Comment on RoadTest Terms & Conditions: Tax Liability

I am glad to see the Element 14 community finally addressing many of the past roadtest issues over the past few months.  It was long overdue and I believe is already positively affecting the program.  Thank you Randall for driving the issues. 

I’m also surprised at how many long time roadtesters, such as Peter Oakes, Inderpreet Singh and DAB, were not aware that the items they have received from Element 14’s Roadtest program are contest prizes, not “gifts” or “samples” from a vendor and are taxable in the U.S. under IRS law.  This is true for all prizes regardless of value, not just those over $600.  The value is entered as Other Income on line 21 of your Form 1040, U.S. Individual Income Tax return.  As income on your individual tax return, you only pay at your highest rate, i.e. if you are a poor student in the 15% tax bracket, you only pay $600, but you must pay.  If you itemize, you may find a $4000 deduction somewhere to counter the added income, but you must report the value.  And the value is the vendor’s list price of the item, even if you can find it cheaper somewhere else.  Remember, in the U.S., the IRS says someone must pay.  If a manufacturer donates an item for review, they write the value off, which means someone else will have to pay the tax.  If they tell you the item is a gift, you don’t have to report it. 

I am glad to see the Element 14 community finally addressing many of the past roadtest issues over the past few months.  It was long overdue and I believe is already positively affecting the program.  Thank you Randall for driving the issues. 

I’m also surprised at how many long time roadtesters, such as Peter Oakes, Inderpreet Singh and DAB, were not aware that the items they have received from Element 14’s Roadtest program are contest prizes, not “gifts” or “samples” from a vendor and are taxable in the U.S. under IRS law.  This is true for all prizes regardless of value, not just those over $600.  The value is entered as Other Income on line 21 of your Form 1040, U.S. Individual Income Tax return.  As income on your individual tax return, you only pay at your highest rate, i.e. if you are a poor student in the 15% tax bracket, you only pay $600, but you must pay.  If you itemize, you may find a $4000 deduction somewhere to counter the added income, but you must report the value.  And the value is the vendor’s list price of the item, even if you can find it cheaper somewhere else.  Remember, in the U.S., the IRS says someone must pay.  If a manufacturer donates an item for review, they write the value off, which means someone else will have to pay the tax.  If they tell you the item is a gift, you don’t have to report it. 

I am in Canada and therefor Prize=tax free . I also receive packages weekly from various other sponsors and they fall into the Gift / Sample / no commercial value category and many of them are useless to me after the review is done. In most cases like Element 14, they also agree to cover duty and brokerage as the review they will receive will not cost them anything except the product they send. I only get what little I can from YouTube / google  adsense.

I can see where products sent from one company to another can be viewed as a taxable benefit but Road Tests for an individual do not fall into this category.

I was also under the impression that in the USA, winning the lottery even would not garnish a 50% or more tax penalty, that just wrong.

Same thing here, except I get problems from the shipping companies, when sponsors forget to write that it is a sample. When someone asks me to test a product "for free", they normally send me a gift, or a sample. One person grabbed the first box he had, and the top-most piece of paper said "Thanks for buying our product!". After seeing that, there was nothing I could say to the tax office. I ended up paying to test a product. Good thing it was worth it :-)

I've had similar things happen here in Belgium, though for review units sent via normal post.

The package is then held in customs and I get a letter asking me for the invoice, so they can calculate the duty/tax etc ...

I then mail the supplier for a $0 invoice that I can then send to customs. The package then gets released, no duty/taxes required.

On other occasions though, the supplier wouldn't send an invoice or respond to my query. I then tell customs I refuse the package, and they send it back.