Comment on RoadTest Terms & Conditions: Tax Liability

I can imagine people will think twice before applying to a Design Challenge as prizes are typically well over 600$.

From what I understand this is a US thing only? Why would this be different for EU? Does the EU not expect any tax income?

The 1099 form that was sent to the RoadTester is a US income form for tax purposes.

I believe the 3 roadtesters were based in the US.

Randall

I understand, but generally speaking, does this apply to the US only or is there a similar EU counterpart to this 1099 form?

I'm going to have to look into it. This was the first time I had to address this issue.

I'll create a post discussing this issue once I get the information.

Randall

Thanks ntewinkel

Yes I did mean lie.

We see the misrepresentation of price often with our Asian parts suppliers and frankly it's not helpful.

In any organisation there are two prices .... what it cost, and what it sells for.

Mark

My original post in regards to taxes of close to $2,000.00 on a less than $4,000.00 piece of test equipment was never to cry foul in regards to Element 14.  I did it with one intent:

1.  To get information from others on what their experiences have been with this and how they may have best dealt with it.

There are some interesting ideas in regards to dealing with the taxes and by keeping good records of many of your IT costs you may be able to offset a good part of this expense.  But even with applying every cost I "could" apply the taxes went from over 50% taxes to around 15% taxes.  This is by filling out everything online and not being concerned about an audit needing documentation later on.  :-)

It is interesting that so far I have not heard of any other members having dealt with this in the past for a Road Test.  As such it is a great opportunity for people to learn and plan for in the future.  The taxation system is a precarious and convoluted system, not something that can be fully addressed on a forum, but experiences can be shared and awareness made. 

The one line in the T&C, which I did read, does not really prepare someone for being taxed at over 50% the MSRP value of an item.  To give an example, recently I was at a computer store in Denver where I purchased close to $50.00 in parts and pieces.  The state charged me approximately $2.00 and the city another $1.75.  So approximately $3.75 of taxes from $50.00 of product.  Now if instead I was charged $25.00+ in taxes I would have been quite surprised.  Even though I understand I pay taxes on items.  The reality of paying a certain small amount of taxes and then coming across a very substantially larger amount of cost can be startling regardless of a single line in the T&C.  I often purchase small amounts of items and see taxes at that level.  This is a new level and due to it being applied as income and their special taxation levels, it is an eyeopening experience.

But by sharing the experience it can raise awareness and expectations and hopefully those of us that have to deal with these taxes might be able to share possible solutions that assist.

Other Countries have to deal with other difficulties in regards to "contests" and the various values of items that come from Element 14 and knowledge is a great way to assist each other in these incidents that take us away from the test bench.  :-)

But under NO circumstances have I intended to imply that Element 14, Mr. Randal Scasny rscasny or any other member/employee is doing something wrong or being disingenuous.  I have appreciated the efforts that Randal has put forth and I understand that this area is an ever-changing arena that can surprise people, confuse people and just generally frustrate people.  Death and Taxes.

I totally agree with you, John, and appreciate you bringing light to the potential income tax liability that comes with a prize. I wasn't aware of that before now.

I think E14 is already going above and beyond by taking care of the customs and brokerage fees, and I totally appreciate that too. I wouldn't expect them to deal with our income taxes too!

The income tax part is tricky business in general. I was once offered a large number of shares for repairing/updating software for a small dot-com, but thankfully just in time I realized that accepting those shares, at the value claimed by the owner of the corporation, would have cost me 10's, maybe 100's of thousands of dollars in income taxes! That company is pretty much defunct now, so I'm doubly glad I said no!

-Nico

I understand, but generally speaking, does this apply to the US only or is there a similar EU counterpart to this 1099 form?

It may be that the US requires those documents, but other countries still leave it up to the individuals to declare.

Also, in countries like Canada (where I live), winnings are not taxed. It might be that the US is one of the few countries that does that.

For a country that claims to have low taxes, the US seems to hit people much harder across a wider range!

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.