Question

IP royalties

Forum|Forum|4 years ago
October 27, 2021
1 reply
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I've never been self employed. I've been retired for 4 years. Every year I get a couple of royalty checks from my longtime employer for my share of income for licensed IP that I contributed to developing. This year when doing my taxes on TurboTax, the instructions led me to paying self-employment tax on this income, which doesn't seem right! I'm not working, I'm just getting paid for something I did in the past. Did TurboTax steer me wrong? Did I make a mistake in how I declared this income? How should it be reported?

Michele_H

Hi @Max C here is what the information related to Royalty income.

Royalties from copyrights, patents, and oil, gas and mineral properties are taxable as ordinary income.

You generally report royalties in Part I of Schedule E (Form 1040 or Form 1040-SR), Supplemental Income and Loss. However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C. This may have been reported incorrectly on the return this year. You may consider having a review of your return to make sure that it has been being done correctly.

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