purposes, a single-member LLC is called a “disregarded entity” because the LLC’s income should be reported on the owner’s personal tax return.

Address

Provide a mailing address.

Federal Tax Classification & TIN

Select the option that corresponds to the federal tax classification of the person or entity whose name is in the name field. Refer to this table if you’re not sure what your tax classification is.

Tax Classification Applies if… Provide this TIN…
Individual You’re reporting SoundCloud income as hobby income, which is uncommon. See “Sole Proprietor” below. Your SSN.
Sole Proprietor You haven’t formed a legal business entity. Your SSN or, if you have one, EIN.
LLC - Single Member You’ve formed an LLC and you’re the only owner/member. Your SSN or EIN. Don’t provide the LLC’s EIN.
LLC - C Corporation You filed Form 8832 after forming the LLC to elect C Corporation status for the LLC. The LLC’s EIN.
LLC - S Corporation You filed Form 2553 after forming the LLC to elect S Corporation status for the LLC. The LLC’s EIN.
LLC - Partnership The LLC has more than one owner and the owners made no subsequent tax elections. The LLC’s EIN.
C Corporation You’ve formed a legal corporation with a state. The corporation’s EIN.
S Corporation You’ve formed a legal corporation with a state and filed Form 2553 after forming the corporation. The corporation’s EIN.
Partnership You haven’t formed any legal business entity but you and a business partner are splitting the royalty income. The partnership’s EIN.
Trust/Other This will be rare. The trust’s EIN.

Part II

In Part II, you’ll be asked to certify a few statements. Here’s an explanation of each statement:

“The number shown on this form is my correct taxpayer identification number”

You must provide the TIN that’s on your or your business’ tax return. Refer to the table above if you’re not sure that you provided the correct TIN.

I am not subject to backup withholding because…

You typically won’t be subject to backup withholding. However, if you’ve provided inaccurate information in the past, either the IRS or SoundCloud might have informed you that you’re subject to backup withholding. If the IRS informed you, don’t check this box until the IRS has confirmed that you’re no longer subject to backup withholding. Contact SoundCloud support to let them know. If SoundCloud informed you, you can remove backup withholding by providing an accurate tax form.

I am a US citizen or US person

For tax purposes, a U.S. person is either a U.S. citizen or resident. You’re a resident if you hold a green card or pass the substantial presence test. If you’re neither of these, then you’re completing the wrong form. Go back to the first screen and select “I am not a U.S. person.” Refer to the W-8BEN walkthrough below.

The FATCA code(s) entered on this form indicate that I am exempt from FATCA reporting

This statement only applies if you provided a FATCA exemption code. This field is optional in the tax form and you’ll usually leave it blank. In case you did enter a code, be certain that you entered the correct code.

Delivery preferences

You’ll then select your tax form delivery preferences. In January of the following year you’ll receive a SoundCloud 1099-MISC based on the delivery preferences you select in this screen.

In the final screen you’ll see that both the payment preferences and tax form have been received by SoundCloud. SoundCloud will review and approve your information before issuing payouts.

Completing the SoundCloud W-8BEN form (non-U.S. users)

SoundCloud users who aren’t located in the United States will complete Form W-8BEN or, if they’ve incorporated a business entity, Form W-8BEN-E. 

Don’t complete this form if you’re a United States citizen living in another country. You need to complete Form W-9. Refer to the last section.

By completing Form W-8BEN on SoundCloud you certify that you:

  • Aren’t a “U.S. person,” 
  • Are the beneficial owner of the royalty payouts, and
  • If applicable, are covered by an income tax treaty.

Depending on the information you provide on the W-8BEN, SoundCloud may withhold taxes from your payments. You should therefore carefully complete the form to avoid unintended tax withholdings.

Certify where your services are provided

After indicating that you’re not a “U.S. person,” you’ll need to certify whether you provide any services in the United States. It’s a vague question, but in general you’ll need to answer this question based on where you work when conducting business.

In the context of a music business, traveling to the United States for live performances may constitute providing services in the United States. You’d want to indicate that you perform services in the United States in this case.

Performing services in the United States could make you liable for paying U.S. taxes on the income you earn for those services, including your SoundCloud income, unless you’re exempted by a tax treaty.

You should speak with a tax professional to review the facts and circumstances of your situation if this describes you.

Form W-8 BEN - Identification of Beneficial Owner

In the next screen you’ll provide identifying information about yourself. This information is used to determine whether you’re covered by a tax treaty. If you’re not covered, you might be subject to a 30% withholding tax.

Name

Enter your first and last name. 

If you’re the sole owner of a U.S. limited liability company you should provide your name and information, not the company’s information.

Country of Citizenship

Enter your country of citizenship. 

If you’re a dual citizen, provide the country where you're both a citizen and a resident at the time you complete this form. If you’re not a resident in any country in which you have citizenship, provide the country where you were most recently a resident.

Permanent Residence

Your permanent residence is the address in the country where you claim to be a resident for purposes of that country’s income tax. 

If you’re completing Form W-8BEN to claim a reduced rate of withholding under an income tax treaty, you must determine your residency in the manner required by the treaty. 

Don’t provide the address of a financial institution, a post office box, or an address used solely for mailing purposes.

Mailing Address

Enter your mailing address only if it is different from the address you show on line 3.

Taxpayer Identification

Enter the tax identification number issued to you by the tax authority of your country of residence.

If you’re claiming treaty benefits and don’t have a tax identification number for the country where you reside, you’re generally required to provide an “ITIN”.

“I’m unable to provide a TIN”

To claim certain treaty benefits, you must complete line 5 by submitting a U.S. Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Alternatively, you can complete line 6 by providing a Foreign Tax Identification Number (FTIN). 

Not providing a SSN, TIN, or FTIN in this section will make you subject to withholding tax.

If you don’t have a U.S. Social Security Number and aren’t eligible to get one, you can apply for an ITIN by filing Form W-7 with the IRS. It usually takes 4–6 weeks to process. 

However, providing an ITIN won’t exempt you from the withholding tax. It will only provide you with the option to file a nonresident tax return (Form 1040-NR) to claim a reduced rate of withholding and refund of withheld taxes, assuming you’re covered by a tax treaty.

Form W-8BEN - Certifications

In the final screen, you’ll need to certify that the information you provided in the form is correct.

What happens after submitting the SoundCloud tax form?

After submitting the SoundCloud tax form, and depending on your answers, you’ll receive an informational tax document early in the following year. The exact tax document that you’ll receive depends on your status as a “U.S. person” and whether or not you’re eligible for tax treaty benefits.

SoundCloud taxes for U.S. Citizens and Residents

SoundCloud will provide U.S. citizens and residents with an annual tax form called Form 1099-MISC. This form reports the payouts SoundCloud sent you during the previous year. SoundCloud provides this form to both you and the IRS.

If you’re required to file a tax return, you’ll use Form 1099-MISC to file an annual tax return before April 15th (October 15th if you’ve filed an extension). You’ll also report income from other sources, such as a job or other music platforms, on your tax return.

SoundCloud taxes for U.S. Nonresidents

Assuming you’re neither a U.S. citizen nor resident, SoundCloud may issue a Form 1042-S at year-end. Form 1042-S reports your total royalty payouts and tax withholdings to the Internal Revenue Service, the U.S. tax authority.

If your home country has an income tax treaty with the U.S, and SoundCloud didn’t withhold taxes from your payouts, then you won’t receive Form 1042-S. No tax treaty, or a treaty that doesn’t exempt royalties, means that SoundCloud will withhold a U.S. taxes from your payouts.

If taxes were withheld in error, you can use Form 1042-S to file a U.S. nonresident tax return (Form 1040-NR) and claim a tax refund. You might also be able to claim a credit for foreign taxes paid on your home country’s tax filing.

Why were taxes withheld from my SoundCloud payouts?

SoundCloud users who aren’t U.S. citizens or residents might have taxes withheld from their payouts. If you’ve had taxes withheld, it was for one or more reasons:

  1. No Income Tax Treaty with the U.S. - Your country doesn’t have an income tax treaty with the United States or the active treaty doesn’t include royalty income. You might be able to claim a credit for foreign taxes paid on your home country’s tax return.
  2. Incorrect W-8 BEN - You completed a tax form called the W-8BEN when registering for SoundCloud payouts. If your country has a tax treaty with the United States and taxes were withheld, you may not have correctly completed the W-8 BEN.
  3. You Perform Services in The U.S. - In some cases, SoundCloud will withhold taxes from payouts to users who perform services in the U.S. 

According to U.S. tax law, nonresidents who aren’t citizens must pay a 30% withholding tax on their U.S. sourced royalty & services income. As a withholding agent, SoundCloud is liable for the taxes associated with the royalties it collects on behalf of its users. If you’re subject to the withholding tax, SoundCloud is also liable so SoundCloud withholds the tax and then remits the tax to the Internal Revenue Service (the U.S. tax authority) to comply with the law.

You can claim an exemption from the 30% tax rate if your country and the United States have an income tax treaty that covers royalty income from U.S. sources. If this is the case, and you’ve provided accurate tax information to SoundCloud, then SoundCloud won’t withhold taxes from your payouts.

In short, to the extent your SoundCloud royalties are U.S. source income, and you’re not covered by an income tax treaty, then SoundCloud will withhold taxes from your payouts. Consult IRS Publication 515 for more information.

Additional questions?

Submitting an accurate SoundCloud tax form will prevent adverse tax consequences later on. Get in touch through the contact form below if you have questions. I can help you provide the correct information so that you’re set up for success.

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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