• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

If a company makes a payment to an individual, must it pay taxes for it?

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

W

Will J

Junior Member
Situation: there is an online social network that raises money from online ads, like the Google AdSense ones. It pays its best users 50% of the revenue that comes from those ads; this is a commitment stated in the T&C, not just a random gift or prize.

- Will the company have to pay taxes for this payment? Can it deduct them? What are the thresholds?

- And as for the individual, must he/she pay taxes for this income? If he/she decides to use it for charity purposes, can he/she deduct them?

This example applies for a US-based, legitimate and audited company.

Thanks four your help!
 


S

seniorjudge

Senior Member
Will J said:
Situation: there is an online social network that raises money from online ads, like the Google AdSense ones. It pays its best users 50% of the revenue that comes from those ads; this is a commitment stated in the T&C, not just a random gift or prize.

- Will the company have to pay taxes for this payment? Can it deduct them? What are the thresholds?

- And as for the individual, must he/she pay taxes for this income? If he/she decides to use it for charity purposes, can he/she deduct them?

This example applies for a US-based, legitimate and audited company.

Thanks four your help!
Click to expand...

Why did you intentionally omit your state?
 
LdiJ

LdiJ

Senior Member
Will J said:
Situation: there is an online social network that raises money from online ads, like the Google AdSense ones. It pays its best users 50% of the revenue that comes from those ads; this is a commitment stated in the T&C, not just a random gift or prize.

- Will the company have to pay taxes for this payment? Can it deduct them? What are the thresholds?

- And as for the individual, must he/she pay taxes for this income? If he/she decides to use it for charity purposes, can he/she deduct them?

This example applies for a US-based, legitimate and audited company.

Thanks four your help!
Click to expand...
Yes, it is income to the company. However, the company may in turn deduct the payments that it makes to the individual. At the end of the year the company will have to give each of those individuals a 1099-Misc (probably as "other" income) and those indivduals will have to report the money and pay the appropriate tax.

Yes, the individuals could donate the money to charity an then take a deduction on their personal tax return.
 
You must log in or register to reply here.

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top