Legal, taxes, etc?

I only know the US rules, so feel free to ignore if you are not a US citizen.

Apple gives you all the money, minus their cut and any bits other countries take out. You are responsible for paying all taxes on your earnings. Apple will not send you any forms at the end of the year. If you are making a decent amount, you need to be paying quarterly taxes throughout the year. The amount of taxes you need to pay really depends on how your company is setup. If you don't have a company, you will need to pay your taxes as part of your individual income, but still in a quarterly fashion. My best advice is to research taxes for the self employed and/or consult an accountant. But the bottom line is: Apple does nothing for you. It's all up to you to keep track of everything.

 

(From the US)

I made about $2000-$3000 and filed it as personal income. Specifically, I filed it as 'income from a hobby', which it is (as opposed to a business). I started out trying to file as a sole proprietorship, but the tax software I was using (TurboTax) starts asking a lot of questions that I didn't really feel were appropriate, since I don't run my app development as an actual business. Filing as hobby income apparently does allow you to take deductions, but only matters if the deductions are up to a certain amount -- in my case, I paid the full amount of taxes on the $2000-$3000 I made, despite indicating my Mac Mini, Wacom tablet, etc... as expenses.

To figure out how much Apple paid me, I literally went and looked up bank transactions from Apple and added it up, that's it. It would be a lot easier if they sent a W-2 or similar income form for the app store proceeds, but I'm sure there's a reason why they don't. LWBS is right. You have to keep track and figure it out yourself.

I didn't really make enough to really worry about the tax implications, but I figure if you make enough where it's an issue, it might be worth having a tax specialist help you figure it out.

FYI, not a lawyer, tax guy, etc... Just a software developer trying to figure out taxes

 

I am not a lawyer and this is not legal advice.

Taxes aren't too hard to do really, if you know the rules.

For one, if you're dealing with non-US the rules are quite a bit different. The big one that you have to watch out for there is just profit sharing ("where" the money is made becomes important, if you pay non-US people to work for you then the money is made where they are located, but if you do profit sharing then the money is made in the US (iTunes store) and you need to, by some amount, start paying taxes on that money before shipping it off.)

For US it is actually really simple (sorta ):
- Even if you don't have a registered business identity (such as an LLC, S-Corp, etc.) you are still treated as a sole proprietorship.
- If you work with anybody on an independent contractor basis who isn't registered as a corporate identity and you pay them over 600$ (2010 rules) then you must acquire a form W-9 from them and send them a MISC-1099 January of next year.
- If you make in excess of 2,000$ in a year, then you must file taxes quarterly (Jan, Feb, March due by April 15th, April May June due by July 15th, etc.). Failure to pay taxes on a quarterly basis means that you will be liable for a penalty at year's end (my friend got a 9% penalty on her taxes from failure to pay quarterly).
- If paying as a sole proprietorship, you attach and fill out a Schedule C ("Additional Income from Business", I think it is called) onto your 1040 return.
- If you register as an LLC (limited liability corporation, usually single member) then you are still seen as a pass-through entity, meaning that you file normally as you would with a sole proprietorship, but you get the advantage of liability protection (meaning if you **** up they can't repossess your car or house - unless you do some sort of Enron like fail).
- LLCs can opt to file as a corporation instead, but the taxes become more complex, but you avoid double taxation (taxation from the LLC profit, then taxation on your own). Note that you only pay taxes on PROFIT, not gross revenue.
- You have, under a corporate identity, a Section 9 (I think it's called) deduction, which means that you get up to 100,000$ in deductible taxes.
- If you have an LLC and have more than one employee (i.e. more than just yourself) then you _must_ pay unemployment tax, payroll tax, etc. This varies from state to state, even city to city. So it is in your interest to actually stay a single member LLC to avoid a lot of extra taxes. I'm not sure of the rules with S/C-Corps.
- Some cities require you to fill out a form if you have a home office. This usually isn't a big thing - it just is a legal waiver that you sign that you say you know you can only have X number of delivery trucks or client cars arrive over course of Y days, etc. For software dev, this is mostly irrelevant stuff. Be sure you get your landlords approval to have a home office (if required to by law and you don't own your home).
- You can use a portion of your house to deduct taxes from your bills - this is tricky though and you have to know your local state laws and rules (especially save your utility bills' receipts). Some states, such as mine, limit this amount to some ridiculously low amount to make it not even worth the trouble.
- As a sole proprietorship or LLC you take the "full tax burden", meaning that you pay the full amount of taxes for medicare and social security (in a normal business setting, when you're the employee, the employer is required by law to pay half).
- Even if you have NO profit (a net operating loss, or NOL), you _still_ _must_ file taxes if you have a corporate identity registered. This is what Joe Stack (that guy who flew his plane into the IRS building down in Texas) got caught up with. Some states will start to penalize you after so many years of taking a NOL.

The trick is to treat others as independent contractors at all times, but there are laws limiting what you can and cannot do with them:
- You are not responsible for paying taxes for that independent contractor (only 1099s do you send any form to). This is the big plus in your favor.
- You cannot order an independent contractor to be working from and to a certain time (they are hired on a project basis, with length of time either agreed to before hand or however long it takes).
- You cannot order an independent contractor to be working from a particular location, unless it is obviously part of the job (e.g. landscaping).
- You cannot order an independent contractor to use a particular form of hardware, software, etc. since they are required to furnish their own equipment. This is a bit of a bitch with coding since with iPhone dev you pretty much HAVE to use Xcode to do builds (for code signing), but alas, you cannot order that they do (they could do their coding in Linux, essentially, and still be in their legal limit).
- You can provide them with office space to work in, but you have to be really careful here: there is nothing to say that they have to show up at any given time, take any amount of time to finish, use particular company equipment, etc.
- It is in your best interest to make sure that your independent contractors are treating you like a client, not as a sub-rate employer. The best way to cover your ass is to force them to work with several clients, either over the course of a year, or simultaneously.

Pro tip, organize your expenses by grouping them into the groups that will be used to file your taxes, namely: Licenses/Taxes, Food/Entertainment, Advertising, Legal, Contracted Labor, Profit Sharing, Other.

Finally, last pro tip, DON'T pay a lawyer to set up "Articles of Organization" for an LLC or S-Corp. The whole "Articles of ..." is a farce - it's just a damn form, like any other form, that you fill out, tell who owns the company (and to what extent they own it and how they are involved), give a legal contact in case of legal issues (usually a lawyer on retainer or just your personal address), and mail it out /w check. You push a hundred to a few hundred (depends on state - small states are really cheap, maybe a 100$ at best, larger states can be thousand $) to your states department of commerce or department of state and pay a small amount each year to keep the business going (usually just a smaller amount than original registration). Just note that if you have more than one owner, give somebody at least 51% ownership so that they can legally sign their name without co-signing every damn thing. Also note that if you have more than one person involved in setting up a LLC, usually it's called a LLP instead (limited liability partnership), which some states set up specifically different rules for from your standard single member LLC (and also different tax forms). Also note that you are usually required to have that tag line in your official name (like mine is "Rogue Pirate Ninja Interactive, LLC" (but I could have used "L.t.d". or "Limited"), or something like "Apple, Inc." or "Microsoft Corporation" (for S/C-Corp)).

 

I think if you make enough where it's an issue you should consult a tax specialist. Why? Because you have to consider a lot of things and you want to get all the tax breaks you can and be squeaky clean -- you can deduct in the US the cost of your license with apple or any other entity like android (shhh--I didn't say that) and any costs for game graphics and any other expenses, for example, website maintenance, expenses if you have a forum or related website, payments to other similar third parties but when it gets to amortizing equipment and software, I think it's a bit complex to do on one's own once you get past a few thousand dollars. Buying a mac can be amortized but don't expect me to figure it out. : )

Anyway in the US you have to report it as income and file. Other countries I don't know but I think it's probably similar. : )

 

I'll be looking into this this weekend. What if your income has changed since last year? (Ex.:You didn't make any money last year, but you EXPECT to make some this year.) It's hard to predict how much we're going to make since it's asking us to predict our sales. Also, apps that are making money this quarter could drop off the charts in a few months, so that income could dry up really fast.