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I'm looking to run a Kickstarter campaign and I was curious about a few things. Obviously you'll need to pay taxes on the amount raised, if you don't spend it all producing something (expenses). Amazon.com which handles the payments for kickstarter sends out a 1099-K to people who raise more than $20k, which I hope to do.

So here's my questions.

1) Is it better to have the money sent to a business account? Or is it just the same to have the money come into your personal account and then giving it to the business? I ask because I'm looking to shoot a film but haven't setup a business yet. I was going to use the money raised to setup the business as it costs about $1300 to setup an LLC.

2) If you raise the funds in 2012, but don't go into production on your project until 2013, do you end up having to pay taxes on the full amount? If I'm looking to raise $100,000 - every penny of that would go towards the film's budget. However, if I end up shooting next year, a lot of that will end up being taxed. So...is there a way around that besides speeding up the shoot schedule?

Thanks so much!

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consider setting up an LLC in another state. It only cost $100 - $200 to setup an LLC in Wyoming. You really don't need to be tied to your home state in the internet era. LLCs and corporate entities are very convenient things to have in the United States given our current tax regime –  CQM Aug 20 '12 at 13:24
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2 Answers

up vote 4 down vote accepted

You better consult with a tax adviser (EA or CPA) on this, my answer doesn't constitute such an advice.

Basically, you're selling stuff on Kickstarter. No matter how they call it (projects, pledges, rewards - all are just words), you're selling stuff. People give you money (=pledges) and in return you're giving them tangible or intangible goods (=rewards). All the rest is just PR.

So you will pay taxes on all the money you get, and you will be able to deduct some of the expenses (depends on whether its a business or a hobby, the deduction may be full or limited).

It doesn't matter if you use LLC or your own account from the financial/taxation point of you, but it matters legally. LLC limits your personal liability, but do get a legal advice on this issue, and whether it is at all relevant for you.

If you raise funds in 2012 you pay taxes on the money in 2012. If you go into production in 2013 - you can deduct expenses in 2013. If you're classified as a hobby, you'll end up paying full taxes in 2012 and deducting nothing in 2013. Talk to a tax adviser.

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I plan on it, was just coming here for some friendly advice and perhaps someone had already had experience with this. –  Jack Marchetti Jun 15 '12 at 0:38
    
@JackMarchetti its pretty straightforward really. –  littleadv Jun 15 '12 at 0:41
    
Right I just don't know if I'll be in production in 2012 and was wondering if there is a way to "carry over". The entire thing would go towards budget so after all expenses there'd be nothing left to tax, if I shoot in 2012 –  Jack Marchetti Jun 15 '12 at 0:47
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@JackMarchetti that's why I said you should go to a tax professional. Careful planning and proper structuring will probably help you, but its not personal finance. –  littleadv Jun 15 '12 at 0:51
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Well, consult with a CPA, but I guess you don't have to pay taxes on 2012 with a correct accounting system since this is the money you are going to completely earn within 2013 so you can record it as future earning which is called deferred revenue or advance payments or unearned revenue.

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That is just one sentence. How about that? –  MrChrister Oct 13 '12 at 4:53
    
Differed revenue is a possibility but it is also carries more complex tax rules. –  stoj Oct 13 '12 at 5:17
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