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How should I report earnings from Apple (from selling mobile applications in the App Store) in 1040 form in USA? I'm permanent resident of USA.

  1. Can I fill Form 1040 with Schedule C as individual without registration of any business like sole proprietor, LLC, etc.?
  2. Will I be able to write off 30% of Apple's commission as expenses when report 1040 form as individual?
  3. Will I be able to write off expenses like home office and medical insurance when report 1040 form as individual?
  4. How should I calculate income and commission for sales worldwide? Apple write all values in original currency. It's hard work to calculate them in US dollars.
  5. What rate of exchange should be used? Apple write not accurate rates for some currencies. So I suggest we should not use them.

Thanks to all for the help.

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    My tax adviser wrote: "In order to write-off business expenses, you need to have your business registered, for state and federal tax purposes. If you don’t, IRS can re-classify your business expenses as hobby… and hobby losses are not deductible." – Dmitry Sep 18 '15 at 16:38
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    I can't answer the specific tax questions, and even though I understand the desire to do everything yourself (I do my taxes myself), this definitely sounds like an area where hiring a pro, if only to get set up to the point you can handle it yourself, would be money well spent. – blm Sep 18 '15 at 17:18
  • Does Apple give you a Form 1099-MISC for this? – user32479 Sep 18 '15 at 19:14
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    @Altaveron you do have to pay taxes in WA. It is called B&O tax, and it is based on your gross receipts. – littleadv Sep 19 '15 at 6:50
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    @Altaveron because that's how the State of Washington laws work? Not sure I follow your logic. In any case, you mentioned you have a tax adviser - shouldn't you be talking to that person? – littleadv Sep 19 '15 at 9:30
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Can I fill Form 1040 with Schedule C as individual without registration of any business like sole proprietor, LLC, etc.?

Yes. The IRS doesn't care. "Sole Proprietor" is registered when born, usually in a hospital. If you have a birth certificate - you're registered.

Will I be able to write off 30% of Apple's commission as expenses when report 1040 form as individual?

Of course.

Will I be able to write off expenses like home office and medical insurance when report 1040 form as individual?

That may be a bit trickier as there are specific rules as to how and when you can deduct those. Generally, if you have a net-positive income from your Schedule C operation after deducting those and all the rest of the requirements are satisfied, you can deduct those.

How should I calculate income and commission for sales worldwide? Apple write all values in original currency. It's hard work to calculate them in US dollars.

I suggest using a calculator. That will make it easier somewhat.

What rate of exchange should be used? Apple write not accurate rates for some currencies. So I suggest we should not use them.

You should use the Department of Treasury rates, and you should use the rate of the day of the transaction.

  • Thanks for your answer. You wrote 'You should use the Department of Treasury rates, and you should use the rate of the day of the transaction.' But it's absolutely impossible to track every of tens of thousands transactions to calculate them using different rates. I should calculate it 8 hours per day if it's really required. I'm sure there is more simpler way to report earnings from App Store. Can you help to find it? – Dmitry Sep 19 '15 at 6:39
  • @Altaveron are you being paid for each transaction separately???? – littleadv Sep 19 '15 at 6:47
  • Only 1 transaction per month without Apple's commission. But Apple report 1099-K for values including commission. So developers must report gross income in Schedule C and Apple's commission. By the way, Apple doesn't provide exact dates for every app sale. So it's impossible to calculate each app sale by separate rate. – Dmitry Sep 19 '15 at 7:04
  • @Altaveron so you have a single transaction a month, what do you care what Apple has? – littleadv Sep 19 '15 at 7:52
  • 1 money transaction but many app sales. As I know I must report all app sales and Apple's commission in Schedule C. App sales are taxable - not cumulative money transactions from Apple. – Dmitry Sep 19 '15 at 8:46

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