In our 2014 Roadmap, one of our goals for the year was to review the financial tools our Envato Market platform provides. We started this project by improving statements earlier in the year, and more recently clarifying our business model and the financial flows.
Alongside this, we’ve also been reviewing how Envato Market handles taxes and tax information. As part of that we’re going to begin collecting relevant US Author information through an IRS Form W-9. The form is used for information reporting to the IRS on income paid to you. This is a US federal tax requirement.
What Information is Required and How do I provide it?
If you are a US Author (an author considered to be a US person because the person is a US citizen, a resident alien, or otherwise satisfies the substantial presence test), then you will be required to complete a standard IRS form called the Form W-9 which includes some basic information about you, including your name and Tax Identification Number (TIN) which can either be your Social Security Number (SSN) or Employer Identification Number (EIN) of your business.
To help you provide this info quickly and easily, we have provided a form on Envato Market that stores your details securely. To learn more about how we handle your information see the FAQs below.
To add your details via the Envato Market app:
- Log in to your account
- Go to your Settings page
- Click on Tax Information and enter your details
If you prefer, you can download a Form W-9 in PDF format from the IRS website. Email the completed and scanned form to email@example.com along with your username and we’ll attach the details to your account.
Detailed instructions for completing Form-W9 are available on the Form W-9 in PDF format from the IRS website.
What Will We Do With this Information?
After the end of each calendar year we’ll send to you and the IRS the appropriate IRS Form 1099 so that you can accurately report your income.
Backup Withholding Tax
If you are a US Author, and do not provide accurate tax information, we may be required to hold back some of your earnings and send it to the IRS. Effectively this is paying part or all of your income tax upfront, and you’ll simply take credit for this amount on your regular tax return for the year. Please note that high net worth persons are subject to a tax rate in excess of backup withholding and may owe additional tax on their income.
You will not be subject to backup withholding on payments you receive if you provide your correct TIN and make the proper certifications. Backup withholding is 28% of the total value of your sales (the total of item prices, exclusive of any buyer or handling fees we charge the buyer, but inclusive of our author fees to you).
Any tax withheld will be remitted to the IRS – and not held by Envato.
Most US taxpayers are not subject to backup withholding and won’t have to worry about it applying so long as the US taxpayer provides a Form W-9. So, if you are a US Author, please correctly complete your details as soon as possible to avoid backup withholding.
We will begin collecting backup withholding tax from authors who have not provided tax information on January 1st 2015. Please ensure that your taxpayer identification number (TIN) and name on the form are correct and accurate, according to IRS records.
I Need Help!
If you’re like me, anything tax-related can at first seem a bit scary and confusing. That’s OK, we’ve got lots of answers for you in the FAQs below, and we’ll be on hand on the forums and have a special email address you can write to where we’ll provide as much help as we can. Of course, this has the caveat that you should always seek advice from a professional accountant / tax advisor because we can’t advise about your specific tax situation.
You can email: firstname.lastname@example.org for questions relating to this announcement.
1. Why are we doing this now? / What’s this all about?
Envato Market has grown a lot, and this year we identified a need to put more attention to, and clarify, how some of the financial aspects of our market work. This includes things like statements, invoices, and what tax information authors provide.
2. Does this apply to non-US Authors?
No, this is a US tax form from the IRS (the US tax authority) for US Persons (including resident aliens).
Definition of a US person (from Form W-9)
For federal tax purposes, you are considered a US person if you are:
- An individual who is a US citizen or US resident alien, or who satisfies the substantial presence test,
- A partnership, limited liability company, corporation, company, or association created or organized in the United States or under the laws of the United States,
- An estate (other than a foreign estate), or
- A domestic trust (as defined in Regulations section 301.7701-7)
3. What’s this for?
This process is to help US Authors to report their earnings properly, and to make sure that the appropriate taxes are applied.
4. What about the past?
This is a change looking forward only, and backup withholding will take effect from earnings made on or after January 1, 2015. We’ll be providing a Form 1099 as required, for income starting Jan 1, 2015.
That said, we highly recommend that you have reviewed and handled any current and past tax filings in your local jurisdiction – that’s just sensible!
5. What happens if I don’t complete my tax info until after withholding starts?
Any amounts withheld prior to receiving your tax information will be sent to the IRS, and you’ll need to settle any corrections with the IRS as part of your income tax return.
6. What happens if I don’t provide my details, Backup Withholding is applied, but I also pay my tax?
You should consult your accountant or tax advisor on how to ensure you’ve paid your correct taxes on your end of year tax return.
7. How securely will my SSN / EIN information be stored with Envato?
We take your privacy and information security seriously, and will apply industry standard practices and our to securely store any details you provide in this form.
8. What documentation will I get about amounts withheld?
You will be able to see tax withheld on your statement page and will receive a 1099 form.
9. Should I be seeking tax or legal advice?
Any time you earn money as an independent contractor, freelancer, or through an online service, you should make sure you have informed your accountant or tax advisor so they can help make sure that you are correctly paying your taxes.
10. What if there are multiple owners of the account?
Envato Market enters into a legal agreement with the person who creates an account and agrees to the terms and conditions. If you are a US Person (a definition which includes Partnerships, LLCs amongst other things, as well as individuals) then you should complete the Form W-9 details.
11. Does this apply to Envato Studio?
Yes, Envato Studio providers will be required to complete these details. We’ll be rolling out the requirement for them in a couple of weeks.
12. I got an email saying I’m a US Person, but I’m not. What should I do?
Based on data in our system we have selected the pool of authors that appear to be US Persons and we have contacted them via email. If you are not a US Person, we will be collecting additional documentation. Please check “I am not a US Person” on the online form and we will contact you in the coming weeks about next steps.
13. I’m a US Person, but didn’t get the email. What should I do?
That’s no problem, just follow the instructions above to access the form on Envato Market or to email your completed and scanned Form W-9.
14. I’m a US Person, but I reside elsewhere or am travelling
You should consult your tax advisor. If you are liable for tax in the US, please ensure you complete the steps to submit your information.
15. Does this apply to members earning income through the Affiliate program?
Yes, if the account owner of the affiliate is a US Person (against the same criteria), please complete the tax information tab. Affiliate earnings will be included in information reporting to the IRS.
16. What is reported on the 1099?
The income of the US Person is reported on the 1099.
When you sell items on Envato Market as an author, you are making a transaction directly with every buyer who purchases your item. Your income is the gross value of this sale to the buyer. In an immediate follow-on transaction, Envato charges authors an Author Fee which is an expense against your income.
Our fee structure changed on September 1st, 2014 to reflect our services to buyers. Buyers now purchase both an item, and pay a Buyer Fee to Envato. Author income is only the portion of the sale which is for the item (i.e. not the separate Buyer Fee transaction). Again, Envato charges authors an Author Fee against that income.
The Statements page is being updated to provide authors with all the information they need to complete their tax return.